NCDEX launches Gaurex and Soydex. Here are the details

NCDEX has for the first time launched 2 sectoral agri indices--GUAREX and SOYDEX. Looking at the current market volatility in guar complex and soya complex, these products have been of great benefit to the retail participants, particularly the ones who used this product as a hedging tool for their open positions in the market. Due to uneven weather conditions--the monsoon has been not favorable to the farmers--a huge surge has been seen in the prices of soybean, guargum, guarseed touching their all-time highs which makes it quite risky to take trades at such levels. So to take benefit of such a rise in prices these indices play a vital role on the exchange as it can be traded with a low margin.

SOYDEX mainly comprises of soybean and refined soy oil contributing 69.72% and 32.08%, respectively, whereas GUAREX is a combination of guarseed and guargum contributing 63.43% and 36.57%, respectively.

As both these indices are cash settled, traders and investors can hold their position till expiry, without the risk of getting it physically delivered and it will also not attract additional margins during its tender period. One of the major benefits that one can have is hedging as there are various individuals or institutional investors who majorly trade in soya complex or guar complex because of its liquidity and volume; therefore, SOYDEX and GUAREX can be good platforms for them.

For example, if looking at current prices we are expecting some correction in overall agri space as once the Kharif season arrival starts so at the same time we are certain about the prices that it will go upside in the next couple of months, then here one can hedge the risk by selling guarex/soydex and when the market goes down they can book the profit and this profit will help in reducing the average cost of holding underlying commodities.     (source: ncdex.com)

Further, in addition to the above SEBI has allowed spread margin benefit in the index which means if we have a buy position in underlying futures then we can sell the index future with only 25% of the overall margin which will be beneficial for all kinds of traders, especially for hedgers and physical delivery clients.

Retail participants can benefit from the limited liquidity risk, as in index major participants are institutional investors and also the underlying commodities do have a good amount of volume; also trading in indices is much lower compared to the trading in futures of any particular underlying commodity where risk-reward will be quite favorable.

Moneycontrol journalists were not involved in the creation of the article