Kochi: Gold futures trading is making a re-entry into the Indian market after a gap of 41 years. This time, however, the trading will be through the online system.

National Multi-Commodity Exchange of India Ltd (NMCEIL) will begin the online gold futures trading through the terminal of Geojit Securities at Vigyan Bhavan in New Delhi on 3 October. All the members of NMCEIL will be able to trade in gold futures after it goes on-stream.

Geojit managing director C J George says the gold futures trading will allow the players to hedge their risk. The size of the gold jewellery market in the country is reckoned to be over Rs 40,000 crore.

On any given day, the Indian bullion traders and speculators are understood to hedge and speculate in gold futures to the extent of around Rs 1,000 crore through exchanges in other countries.

India is the largest consumer of gold though the per capita consumption is low. In the current year the estimated demand of gold in the country is 880 tonnes. Most of the 2,700 jewellers in India are expected to participate in the trading, George says.

Unlike the large contract sizes of many international exchanges, NMCEIL's unit of trade and delivery is 100gm bar of .999 fineness. The derivative transactions are cleared and settled through NMCEIL's in-house clearing and settlement house. Delivery is backed by a Central Warehousing Corporation (CWC) receipt, which meets the current international standards.

The trading is only in gold bars with the hallmark of eight foreign companies approved by NMCEIL. The trading will be of three-month contracts starting from December, January and February. Geojit will be collecting a 10-per cent margin for 100 gms.

George says the gold futures trading has immense scope for individual investors, non-banking finance companies, financiers and industrial consumers. While the individuals can cover the risk of keeping the ornaments, the others can play safe against a future dip in prices.

The online trading will be inaugurated by Union Minister of Consumer Affairs, Food and Public Distribution Sharad Yadav. Geojit has at present a 60-per cent share of about 2,000-tonne daily turnover of rubber futures trading and 85 per cent of pepper futures trading in the country. George says NMCEIL is planning to start futures trading in wheat and rice soon.