The history of commodities trading in India is quite robust. The commodities market was present in India much before 1970’s however it came to a standstill in the 1970’s since there were many rules and regulations that in force that prevented the growth of the market. The derivatives and the futures market for the commodity trading in India has opened up great avenues for retail investors also.
Products for commodity trading
Retail investors can invest in many types of agri commodities such as pulses, cereals, oilseeds etc. and also in non agri commodities such as gold silver, crude oil etc. Since the delivery at the end of the contract period can be given in physical stocks or settled in cash, it gives investors the freedom to add these to their financial portfolios and benefit from the diversification in their portfolios.
Exchanges in the country
The various commodity exchanges where the products are traded and retail investors can participate are National Commodity and Derivative Exchange (NCDEX), the Multi Commodity Exchange of India (MCX) and the National Multi Commodity Exchange of India Ltd. (NMCE).
The stocks can be traded electronically and the settlement made. The three national exchanges have their presence in more than 1500 cities and smaller towns across India. These exchanges are also regulated by the Forward Markets Commission. The registered brokers of the exchange are listed on the sites of these exchanges. Some of the more prominent commodities broker is Refco Sify Securities, SSKI (Sharekhan), ICICIcommtrade etc.
There are certain commodities trading basics that can be used by the retail investors.
- The commodity trading in India can be started with a minimum investment of R 5000. Money is also required for payment of brokerage charges and margin calls.
- The margins will be usually being in the range of 5% – 10% of the contract value of the commodities futures contract.
- The unit and the prices will differ for each commodity. The units can be in grams, kilograms and tons or metric tons.
- Since the exchanges have systems for both cash and physical settlement, investors can choose their mode of settlement and payment for the futures contracts. For physical deliveries, warehouse receipts are required at the time of settlement and delivery.
For those that are investors and players in the market, market information is also available quite easily. The prices of the commodities futures are dependent on the demand and the supply of the commodities and many other economical and outside factors.
For trading in futures, the investor would require a Demat account for commodities trading from National Securities Depository Ltd. PAN no, contact details and bank account no are mandatory for entering into contract with the commodity trading broker.
Companies offer commodity trading tips that are chargeable. Investors are alerted through SMS and emails for the tips to help them profit from their investments. Apart from this investors can use the information available in commodity related magazines, daily financial newspapers and reports from market analysts as well as many news channels.
