India is predominantly an agrarian economy, ranking second in farm production in the world. The contribution of agriculture to the nation’s GDP declined to less than 15 per cent in 2012¬–13, and the agricultural sector provided employment to about 52 per cent of the workforce.
India exported $39 billion worth of agricultural products in 2013, making it the seventh largest agricultural exporter worldwide, and the sixth largest net exporter, says the USDA. Agriculture accounts for about 14.7 per cent of the total export earnings. Besides, goods made with the agricultural raw material also contribute about 20 per cent in Indian exports. In other words, agriculture and its related goods contribute about 38 per cent in total exports of the country.
While keeping pace with the increasing population, the growing agricultural production over the past several decades has thrown up major challenges in marketing, as well as supply, storage, and distribution. With highly fragmented markets and volatile commodity prices, it is a challenge to ensure a ‘fair’ and ‘remunerative’ price for the Indian farmer. Keeping these in mind, the government introduced a number of reforms. In all this, the strengthening of existing institutions in spot and derivative trade has become crucial as commodity markets do influence the lives of millions of stakeholders in the country’s diverse and large commodity ecosystem.
“Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness”
- Thomas Jefferson
Of the various ways one can trade in commodities, the ‘index way’ stands out for its ease and ability to provide exposure to the performance of a basket of commodities. MCX iCOMDEX series of commodity indices are excess return indices which consist of a composite index (constituting futures contracts across different commodity segments), two sectoral indices (Bullion Index and Base Metals Index) and four Single Commodity Indices (Gold Index, Silver Index, Copper Index and Crude Oil Index). The underlying constituents of all the indices under the MCX iCOMDEX series are liquid futures contracts traded on MCX.
Being excess return indices, MCX iCOMDEX indices provide a ‘roll return’ (generated as the underlying constituents are ‘rolled over’ on their expiry) over and apart from price returns. As such, they reflect the actual returns generated from holding a portfolio of futures, rather than physical commodities.
Trading on MCX iCOMDEX indices offers the benefits of investing in commodities - such as portfolio diversification and low volatility – in an easy and reliable manner. An investor can use these indices by way of trading futures or options on the indices (as and when they are launched), investing in products such as an Exchange Traded Funds (when they are available) or using the indices to benchmark the performance of their commodity investment portfolios.
The MCX iCOMDEX index series conforms to the Principles for Financial Benchmarks set by the International Organization of Securities Commissions (IOSCO) in construction, administration and governance, as certified by an independent external assurance firm.
