Commodity Indices

A commodity index is an investment vehicle that tracks the price and the return on investment of a basket of commodities.

  • SEBI recently permitted stock exchanges with commodity derivative segment to introduce futures on indices.

Impact

  • Price Discovery: Based on inputs regarding specific market information, buyers and sellers conduct trading at futures exchanges. This results into continuous price discovery mechanism.
  • Hedging: It is strategy of managing price risk that is inherent in spot market by taking an equal but opposite position in the futures market to protect their business from adverse price change.
  • Import- Export competitiveness:The exporters can hedge their price risk and ....
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