National Spot Exchange (NSEL), an electronic spot market promoted by Financial Technologies India Ltd (FTIL) and National Agricultural Co-operative Marketing Federation of India Limited (NAFED), launched a unique investment product in the form of demat gold on its platform yesterday. The segment which is similar in functionality to the cash segment in equities, offers commodities in the demat form in smaller denominations (e.g. 1, 2 3…… gms). This is expected to be a big hit with the retail investors, who have waited a long for an investment product in commodities. On the first day of its launch, the contract recorded a unit volume of 43,438, valued at Rs 7.40 crores. This product is designed to reach the masses across the country. Investors can now trade and invest in gold of 1 gm denomination and multiples thereof, just like shares.
Distinguished participants of the equity market viz. Globe Capital, Religare, Karvy, Goldmine, IL&FS, Monarch capital, SMC and SSD securities have been empanelled with NSEL as depository participants (DP). An individual can trade in this investment product after opening a demat account with any of these DPs. Physical delivery of gold is possible in the form of gold bars / coins from Ahmadabad, Mumbai and Delhi. NSEL is in the process of expanding its delivery facilities to other locations. The clearing and settlement pay-in and pay-out are based on T+2 cycles.
Mr. Anjani Sinha, MD and CEO, NSEL, said, "The sum of demat accounts maintained with depositories is around 1.65 crores. Most of the retail investors either purchase stocks using their demat account or purchase units of mutual funds. In India, the time-honored ancestral wisdom places a high premium on buying precious metals as investment and every household in India invests in gold / silver of one form or the other. Thus, the potential for demat accounts in commodities is at least 4-5 crores over a period of next 3 years. This is a great business opportunity for large number of DPs and retail broking houses."
For the first time in the history of Indian commodity market, a dematerialised product is being made available for retail investors. Hitherto the exposure of commodities market participants in India has been limited to commodity futures contract, physical commodity and ETF Gold. Trade and investment in commodities in the demat form is a dream come true for retail investors and portfolio managers.
NSEL is spreading its footprints and is today present in 11 states with 23 commodities, 49 delivery centres and 194 commodities contract. The Exchange owes its success to its 310 members consisting of eminent market participants. The leading Government organizations such as MMTC, PEC, Cotton Corporation of India, NAFED, FCI have taken membership of NSEL and use its platform for dealing in various commodities.
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