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Home / IAS Preparation / Ncdex National Commodity And Derivatives Exchange

NCDEX Market - AGRINDEX, Regulation, Equity & Commodity Trading for UPSC!

Last Updated on Aug 26, 2022
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Indian online commodity market NCDEX (National Commodities and Derivatives Exchange) focuses on agricultural commodities. It was established as a public limited company on April 23, 2003, in accordance with the Forward Contracts (Regulation) Act of 1952. Some of India’s most renowned financial organisations, including Punjab National Bank (PNB), Canara Bank, the National Stock Exchange of India, and the National Bank for Agricultural and Rural Development, among others, founded the exchange.

This topic of NCDEX is important from the perspective of the UPSC IAS Examination as it falls under the General Studies Paper 3 of Mains and General Studies Paper 1 of Prelims and particularly in the Indian Economy Section.

In this article we shall discuss the NCDEX, the trading commodities involved, AGRINDEX, regulation of NCDEX and the difference between equity and commodity trading to boost your UPSC Exam preparation

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What is NCDEX Market?

An agricultural product exchange with a significant market share in the agricultural products sector is National Commodity & Derivatives Exchange Limited (NCDEX/the Exchange), situated in India. A board of directors with knowledge of the agricultural products sector makes up the organization. The NCDEX’s primary goal is to give market participants looking to trade agricultural products a platform for exchange.

  • As a public limited company, NCDEX was established on April 23, 2003, and as a recognised association under The Forward Contracts (Regulation) Act, 1952, it began operating on December 15, 2003.
  •  As of September 28, 2015, the Securities Contracts (Regulation) Act, 1956, which is governed by the Securities and Exchange Board of India (SEBI), deemed the Exchange to be a recognised stock exchange .
  • An independent board of directors with no ties to the agricultural sector oversees NCDEX.

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NCDEX – Trading Commodities

There are 29 different agricultural commodities available for trading at the National Commodity & Derivatives Exchange Limited as on December 2017. These products, which make up a sizeable amount of India’s international trade, include pulses, spices, and guar, none of which are traded on any major international exchanges while being economically vital to India.

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NCDEX – AGRIDEX

The NCDEX AGRIDEX index tracks the performance of ten liquid commodities traded on the NCDEX and is the country’s first return-based agricultural futures index. The index is composed of a ten-commodity basket that is selected based on liquidity on the exchange. It is possible to duplicate the performance of the underlying commodities using the NCDEX AGRIDEX as a benchmark.

The value of this index will be determined by the spot and future prices of these ten commodities: soybean, chana, coriander, cottonseed oilcake, guar gum, guar seed, mustard seed, refined soy oil, castor seed, and jeera. The index includes price references for a variety of agricultural products from the kharif and Rabi seasons. On the basis of anticipated product prices, Agridex will also assist the participants in hedging their commodity risk.

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How is the NCDEX Regulated?

The Securities and Exchange Board of India has regulatory control over the NCDEX (SEBI). The Securities Contracts (Regulation) Act of 1956, the Companies Act, the Contract Act, and other laws are among those that regulate the exchange under the Indian Penal Code. The NCDEX headquarters are in Mumbai and provide services to its members through the centers spread out over India.

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Difference Between Equity And Commodity Trading

The differences between Equity and Commodity trading are presented in a tabular format below for better understanding.

Equity Commodity Trading
The value that would be restored to a company’s shareholders if all of its assets were sold and all of its obligations were settled is known as equity. Food, energy, and metals are major components of daily life and are the focus of this market.
This provides businesses access to financing and investors a stake in a firm with the possibility to make money based on its performance in the future. Commodities are utilised as a significant strategy to diversify a portfolio beyond standard securities because they typically move counter to stocks.
Public stocks, or those listed on the stock exchange, or privately traded stocks, can both be exchanged in the equity market. Commodity categories in this market include energy sources like crude oil, gasoline, and metals like gold, silver, etc.

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Examples of Commodities on the NCDEX

Some of the most important agricultural commodities traded on the NCDEX are barley, wheat, and soybeans. In addition, the market includes a few contracts that serve as international benchmarks for commodities including coriander as well as steel, cotton, palm oil, and guar. Three agricultural commodities indices are also managed by the NCDEX: one based on soybeans, one based on guar, and one that is a composite of several agricultural products. Given that India is the world’s top producer and consumer of spices, NCDEX is regarded as a key source of information on spices.

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Conclusion

An Indian commodities exchange with a focus on agricultural commodities is called the National Commodity and Derivatives Market (NCDEX). The National Commodity and Derivatives Exchange has offices all around the nation to facilitate trade, although its headquarters are in Mumbai. Exchanges like NCDEX have additionally contributed to the advancement of Indian agricultural methods. Barley, wheat, and soybeans are just a few of the agricultural products that are traded on the NCDEX.

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We hope all your doubts regarding the NCDEX are addressed after going through this article. Testbook provides comprehensive notes for different competitive examinations. It has always assured the quality of its product like content pages, live tests, Gk and current affairs, mocks, and so on. Ace your UPSC preparation with the Testbook App.

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NCDEX FAQs

National Commodity & Derivatives Exchange Limited (NCDEX) is a nationally recognised, technology-driven online stock exchange with a professional management team and an independent Board of Directors.

The Securities and Exchange Board of India regulated NCDEX.

The National Commodity and Derivatives Exchange (NCDEX) is an Indian commodity exchange that specialises in trading agricultural products.

In India, there are two electronic commodity exchanges: the Multi Commodity Exchange (MCX) and the National Commodity and Derivatives Exchange (NCDEX). They operate distinct businesses and are rivals.

The buying and selling of various commodities and the derivative goods derived from them is known as commodity trading whereas equity is the term used to describe your ownership interest in a company, which is represented by a proportionate share of the firm's revenue and net worth.
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