Commodity trading takes place for a total of 53 hard and soft commodities in India. These include-
- Hard commodities – Metal, Crude oil, etc.
- Soft Commodities – Agricultural goods like corn, wheat, soybean, guar, etc. That have limited shelf life
Commodity prices are affected by many factors and it is vital to understand these before making a foray into the commodity trading in India. Also, a clear idea about the demand and supply chain is vital for this.
Thus, if you are a beginner, having a clear idea about commodity, types, prices, and fluctuations, etc. is vital to your success in this market.
Benefits of commodity trading in India
Some of the major reasons to take commodity trading in India are –
- High leverage –
You can take the position in a commodity by paying attention to the price fluctuations in the commodity exchange in India. Later, when the same is clear to you, you can make higher investments in the market by making lower actual investment. This is called as leverage.
- Lower manipulation
Since the commodity trading in India is largely governed by the international price movement, the market is less prone to price manipulation or rigging.
Commodity prices are prone to supply and demand dynamics, weather conditions, geopolitical factors, and even natural disasters. As a result, these form a separate and independent class that can be an excellent diversification in investment portfolio.
Thus, commodity trading in India will benefit you in the following manner –
- Hedging against price volatility –
Considering the highly competitive marketplace, wide fluctuations are observed in the import and export of goods. This can affect your bottom line considerably. Using the help of commodity futures trading in India, you can gain or sell commodity at a price decided months ago. As a result, you are safe against the market fluctuations and price changes.
- Helps you to lock in your goods –
If you are a producer of a commodity, investing your goods for commodity trading in India helps you to save your current price of goods. If the price of the same crashes in the later stages, then this strategy can save you from going through a major loss.
- Assured demand –
Any log in the physical market can mean huge wait times for your buyers. Therefore, selling your commodity futures can give you assured demand for your products.