Commodity Markets & Commodity Trading in India

Commodity Markets & Commodity Trading in India India became a trillion-dollar economy in 2007 with commodities playing a crucial role in the market exchange. As per a historical stat, buying and selling of commodities first started in India only in the year 1875.

Commodity Markets and trading is an attractive option in India.

Many traders and investors look for Investment portfolio management to make the right decisions precisely. There are many aspects of commodity trading that you should know before starting investing in Commodity markets in India.

If you are looking for a systematic investment plan, you have come to the right place. We are offering systematic investment plan in various modes like one-time lump sums, monthly SIPs, Quarterly SIPs, Half Yearly SIPs and Yearly SIPs. What is a Commodity?

Commodity all the general items that are in use for daily lives such as spices, metals, energy, etc. There are a few basic categorizations for commodities.

Agriculture — Wheat, Rice, Cocoa, Rice, Soybean, etc.

Base Metals — Aluminium (Al) Copper (Cu) Nickel (Ni), etc.

Precious Metals — Gold, Platinum, Silver, etc.

Energy — heating gas, Gasoline, Petroleum, Green energy, etc.

What is trading?

In an open market, trade by simple definition is exchanging products for another. A normal person does buy and selling of products in the cash. While in markets, trading is the mean by which we buy and sell shares of commodities present on the stock exchange.

By simple definition, we have two basic commodities types as Soft Commodities that comprise agricultural products Hard Commodities are mainly natural resources either extracted or mined What is Commodity Trading in India?

Commodity trading is a historic tradition in India when even cash was not present in the economy. People used to trade one product for another.

Commodity trading is done organized at approach Commodity exchange. There are multiple commodity exchanges available in the Indian markets.

National Multi Commodity Exchange (NMCE) Indian Commodity Exchange (ICEX) National Commodity and Derivatives Exchange (NCDEX) Securities and Exchange Board of India (SEBI) is the organization that controls and regulates commodity trading in India.

Commodity Exchange operated from Monday to Friday from 9 AM to 5 PM for all agricultural commodities while for non-agricultural commodities timings are 10 AM to 11:55 PM respectively.

Commodity Market Trading v/s Stock Market Trading There are some major differences between Commodity market trading and stock market trading.

Commodities represent products that are used in regular life activities while Equity or stock is part of the company share.

Commodities trading is done for a shorter duration while shares can be held for any specific duration.

On the aspect of volatility, Commodity trading is more volatile than equity trading.

Commodity trading uses high leverage and margin money only.

While stock trading allows regular investment and few margin money as well.

With the systematic investment plan (SIP), you can invest in a stock market mutual fund by making regular investments.

Advantages and Disadvantages of Commodity Futures The advantage of Commodity futures comes with high leverage prospects. So an investor uses small money to invest and risks big in the commodity markets. The commodity market is easier to start, enter, and then subsequently exit from the market investments.

One of the key disadvantages of Commodity futures lies in their volatility. Commodity investment is riskier than the traditional stock market.

Conclusion MCX and NCDEX are the two main commodities exchanges in India. Investors can use both on-the-spot and future indices to invest in commodities.

In Spot markets, commodity trading is settled by cash as in a retail market while the future market follows the same practices as an

equity investment. Investors participate for profit or loss only not in the physical delivery of the commodity.

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