The Kotak Mahindra Bank Ltd.-backed exchange, the nation’s biggest venue for commodities, began a cash-settled bullion index futures on Monday and plans to start a similar product for base metals in a month followed by energy and farm commodities, Managing Director P.S. Reddy said in an interview.
“The markets generally prefer cash-settled contracts to delivery-based contracts,” as they don’t need to worry about the delivery and quality, he said.
Growing investor appetite for bullion has pushed up prices by almost 30 per cent this year, with record inflows into exchange-traded funds amid the coronavirus pandemic even as physical demand in the second-biggest consumer suffers.
The exchange, which started in 2003, already offers futures contracts in gold including 10 grams, guinea, mini and petal contracts. Bullion accounted for 35 per cent of the company’s revenue in the financial year ended March 31, base metals contributed nearly 19 per cent while crude oil was 40 per cent
MCX is currently in the process of permitting delivery of gold based on Indian standards, and is also exploring allowing secondary or recycled lead, Reddy said. “This will further deepen the relationship between MCX and the physical market,” he said.
Average daily turnover on the bourse is about 300 billion rupees, close to last year’s levels despite initial hiccups of reduced trading hours due to the coronavirus outbreak, Reddy said.