Want to invest in gold, silver? You can now trade in India’s first-ever bullion index

The futures contract in the Bullion Index, or Bulldex, launched by MCX today will allow investors to invest in the bullion sector as a whole, instead of trading in gold and silver contracts separately.

Business Desk, Etv Bharat: At a time when gold and silver are on traders’ radar due to the huge rally seen in prices of both the precious metals in the past few weeks, the Multi Commodity Exchange of India Ltd (MCX) on Monday launched trading in India’s first bullion index -- MCX iCOMDEX Bullion Index, or Bulldex.

The futures contract in the Bullion Index will allow investors to invest in the bullion sector as a whole, instead of trading in gold and silver contracts separately.

The Bulldex tracks the performance of MCX gold futures (1kg) and silver futures (30kg) contracts.

Currently, the MCX iCOMDEX Bullion Index Futures contracts expiring in the months of September 2020, October 2020 and November 2020 are available for trading.

Features

• The underlying for the futures contract is the MCX iCOMDEX Bullion index. Currently, gold holds 70.52% weight in the index, while silver holds 29.48%. But weights are rebalanced annually.
• It is an excess returns index, which basically means that it will include returns from commodity prices plus the return from rolling the expiring futures contract into a new one.
• Each contract starts on the 20th day of contract launch month and if 20th is a holiday, the subsequent working day would be the starting day.
• The Bulldex will have a market lot size of 50 and, unlike gold and silver contracts, it will be a cash-settled futures contract. A cash settlement is a settlement method used in certain futures and options contracts where, upon expiration or exercise, the seller of the financial instrument does not deliver the actual (physical) underlying asset but instead transfers the associated cash position.
• In order to encourage active participation by investors, MCX has also announced that it would not levy any transaction charges on MCX iCOMDEX Bullion index future contracts up to 23 November 2020.

Advantages

• The Bullion index futures also offer traders an opportunity to reduce volatility in comparison to futures with single commodity exposure.
• The Bulldex can also be used as a benchmark for tracking the performance of the bullion sector in India.
• It has smaller contract value, and therefore lesser margin requirements, as compared to the individual gold and silver futures contract, which may make it more attractive for retail investors.