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The Commodities market is set to take the country by storms. Commodities like the wheat in our bread, the cotton in our clothes, our gold jewels, the oil that runs our cars, sugar that sweeten our tongue are traded across the world in major exchanges.

The commodity market facilitates trading in various commodities. It may be spot or a derivatives market. In a spot market, commodities are bought and sold for immediate delivery, whereas in a derivative market, various financial instruments based on commodities are traded. In India these financial instruments such as “FUTURES” are traded in exchanges like

  • MCX ( Multi Commodity Exchange)
  • NCDEX ( National Commodity Derivatives Exchange )


The Exchange timings are as follows:

Monday to Friday:
Metals & Energy
: 10.00 am to 11.55 pm
Agricultural products : 10.00 am to 05.00 pm
 
Saturday:
Metal, Energy & Agro products : 10.00 am to 2.00 pm

COMMODITY FUTURES AS AN INVESTMENT AVENUE

Commodity futures are globally recognized to be a part of every successful and diversified investment portfolio. The fact that the returns from most of the commodities in last 53 years from 1951 to 2003 have been higher than the global inflation rate, establishes that investments in commodity are an effective hedge against inflation.

Some of the reasons that make investing in commodity futures an attractive preposition are described below.

Leverage:
Commodity Futures trading is done on margins. The investors only deposits a fraction of the value of the futures contract with the broker to cover the exchange specified margin requirements. This gives the investor greater leverage and thus the ability to generate higher returns.

   
Liquidity:
Unlike investment vehicles like real estate, investments in commodity futures offer high liquidity. It is equally easy to both buy and sell futures and the investor can easily liquidate his position whenever required. There is also another advantage of being able to use the profits from a trade elsewhere, without having to close the position.
   
Diversification:
Investment in commodity market is an excellent means of portfolio diversification. For example, gold prices have historically shown a low correlation with most other asset prices ( such as equities ) and thus offer an excellent means for portfolio diversification.
   
Inflation Hedge:
As the commodity prices determine price levels and consequently inflation, investing in commodity futures can act as a hedge against inflation.

For further information contact us.

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