subject: Minutiae about Commodity Markets [print this page] Minutiae about Commodity Markets Minutiae about Commodity Markets
Attraction
If you are looking to diversify your portfolio with something other than bonds, shares, real estate, then the commodity market can provide just the opportunity you are looking for. With the Indian economy opening up and the establishment of multi commodity exchanges, retail investors now have the chance to trade in commodity futures which has nothing to do with actual physical stocks. Commodity trading offers immense potential for the creation of a distinct asset class in the market that savvy speculators and investors can take advantage of. Commodity market is relatively easy to understand and the pricing here is more stable compared to the volatility of equity and bond market, thus paving the way for effective portfolio diversification. The commodity trading market plays a vital role for risk sharing and information pooling in the sector and facilitates mediations between sellers and buyers. The underlying market is made more liquid because of this.
Commodity Trading
Commodities can be traded on 3 platforms the Multi Commodity Exchange of India Limited (handles futures trading of many commodities), the National Commodity and Derivative Exchange (handles energy, metal and agricultural commodities) and the National Multi Commodity Exchange of India Limited (handles mainly agricultural and metals commodities). Electronic trading and settlement is possible on all 3 systems. You can start trading with an amount as small as Rs5000. You need money to pay upfront for the margins during exchange through brokers, with margins usually ranging from 5-10% of the total value of the contract. You need a bank account as well as commodities demat account registered with the national Securities Depository Limited to start commodity trading.
Collecting Information
You can get relevant information and news from daily business newspapers. You can also check out specialized metals and agricultural commodities magazines. Brokers too provide analysis as well as research support. You can make use of the internet to look for specific information.
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