The Dow Jones Industrial Average (DJIA) and the S&P 500 -- the two of the very followed indices of the US stock -- would start trading from tomorrow about the National Stock Exchange (NSE), India's biggest bourse.
The move would allow investors to take positions on trends thousands of miles away in america market on Dalal Street, the commonly used term for that Indian stock market by virtue of being it's traditional address.
The S&P 500 is an index from the 500 leading companies of the US economy, while the DJIA comprises of the 30-most liquid blue-chip companies based in the usa.
This is the first time that derivative contracts on global indices are now being launched in India. This is also the first time on the planet that futures contracts on the S&P 500 index are now being introduced and listed on an exchange outside of the home country, the US.
In order to encourage active participation in trading of those indices, the NSE has decided that it won't levy any transaction charges on trades done until February 29, 2012.
Trading would begin tomorrow in futures contracts on both indices and options contracts on the S&P 500 catalog.
The contracts would be rupee-denominated and would end up being traded during Indian market hours.
The NSE has said that all the member brokers of its equity derivatives segment could trade in this product for themselves and their own clients.
"Derivative contracts on these global indices will give you Indian investors easy access to US markets within Indian market hours, without taking any currency danger, " NSE Managing Director and Chief Executive Ravi Narain stated.
The new products would help the Indian traders in portfolio diversification and hedging of risks.
The movements in these indices is probably not affected by the economic and market trends in India and for that reason, these indices can help the investors reap a few benefits even in times of losses in Indian native markets, provided there are favourable trends in the united states markets, market experts said.
Besides, Indian investors can now take positions based on expected newsflow in america market.
In late June, NSE had got market regulator Sebi's approval to launch derivative contracts on both of these US indices. Sebi had released the regulatory construction for such products in January.