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India’s first real-time commodity futures index rejigged

India’s first real-time commodity futures index rejigged
PTI
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First Published: Wed, Aug 08 2007. 11 57 PM IST
Updated: Wed, Aug 08 2007. 11 57 PM IST
Mumbai: Multi Commodity Exchange of India Ltd (MCX) and the Index Maintenance Committee, comprising senior officials from the Indian Statistical Institute (ISI) and Credit Analysis & Research Ltd, on Wednesday announced changes in the composition and weightage of India’s first real-time composite commodity futures index—MCX-Comdex. The index is calculated and displayed on a real-time basis on MCX Trader Workstation, and at various other display centres.
MCX-Comdex captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX, a statement from the exchange said.
The index was initially designed and developed by the research and development department of MCX in association with ISI, Kolkata, and launched in June 2005.
Before the changes, the Comdex was composed of wheat, urad, soya oil, rubber, guarseed, kapaskhali in agriculture; gold, silver, copper in metals; and crude oil in energy. In order to synchronize the index with changing economic dynamics and increased trading activities on the exchange, the index committee has decided to revamp its composition and weights, the statement said.
In the process, group weights in the composite index have been modified from equal weights of sub-indices to 40% each in the case of MCX Metal Index and MCX Energy Index and 20% in the case of MCX Agri Index. Thus, each sector has been given due weightage to represent its significance in the physical and futures markets.
The new composition comes on the back of continuous research, intensive analysis and interaction with economists, statisticians and market players to position MCX-Comdex as an effective barometer of economic trends in the country. It also enables the Comdex to retain its characteristics as an attractive tradable index in the longer term, MCX officials said.
With its component weightages being adjusted to reflect their physical market shares, Comdex with its underlying futures prices of commodities could function as the augury of future price trends. It could thereby provide enough leeway for the country’s economic managers to take appropriate corrective action, if not in advance, at least on time.
A precise relationship, if established between balance sheet parameters and Comdex, would serve to help corporates with extensive exposure to component commodities take advance remedial measures while charting their growth path and add value for investors, MCX officials said.
Investors, who own stocks of companies having exposure to primary commodities, could use the Comdex as a guide to hedge their risk on the commodity exchange, thereby bringing stability to the financial markets and strengthening linkages.
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First Published: Wed, Aug 08 2007. 11 57 PM IST