Having been hit by a sudden ban on derivatives trading in key agriculture commodities, NCDEX plans to venture into equity and equity derivatives trading and start a feasibility study.
The decision was taken at the Board meeting of the exchange held on Wednesday. The exchange plans to invest ₹300-₹600 crore to establish itself in the highly competitive equity trading space dominated by NSE and BSE.
“The Board of Directors of the Exchange at its meeting held on Wednesday approved for the launch of equity and equity derivatives segment in the Exchange based on a feasibility study and business plan prepared for the same,” said NCDEX in a statement.
The exchange will benefit from its entry into the equity and equity derivatives segment, which is very large and growing and offers an opportunity for NCDEX to diversify beyond the agriculture segment. The diversification is also expected to benefit the agriculture segment through significant synergies, it added.
One of the leading agriculture-focused exchanges, NCDEX, has banned derivatives trading in seven agricultural commodities through a series of orders for past three years. In the latest round, the ban was extended till March-end.
The exchange had reported a net loss of ₹12 crore in the December quarter against ₹11 crore logged in the same period last year. Its revenue was down marginally at ₹22 crore (₹23 crore).
SEBI’s nod may be tough
Narinder Wadhwa, Managing Director & CEO, SKI Capital Services said the exchange’s plans for equity trading are ambitious, but its viability faces significant challenges given the dominance of NSE, which holds over 95 per cent of the market share in equity derivatives, while BSE has a niche in cash market trading.
Moreover, SEBI’s approval could be challenging, particularly due to NSE’s 15 per cent stake in NCDEX. SEBI may see a conflict of interest, as allowing NCDEX into equity trading would mean NSE has an indirect interest in a competing platform, he said.
However, since SEBI has been encouraging competition in the exchange space, NCDEX might get a chance if it presents a unique value proposition, said Wadhwa.
While exchanges can theoretically offer all SEBI-regulated products, it will be challenging to get broker and trader participation in equity derivatives.
Instead of competing directly, NCDEX could focus on unique segments—such as SME stocks, agri-related equity derivatives, or innovative index products linked to commodities.
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