How Commodity Trading Works in India?

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How Commodity Trading Works in India?

Date: Oct 17, 2022 | Time: 06:35:00 PM | Author: Editor News

The working of Commodity Trading can be done either in a virtual or physical space and it is not much different in India. You could purchase, sell or trade diverse commodities at current or future dates. You could even venture into commodity trading with the help of futures contracts, options, swaps, forward and plenty of others. Forward contracts are also used to trade commodities between farmers and exporters/importers who wish to hedge against price volatility. Here in India, if you are planning to try your luck in commodity training, you should know it's very functioning to be successful and create wealth.

Trade is enabled in the regions where there is insufficient supply when the commodity market is deemed as a market tool. To maximise profits by reducing risks, several businesses and investors exchange them and other entities. The commodities that are usually traded in the commodity market instruments are gold, coffee, oil and plenty others. Investors facilitate the exchange of material objects while using the immaterial worth of these commodities. The commodities market is essentially governed by the principles of demand and supply. When demand matches supply, the market has attained equilibrium.

The working of the commodity market happens on four different levels:

Level 1: Primary production is the very first thing happening in the commodity market. The functioning of the commodity markets kick-starts with the production of the commodity in India, just like in any other part of the world. Cultivators, animal rearers, miners, and other primary producers transport their products to marketplaces to sell.

Level 2: Next on the list is secondary production, that is, the raw materials collected from the marketplaces are turned into finished goods such as wheat into flour, cotton into fabric or yarn or even rice into rice powder.

Level 3: The following level comprises merchants, wholesalers, and retailers selling completed items to customers. This is known as the distribution commerce stage.

Level 4: In India, the commodities market is winded up at this level, when the products and services are utilised by individuals and institutions for the purpose of further process or manufacturing or their personal purposes.

Besides the aforementioned, you need to be familiar with the Indian commodity market, which is a syndicated, structured and massive market functioning for the trading and settling of all commodities. It is addressed as structured because the market is comprised of various regional markets in different states of the country. As the agro-climatic conditions are diverse for different regions, though, of the same state, one needs to choose regional exchanges accordingly.

The commodity exchanges operating in the country are Multi Commodity Exchange (MCX), Indian Commodities Exchange (ICEX), National Commodities and Derivative Exchange Limited (NCDEX) and others. Commodity exchanges serve as a meeting place for buyers and sellers. These exchanges will have a list of commodities that they will add to regularly based on demand and supply patterns. These commodities can be traded on the exchange online from the comfort of your own home or in your broker's office.

If the daily operations of commodity trading are monitored by the Commodity Derivatives Market Regulation Department (CDMRD), it is regulated by the Securities and Exchange Board of India (SEBI). Furthermore, the trading days in India are from Monday to Friday and the timings are from 9:00 am to 5:00 pm IST for agricultural commodities.

Meanwhile, it is from 10:00 am to 11:55 pm for trading in non-agricultural commodities such as crude oil, gold, silver etc.

Bottom Line

Commodity markets will be most appropriate for you, whilst you are looking for a more stable investment option in India. Now with the advent of technology in trading, online commodity trading has become more popular, as it is seamless, safe and trading is conducted in a planned manner.
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How Commodity Trading Works in India?

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