A commodity market allows you to trade in raw materials like sugar, gold, oil and spices, just to name a few. While the share market is for stocks, the commodity market allows investors and traders to take positions based on forecasted economic trends or arbitrage opportunities. When done smartly, commodity trading can be a profitable exercise. With Indian investors warming up to different financial assets for investments, commodities present a unique opportunity. Let us find out more.
A commodity is a group of goods that are important in everyday life. Commodity can be in the form of food, energy, metals etc. Do remember that a commodity is exchangeable by nature. Commodities can be moved from one place to another physically. To understand about more commodities, read different commodity updates and understand how this market works.
Even today in villages, farmers exchange commodities among themselves. In the organized commodity trading world, things are a little different. Commodity trading is regaining its importance among investors. This trading happens on a commodities exchange, where various commodities and their derivatives products are bought/sold. The most commonly traded items are agricultural products and contracts based on them. But, increasing non-agro commodities are also being traded like diamonds, steel, energy items etc.
A tradable commodity can be bought and sold, just like you trade in equity/shares. You buy a commodity, expecting future Price appreciation. When the future price hits the target, you sell it. This is the modus operandi. On the other side, sellers of a commodity sell it when they think there is no room for appreciation for future price. Open a demat account today.
The trading in commodities in India takes place in either spot market, or futures markets. In spot markets, the commodity trading happens instantly and in exchange for cash. Track prices of commodity future live to understand how the prices move.
In commodities future space, buyers and sellers trade a commodity based on a standardized contract considering future price. Trade in future contracts happens electronically, and the contracts can be settled in hard cash.
Commodity futures contracts are contracts for delivery of goods. You can get delivery of goods against commodity futures contracts if there is sufficient delivery logic in the contract design. In commodity futures, the future price comes from bids and offers put in by commodity dealers/traders/investors.
The National Commodity & Derivatives Exchange Limited (NCDEX) allows trading in commodities such as barley, chana, mazie, moong, paddy (basmati), kapas, 29 mm, cotton, guar seed 1 mt, guar seed 10 mt, guar gum, castor seed, cotton seed oilcake, soybean, refined soy oil, mustard seed, crude palm oil, sugar, pepper, turmeric, jeera and coriander.
The Multi Commodity Exchange of India Limited (MCX) allows trading in bullion products (Gold, Gold Mini, Gold Guinea, Gold Petal, Silver, Silver Mini, Silver Micro), base metals (Aluminium, Aluminium Mini, Brass, Copper, Lead, Lead Mini, Nickel, Zinc, Zinc Mini), energy (Crude Oil, Crude Oil Mini, Natural Gas) and agri items (Black Pepper, Cardamom, Castor Seed, Cotton, Crude Palm Oil, Mentha Oil, RBD Palmolein, Rubber)
The ICEX not just allows trading in agri products, plantation (rubber), fiber (jute), but also commodities like diamonds and steel.
The trade timings of commodity exchange from Monday to Friday are IST 10:00 a.m to 11.30 p.m. / 11.55 p.m.* (*during US daylight saving period). You can catch all the action about commodity future live during the trade hours.
In India, there are commodity exchanges including The National Commodity & Derivatives Exchange Limited (NCDEX), The Multi Commodity Exchange of India Limited (MCX) and The Indian Commodity Exchange Limited (ICEX). The National Multi-Commodity Exchange (NMCE) has been merged with ICEX.
There are two sides to the same coin. Commodity trading has its own advantages and disadvantages.
The advantages include commodity futures are highly leveraged investments, which means with a relatively small amount of money you can take a bigger bet. Commodity future markets generally are very liquid, which means entry and exit are easy. Commodity futures can potentially give huge profits, if traded carefully and smartly
The disadvantages of commodity futures trading are that markets are volatile, which means risk is higher. Direct investment in the commodity markets is of high-risk, especially for new investors. So, be careful. Gains and losses are magnified by leverage, which means you win big or lose big.
Investors looking at commodity trading opportunities will get commodity updates in various places. But, instead of looking at the entire internet for information, use Nirmal Bang's reports and calls. Key commodity updates future regarding price and delivery will help you spot potential trades. Open a demat account today.
The SEBI regulates commodity market trading in India. The Commodity Derivatives Market Regulation Department (CDMRD) looks after day to day operations.
Recently, the SEBI has allowed mutual funds and PMSes to trade in commodities derivatives segment.
You have to select the right partner broker for commodity broking. There are many brokers, but only a few can be your friends for life.
Nirmal Bang offers clients commodity trading in the commodity markets. Our personalized services in commodity trade and investment through our competent and knowledgeable team of professionals involve trading of commodity derivatives in terms of futures and options.
Our advantage is our nationwide network and powerful research team. We provide our clients with trust based and ethical personalized services and guide them through the huge investment opportunities available in commodity market. Do not hesitate to ask Nirmal Bang all your questions about commodity updates future, nitty-gritties about commodity future price, commodity investing strategies and taxation.