US Futures Exchange chairman Kevin Davis (left) and Bombay Stock Exchange CEO Rajnikant Patel in Mumbai on Monday. (Fotocorp)

Mumbai, Nov. 12: Investors in the US will now be able to directly participate in India’s booming equity markets by trading in sensex futures.

The Chicago-based US Futures Exchange (USFE) today signed a licensing agreement with the Bombay Stock Exchange’s (BSE) 30-share sensitive index for US dollar-denominated futures trading, starting from February 22 next year.

The USFE’s sensex contract — the first of its kind — cuts through a cumbersome authorisation process of using American Depositary Receipts (ADRs).

The dollar-denominated sensex futures contract will trade 23 hours every day and settle monthly to the corresponding value of BSE’s futures contract. The contract would have a notional value of 40,000 and a tick size of $5.

Expected market participants include hedge funds and institutions, international mutual funds, and individuals seeking investments in Indian equities through existing futures accounts. The USFE will be regulated by the Commodity Futures Trading Commission (CFTC).

Rajnikant Patel, managing director and CEO of BSE, said, “The sensex has been and continues to be the flagship index of the Indian capital market. For millions of investors and high net worth individuals in India and abroad, the sensex is synonymous with the Indian equity market and is considered globally as a barometer of the performance of the economy. The launch of a futures contract based on the sensex will give the huge base of US investors direct exposure to the Indian equities.”

The sensex, which comprises 30 frontline Indian stocks, is considered as the country’s premier stock market index.