Retail investors log on to Ncdex mini bullion futures

National Commodity and Derivatives Exchange's (NCDEX) plans to lure retail investors into bullion trading by launching mini gold and silver contracts recently, has been successful so far.

"Keen retail investor interest has prompted us to launch new futurescontracts in bullion. Moreover, investment in gold, which is the best hedge against inflation and currency depreciation, is a good asset diversificationstrategy for retail investors," Managing Director and Chief Executive Officer P H Ravikumar said in a press release.

On Tuesday, NCDEX launched mini gold and silver contracts of 100 gm and 5 kg, respectively, expiring in December, January, and February. "In the past two days alone, we (NCDEX) has captured 10 per cent market share," Narendra Gupta, chief business officer, NCDEX, told CRISIL MarketWire.

"The response has been good so far. A section of clients wanted a contract which was smaller in terms of lot size...as the rise in gold prices was not making it feasible to hold contracts of 1 kg," Gupta said.

The exchange also offers 1 kg gold contract and 30 kg silver contract, which figure among five top-traded contracts.

In last two days, total average volume of December gold mini contract was slightly over 271 kg, while in December silver contract it was 5,250 kg.

A Mumbai-based analyst said the design of the contracts, especially gold, was investor-friendly, which could attract more retail investors. A trader interested in buying 100 gm gold can enter into a contract on the exchange by paying a margin of just 4,300 rupees for 100 gm lot, against the contract value of around 92,000 rupees.

Also, the quality specification for mini gold contract of NCDEX was based on .995 fineness and hence, could attract more retail buyers.

"Well CBOT (Chicago Board of Trade) have launched mini gold contracts and market has accepted it. So we can also expect the same response here," the local analyst said.

However, he sounded a word of caution and said one needs to see how much volume NCDEX is able to register in coming days.

Vishal Gupta, manager, MD Overseas, said these mini contracts will enable small retailers and jewellers to hedge their requirements.

The contract can safeguard itself from volatility in prices for those individuals planning to buy the precious yellow metal for special occasions like marriages, another dealer said.

He said the success of such contracts would become more evident once retail participation increases significantly.