There were many investors or traders who wanted to access the commodities market without having to take care of the physical delivery of the commodity and the costs associated with it. The launch of the first-ever tradable commodity index, MCX iCOMDEX in 2019 acted as a blessing in disguise for them. This is because it allows investors to trade in the commodity market through indices rather than futures contracts. Before we move any further, you must know that commodities can be traded in 3 ways – indices, futures and options but in this article, we will discuss only indices. Now, let’s understand what is a commodity index and how it helps investors and traders seeking entry into the commodity market.
Understanding commodity index
A commodity index is an investment tool that tracks prices and returns on a basket of underlying commodities (consists of a single commodity or combination of commodities). These indices would track various groups of commodities such as energy, precious metals, agriculture, industrial metals, and more. You must know that the value of each index would fluctuate on the basis of the price movement of its underlying assets.
The major difference between commodity index and NIFTY or SENSEX is the constituents. While the constituents of NIFTY or SENSEX are prices of underlying stocks, MCX iCOMDEX consists of commodity futures.
Now let’s take a look at the salient features of MCX iCOMDEX before we understand its various indices.
- It consists of the following:
- The composite index which is composed of futures contracts across various segments
- Two sectoral indices namely, Bullion Index and Base Metals Index
- The underlying constituents under this index are liquid futures contracts traded on MCX
Why should you trade in commodity indices?
Types of commodity indices on MCX and NCDEX
The below table will give you a better understanding of all the commodity indices on MCX and NCDEX.
|MCX iCOMDEX Bullion Index
|MCX iCOMDEX Base Metal Index
|MCX iCOMDEX Energy Index
This categorization of commodities into various indices helps investors experience the commodity market without having to worry about the physical delivery of the products. Each commodity index helps in understanding how the underlying commodities are performing as a whole. To start trading in the commodities, follow the below-mentioned trading session timings:
- Monday to Friday – 09:00 am to 11:30 pm / 11:55 pm
- On expiry day – 09:00 am to 05:00 pm
Disclaimer: This blog is exclusively for educational purposes.