The Indian markets have recently opened up new avenues for investors who want to participate in tradecommodity derivatives. Serious investors are always on the lookout for opportunities to diversify their investment portfolios beyond bonds, shares, and real estate. Commodities are the best option for this as they offer immense potential for profit. Mastering the art and science of commodities trading will allow you to become part of the asset class for investors, speculators, and arbitrageurs who are extremely market-savvy.
The commodities market is not necessarily unfathomable, although it may take newcomers some time to learn its ropes. As far as understanding its fundamentals are concerned, you will find it easy to get on board if you know the basic principles of supply and demand. As an investor, you should understand the advantages as well as the risks of trading commodities in futures form before taking any leapeven a small one. Historically speaking, pricing in commodities futures is less volatile compared to equity and bonds, making them a great option for portfolio diversification.
India is starting to have sizable commodities markets, which is why investors are becoming increasingly interested in its benefits. Like any other market, the commodity futures market has a valuable role in risk sharing and information pooling. It mediates between commodity buyers and sellers while facilitating decisions related to consumption and storage of commodities. All these contribute to the liquidity of the underlying market. Here are some trade ideas for those who wish to enter India’s commodities market:
You have three places to go to when deciding to trade in commodity futures: the National Commodity and Derivative Exchange, the National Multi Commodity Exchange of India Ltd., and the Multi Commodity Exchange of India Ltd. All of these trading locations have their electronic trading and settlement systems and all have a national presence.
Many established equity brokers have also sought membership with MCX and NCDEX. Many consultancy firms have also started offering commodity futures services, including those who offer trading via the web, just like how other equities are offered.
The minimum investment for commodities trading is Rs 5,000. For the most part, all you need is the amount for margins payable upfront to the exchanges through your broker. Margins range between 5 and 10 percent of the commodity contract’s value. Minimum prices for trading gold and silver (bullion), lots, and other commodities vary from one exchange to the next.
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