Developing an Index for Trading through Multi Commodity Exchange in India

This study describes the construction of index for a commodity exchange organization. There are three types of commodities viz. Metal, Energy and Agricultural products, which are traded through this exchange. We have constructed indices for each commodity group and a combined index. For each commodity group, we have used weighted geometric mean of the price relatives as the index. Weights are selected based on the percentage of contribution of the number of contracts and physical market value. The combined index has been calculated by weighted arithmetic mean of group indices. Such a composite index is called MCX COMDEX. These indices are comparable with indices of other trading organizations. The indices have been made on-line by the trading exchange to give the current scenario of the real-time performance of the indices.