The Indian financial market has various investment avenues. All work favorably in enhancing your investment portfolio. A prime example of this is Commodity Trading. It deals in buying and selling of raw materials. It protects the investor against inflation and lets you hedge against risky geopolitical events.
Commodity Trading operates in a specific market like any other trading form. It is called the Commodity Market. It is a financial marketplace that supports producers, manufacturers, wholesale traders, etc. It serves as a price discovery mechanism for the many goods and commodities these individuals offer. In India, three primary commodity exchanges are currently operational. They are:
- The Multi Commodity Exchange of India (MCX)
- The Indian Commodity Exchange (ICEX)
- The National Commodity & Derivatives Exchange Limited (NCDEX)
Types of commodities traded in India
A Commodity Investment in India can be of any kind. However, it should fall under any one of the following categories:
- Agriculture
Commodities include rice, wheat, maise jeera, castor oil, turmeric, yellow peas, etc.
- Metals & materials
These entail aluminium, copper, iron ore, rare earth metals, etc.
- Precious metals & materials
You trade precious metals like gold, silver, platinum, and palladium here.
- Energy
This involves materials like crude oil, natural gas, alternate energy, etc.
- Services
This category includes oil services, mining services, etc.
Role of Commodity Market in India
The Commodities Market contributes significantly to India’s growth. It impacts the economy in the following ways:
- Offers security
It ensures that the suppliers of essential commodities are safeguarded against falling prices. It also utilizesFuture Contracts to lock-in specific prices. As a result, the country has an adequate supply of necessities in a secure environment.
- Facilitates agriculture & infrastructure
It provides farmers, brokers, customers, and intermediaries with sufficient profits. This way, it facilitates post-harvest infrastructure, warehousing amenities, transport, etc. It attracts better investments in the agriculture sector by offering support.
- Serves as a reliable platform
Farmers and manufacturers had to rely on intermediaries to sell their products. They had no option but to pay them whatever they demanded. But the introduction of the Commodity Market has changed this scenario. By serving as a reliable and organized platform, it has discarded the need for such intermediaries.
- Diminishes volatility
It mitigates concentrated threats and ensures the overall distribution of risk exposure. For instance, a jeweler could sell a Gold Futures Contract to dodge price hikes. On the other hand, an investor can buy them to capitalize on the price hike. In either case, the contract evenly distributes the risk factor and reduces volatility.
ICICI Securities Ltd. (I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. – ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai – 400 025, India, Tel No : 022 – 6807 7100. I-Sec is a Member of National Stock Exchange of India Ltd (Member Code :07730), BSE Ltd (Member Code :103) and Member of Multi Commodity Exchange of India Ltd. (Member Code: 56250) and having SEBI registration no. INZ000183631. Name of the Compliance officer (broking): Mr. Anoop Goyal, Contact number: 022-40701000, E-mail address: complianceofficer@icicisecurities.com. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. The contents herein above are solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments or any other product. Investors should consult their financial advisers whether the product is suitable for them before taking any decision. The contents herein mentioned are solely for informational and educational purpose.ss
