The agri commodities market is beginning to look up as agricultural produce and incomes affects the markets to a huge extent. Agriculture still constitutes about 58% of the employment in the country as per as the 2001 census. This sector is also seen as a potential source for most companies as it drives up the domestic demand. However, the share in GDP from agriculture has been declining in the previous years and in 2009 – 2010 was only about 12.3% (excluding fisheries, forestry and logging).
Agro commodities exchanges in India
With the opening up commodities derivatives, the agri commodities trading in India have got a fillip. It is a great opportunity for investors both retail and corporate to diversify their portfolios and look beyond the stock and shares in the market. Many retail investors also find it difficult to physically trade in the commodities market. Before the future markets were set up, there were no avenues when the commodities could be actually being traded.
There are currently 3 commodities markets that are present, that also allow multi agri commodities trading. These are ‘National Commodity and Derivative Exchange’, ‘Multi Commodity Exchange of India Ltd’ and the ‘National Multi Commodity Exchange of India Ltd.’. This is a great avenue for those that are speculators, arbitrageurs, and other investors that keep track of the pulse in the market. As the recent history has shown, trading and futures in commodities market is less volatile or risky that trading in pure financial instruments such as shares, stocks, bonds and other financial derivatives.
Retail investors need to keep track of the agri commodities through various sources of information from the market and the media such as the agri commodities. This is imperative to ensure that they can book profits on their investments.
Trading in the agri commodities
The prices and the lot size for various agri commodities will vary and is dependent on the exchanges where the trading will take place. The lot size can vary and can be quoted in kg, quintals and tonnes. The minimum investment required for trading is R 5,000. The settlements can be made in physical form and in cash form as the exchanges support both formats. For those investors that wish to settle in cash, prior intimation has to be given of the same.
The various requirements for setting up an account are much the same for trading in stocks.
Investors require:
- Bank account
- Demat account with National Securities Depository Ltd. For trading on NCDEX
- PAN No
- Agreements with the Brokers and a KYC
- The Brokerage rates and commission rates will range between 0.10 – 0.25% of the contract value and the transaction charges will be in the range of Rs. 5 – Rs. 10 per contract or per lakh.
The products that can be currently traded fall under the category of Plantation products, spices, pulses, fibre, cereals, oil and oilseeds and others. Trade can be conducted in 25 such products. The information about the derivatives and the futures markets pertaining to the agri commodities are given daily in the economic newspapers, websites and on exchange websites.
