MCX revamps COMDEX - India’s first real-time composite commodity futures index

MCX-COMDEX captures diversified sectors encompassing futures contracts drawn on metals, energy and agricultural commodities that are traded on MCX. The index was initially designed and developed by the Research and Development Department of MCX in association with Indian Statistical Institute (ISI), Kolkata, and launched in June 2005.

Before the changes, the COMDEX was composed of wheat, urad, soya oil, rubber, guarseed, kapaskhali in agri; gold, silver, copper in metals; and crude oil in energy. In order to synchronize index with changing economic dynamics and increased trading activities on the exchange, the Index Committee has decided to revamp its composition and weights.

In the process, group weights in the composite index have been modified from equal weights of sub-indices to 40 percent each in the case of MCX Metal Index and MCX Energy Index and 20 percent in the case of MCX Agri Index. Thus each sector has been given due weightage to represent its significance in the physical and futures markets.
The new composition of commodities and their weights in the MCX-COMDEX are:

Commodity Final Wts. Group Wts.
MCX-METAL
1 Gold 16.6% 40%
2 Silver 10.4%
3 Copper 7.0%
4 Aluminum 2.0%
5 Nickel 2.0%
6 Zinc 2.0%
MCX-ENERGY
7 Crude Oil 31.8% 40%
8 Natural Gas 8.2%
MCX-AGRI
9 Ref. Soy Oil 3.1% 20%
10 Mentha Oil 4.5%
11 Potato 3.3%
12 Kapaskhalli 2.0%
13 Cardamom 2.0%
14 Chana 3.1%
15 Guarseed 2.0%

The new composition comes on the back of continuous research, intensive analysis and interaction with economists, statisticians and market players to position MCX-COMDEX as an effective barometer of economic trends in the country. It also enables the Comdex to retain its characteristics as an attractive tradeable index in the longer term.

With its component weightages being adjusted to reflect their physical market shares, COMDEX with its underlying futures prices of commodities could function as the augury of future price trends. It could thereby provide enough leeway for country’s economic managers to take appropriate corrective action if not in advance at least on time.

A precise relationship if established between balance sheet parameters and COMDEX would serve to help corporates with extensive exposure to component commodities take advance remedial measures while charting their growth path and add value for investors.

Investors who own stocks of companies having exposure to primary commodities could use the COMDEX as a guide to hedge their risk in the commodity exchange, thereby bringing stability to the financial markets and strengthening linkages.