Dubai: With the announcement of the launch of BSE Sensex Futures on Wednesday, the first ever equity index product offered by the Dubai Gold and Commodities Exchange (DGCX), investors of the Middle East and North Africa (Mena) region can now access the Indian stock market.

The S&P BSE Sensex 30, considered the benchmark stock index of India, comprises 30 bluechip companies, based on its free float market capitalisation methodology. It covers 10 sectors and has over 48 per cent of the market coverage.

The timing of the launch of the new asset class product is not lost, given the volatility in the Indian market amid slowing GDP growth and a reeling Indian rupee.

“Due to the volatility in terms of timing, it’s a good opportunity. For those people who have exposure to India already, we have a readymade contract,” said Gary Anderson, chief executive of DGCX. “[For those who] in the short term [think] the market is going to come off, [they] can participate on this DGCX contract — sell a Sensex contract and hedge their risk.”

There is more than just latent demand for investing in India in foreign markets as seen in surging volumes of Indian derivatives on the Singapore stock exchange, which offers the products in collaboration with S&P Nifty, the other equity index of India. It is competing with the Indian markets in terms of volumes so much so that brokers in India have expressed worries about losing business volumes to Singapore.

Target audience

DGCX’s new contract will target retail participants, including non-resident Indians (NRIs) across the world, existing DGCX members focused on retail offerings, the NRI desks of banks, professional traders trading and arbitraging Indian markets offshore and large foreign institutional investors seeking exposure to Indian equity markets.

The BSE stock exchange’s choice of the Dubai exchange was on expected lines. With about six million non-resident Indians in the Gulf with a natural affinity towards Indian investments, it’s a size that could hardly be ignored.

“Over and above that, this [DGCX] is an international financial centre,” said Ashishkumar Chauhan, managing director of Bombay Stock Exchange. “So it is able to attract people and investments from various parts of the world. It has done well for itself in the last seven-eight years and there is some hope that they would be able to market these products well and create a good market here.”

By introducing this asset class, DGCX believes that it not only complements other Indian products, the Indian rupee in particular, but also gives it the ability to diversify products across the region itself. It also fits into their emerging markets strategy.

High hopes

On DGCX’s expectations on the new product, Anderson said homework suggests that “there is a tremendous amount of enthusiasm in the market about the contract. We will have market makers from day one, we will have price makers and price takers. Once we develop that liquidity and once we are able to distribute over a much broader time zone, I think we will have a much better idea of who is going to access the Sensex contract.”

“The most important thing from our collaboration with S&P BSE was our extended trading hours — the fact we will be able to extend the Sensex contract across Europe and into the US and complement our INR products, which have become very successful in the past 18 months,” added Anderson.