In the recent past, there had been news doing the rounds of a merger between NCDEX (National Commodities and Derivatives Exchange Limited) and NSE (National Stock Exchange). As of 26 November 2021, the report is close to being confirmed and announced. Find out more details regarding this story below:
Key Highlights of the NCDEX-NSE Merger
- The merger between India’s market leader in equity trade (NSE) and the market leader in Agri-commodities (NCDEX) could potentially transform the agri-commodity business.
- Although NCDEX focussed mainly on agri-commodities, most of its trading activities have been the direct cause of inflation in the past and have impacted the nation’s household kitchen budget adversely. Hence, governments have maintained extensive scrutiny over this exchange to date.
- In 2007, the NCDEX faced flak from the Government for futures trades in urad and tuar, which had led to direct inflation of these commodities. The Government banned NCDEX from trading in the same.
- Consequently, NCDEXdoes not trade in commodities that have pan-India consumption or production. Instead, it allows futures and options trading on guar seed, guar gum, castor seeds, etc.
- The NCDEX-NSE merger may revive agri-commodities as hoped by the Government.
NCDEX stands for the National Commodities and Derivatives Exchange Limited. This is India’s leading agriculture commodity exchange and has had a market share of around 80% since 2019. This exchange has a broad base of commodity trading products, including spices, pulses, and guar, keeping the domestic market in mind.
NCDEX was established as a Public Limited company back in April 2003. Presently, some of its shareholders include:
- Life Insurance Corporation of India (LIC)
- National Bank for Agriculture and Rural Development (NABARD)
- Canara Bank
- Punjab National Bank
- CRISIL Limited
To sum it up, SEBI regulates NCDEX, and its headquarters are in Mumbai. It offers futures and options contracts for commodities on the platform.
Market experts believe domestic institutional investors need to participate in agri-commodities trade, and they may do so once the merger comes through. After the merger, both foreign and domestic companies may begin to trade on NCDEX.
A merger plan has been going around for the past two years between NCDEX and NSE. Meanwhile, NCDEX had even decided to go public, but COVID-19 delayed those plans. As things stand now, analysts expect the merger to be announced any time soon.
However, there exists a problem with trading in agri-futures, as the trade is concerned with only a few products like chana, soya, mustard, guar, etc. So, only time will tell if this is a beneficial move or not.
Frequently Asked Questions
- What is the authorised capital of NCDEX?
Ans. The authorised capital of NCDEX is Rs. 70,00,00,000.
- What are the trading products that NCDEX offers?
Ans. NCDEX offers the following trading products:
- 1 indices contract
- 1 non-agricultural commodity
- 23 agricultural commodities
- 7 options contracts for agricultural commodities
- For how much will NSE acquire NCDEX?
Ans. NSE is likely to acquire NCDEX for Rs. 900-1,000 crores.