In a move to allow US investors participate directly in India’s equity markets, Chicago-based US Futures Exchange (USFE) will exclusively licence Bombay Stock Exchange’s Sensex index for US dollar-denominated futures trading beginning on February 22, 2008.

“Exposure to emerging markets, particularly India, is now essential for institutional portfolio management and retail investors alike,” said USFE Chairman Kevin Davis. “This agreement will provide the opportunity for US investors to gain exposure to India’s unprecedented economic growth, expansion and investment performance,” he added.

Overseas investors

Currently, US investors can buy only a handful of Indian stocks listed on New York and NASDAQ exchanges through an American Depository Receipt (ADR) authorisation.

USFE’s US dollar-denominated Sensex futures contract will trade 23 hours per day and settle monthly to the corresponding value of BSE’s futures contract. The contract will have a notional value of 40,000 and a tick size of $5. BSE MD & CEO Rajnikant Patel said the launch of a futures contract based on the Sensex will facilitate overseas investors in taking exposure to Indian equities.

Expected market participants include hedge funds and institutions, international mutual funds, and individuals seeking investments in Indian markets. Following the curbs on P-notes, analysts expect hedge funds and other investors, who are denied direct entry to Indian markets, to take exposure to Indian stocks through the Sensex futures in USFE.

“The Sensex futures product is an ideal fit for USFE’s global distribution model and commitment to innovation,” said USFE CEO Satish Nandapurkar. “USFE’s listing of the Sensex will provide US market participants with direct access to pure Indian equities exposure through existing futures accounts.”