While there’s an air of caution among bullion dealers regarding Bulldex, several bankers, mutual funds and analysts ET spoke with said the index will help in better price recovery for retail investors.
“Bullion dealers will keenly watch how the index behaves for a month since its launch. If it moves along with the international price movement, then definitely participation will increase from the trade,” said Surendra Mehta, national secretary at India Bullion & Jewellers Association.
Bulldex comes at a time when bullion prices are rising, and offers investors a chance to participate in the gold and silver price rally without having to take delivery of the metals which would involve blocking capital and complying with rules, including goods and services tax (GST).
It will be a cash-settled product and can be rolled over into far months at a much lower cost as compared with rollover in futures contract, according to an MCX circular.
Bulldex gives exposure to the extent of 70:30 in gold and silver in a single product, thereby allowing small investors to ride on trend rather than buying two futures requiring much higher funds.
Shekhar Bhandari, president, global transaction banking at Kotak Mahindra Bank, said, “The index will help in better price discovery for the retail investors. It is a good move that India too will have a benchmark index for bullions.”
Bulldex may benefit mutual funds and portfolio managers who have started putting on an average about 15% of the total investible funds into gold.
“Being a rupee-denominated product, it offers the twin advantage of currency and commodity hedging in one single product, making it an attractive product for physical players and gold jewellery manufacturers to hedge their price risks in the volatile market,” said Vikram Dhawan, fund manager (commodities), at Nippon India Mutual Fund.
Kunal Shah, head of commodities at Nirmal Bang said, “Bulldex is a relatively low-cost tool for the bullion industry to hedge the price risk and raise the capital efficiency in the volatile time that the market is witnessing since the last couple of months.”