What Is the National Commodity and Derivatives Exchange (NCDEX)?

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Updated May 13, 2022

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What Is the National Commodity and Derivatives Exchange (NCDEX)?

The National Commodity and Derivatives Exchange (NCDEX) is a commodities exchange dealing primarily in agricultural commodities in India. The NCDEX was established in 2003, and its headquarters are in Mumbai.

Many of India’s leading financial institutions have a stake in the NCDEX. As of 2022, significant shareholders included Life Insurance Corp. of India (LIC), the National Stock Exchange of India Ltd. (NSE), and the National Bank for Agriculture and Rural Development (NABARD).

Key Takeaways

The National Commodity and Derivatives Exchange (NCDEX) is a commodities exchange dealing primarily in agricultural commodities in India.
The NCDEX is located in Mumbai but has offices across the country to facilitate trade.
Exchanges like the NCDEX have also played a key role in improving Indian agricultural practices.
Barley, wheat, and soybeans are some of the leading agricultural commodities traded on the NCDEX.

Understanding the NCDEX

The NCDEX is one of the top commodity exchanges in India based on value and the number of contracts. It is second only to the Multi Commodity Exchange (MCX), which is focused on energy and metals. The NCDEX is located in Mumbai but has offices across the country to facilitate trade.

As of 2022, the NCDEX featured futures contracts on 23 agricultural commodities and options on seven agricultural commodities. It also offers clearing services for derivatives contracts traded on the exchange.

India is a world power in terms of agriculture. It is one of the largest producers of wheat, rice, milk, and many types of fruits and vegetables. The size of India’s agriculture sector is somewhat hidden internationally because the populous nation consumes much of what it produces. However, increasing farm-level productivity is making India’s strength in agriculture more apparent. The NCDEX plays a critical role in India’s growing agriculture sector.

An independent board of directors runs the NCDEX, and they have no direct interests in agriculture.

Benefits of the NCDEX

In establishing and maintaining an online futures market for crops, the NCDEX has helped increase market transparency. The exchange assists Indian farmers in the price discovery process. The NCDEX enables them to price their goods more accurately even if they are not active in the futures market.

Intermediaries, who are known as commission agents, previously controlled much of the market information in India. The introduction of online commodity exchanges like the NCDEX reduces the cost of price data for farmers by cutting out the middlemen.

Exchanges like the NCDEX have also played a key role in improving Indian agricultural practices. By standardizing the quality specifications of various products through contracts, the NCDEX has raised quality awareness. Farmers in India increasingly focus on testing requirements and enacting farming practices that result in consistently high-quality crops.

The NCDEX is still young by some standards, but traders and large market participants are already using contracts to hedge and speculate. This trend is likely to continue as India’s agricultural sector grows in terms of productivity and exports.

Examples of Commodities on the NCDEX

Barley, wheat, and soybeans are some of the leading agricultural commodities traded on the NCDEX. The exchange also hosts some contracts that are global benchmarks for commodities like coriander, as well as commodities such as steel, cotton, palm oil, and guar. The NCDEX also manages three agricultural commodities indexes: one based on soybeans, one on guar, and one a composite of several agricultural products.

NCDEX is seen as a significant source of information on spices, as India is the leading producer and consumer of spices in the world.

What is the difference between the National Commodity and Derivatives Exchange (NCDEX) and the Multi Commodity Exchange (MCX)?

The National Commodity and Derivatives Exchange (NCDEX) and the Multi Commodity Exchange (MCX) are both electronic commodities exchanges in India. They are separate businesses and compete with one another. The NCDEX specializes more in agricultural commodities, while the MCX is better known for its trading in metals and energy products.

How can I trade on the NCDEX?

To access NCDEX markets, you would need to have an account at an authorized broker who is connected to the exchange in India. These include Angel One, Sharekhan, Edelweiss, and Upstox, among others. Note that Zerodha, a large Indian broker, does not effect trades on the NCDEX, only on the MCX.

What are the most active listings on the NCDEX?

While these are subject to change, the most active products on the NCDEX are currently contracts on cottonseed oil, guar seed, and castor oil.

Article Sources

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National Commodity and Derivatives Exchange. “NCDEX Overview.”
Multi Commodity Exchange of India (MCX). “About Us.”
The India Forum. “India’s Biggest Challenge: The Future of Farming.”
Indian Institute of Management Ahmedabad. “Farmers’ Participation in India’s Futures Markets: Potential, Experience, and Constraints,” Pages 49–55 (Pages 66–72 of PDF).
Food and Agriculture Organization of the United Nations. “FAOSTAT: Crops and Livestock Products: Visualize Data,” select “Spices nes” from Item menu, “World + (Total)” from Country/Region menu, “1994” from From Year menu, “2020” from To Year menu, and “Average” from Aggregation menu.
Helgi Library. “Which Country Eats the Most Spice?”
Chittorgarh. “Does Zerodha Offer NCDEX Trading?”
moneycontrol. “Most Active Commodity on NCDEX (Volume).”

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