In the segment of share market, we will try to give detailed information on this article, commodity market, about which very few people in India know that such a trading market is also there. Trading is done on natural things in the commodity market and it is said that in the coming future it will become a bigger economic market than the stock market in India.
There are mainly two types of commodities in the natural things of the commodity market, in which commodities related to agriculture and hard commodities in which things like gold and metals come. Talking about today in India, most of the commodity trading takes place in the non-agricultural market, for the development of the commodity market, in agriculture, it is necessary to give education and knowledge of technology in the agricultural sector.
Platforms like “NCDX” have been created for the agriculture market, on which very little trading takes place and very few people know about it. Our problem is that agriculture is the most profitable business in the world, which we run in a traditional way, so we do not understand its importance.
It is said that the big companies in the market are looking for the way when this traditional agriculture sector will end and when we will get into it. So we will see how the commodity market runs and what will be its future. Commodity market being a very big topic, we will tell you on its important issues, and there are going to be many things on which we will make another article if needed.
What is Commodity Market? –
Commodity market, it trades like the stock market, but the goods produced in the stock market are traded on the companies, but in the commodity market this investment is not done on the companies, it is done directly on the commodities.
In which there are also natural winning things, which have their value or utility for humans, such things are traded. Talking about India, platforms like MCX have been created by the government for more trading in the commodity market with more hard commodities or without agricultural things.
Platforms like NCDEX have been created separately for the agriculture sector, in which agricultural products are traded. If we talk about Europe and America, then there is very little trading for it in India. The Indian agriculture sector has the potential to become the world’s largest market in the commodity market, but we get to see the conflict between the capitalist policies and the socialist model.
Due to which the socialist model will not be able to survive in the agricultural sector, it is not surprising that if we get to see the capitalist agriculture sector in the future, how successful this model is, it is a matter of intellectual people’s contemplation.
What is MCX ? –
Like “NSC” and “BSC”, this market is a platform created under the regulation of SEBI for the commodity market. Whose headquarter is in Mumbai and it is run all over India through online medium, in which mainly trading of hard commodities is highest and agricultural commodities are done in very less quantity. Even those things which cannot be spoiled are more on it like wheat, lentils, rice etc.
Within which all the agricultural products which are natural without coming in the commodity market are traded. About 40 commodities are traded in the agriculture sector, but the evidence for this is very less. The trade of such commodity products is dependent on the international market, so its prices are not limited to the market of India like the shares of the stock market, it depends on the international market.
This market is considered to be the most traded market in the world in silver, gold, copper and crude oil. Due to the large number of people doing traditional farming in the agriculture sector in our country, its trade is very less in the commodity market.
What is NCDEX ? –
The full form of “NCDEX” is “National Commodity & Derivatives Exchange”. As we know that in India, agriculture was considered a traditional means of livelihood and today it is considered a symbol of prestige, but no one considers it a developed way of doing business.
In America, major commodity markets such as CME ie Chicago Mercantile Exchange and NYMEX New York Mercantile Exchange are run where natural changes and natural cyclone trades are done in futures contracts so that future losses can be avoided. Therefore, like the capitalist policy, the first capitalization of the government agriculture sector will be done.
Then it will be traded in the commodity market, it seems, because the traditional agricultural sector has become the arena of this prestige and politics. Which no one is ready to see as a business model. Hence this commodity market has been established. In which all the production related to agriculture sector can be traded, but till now very little response is seen in it.
How to Earn Money in Commodity ? –
- To invest in the commodity market, it is important to know the “MCX” market and “NCDEX” market where all types of commodity market products are traded.
- Hiring a good stockbroker who is registered with SEBI.
- Starting a Commodity Trading Account with a stockbroker.
- Once the trading account is opened, the initial amount has to be kept which is 5-10% of any contract value.
- It is necessary to have a good strategy for trading so that the commodity margin can be used properly.
- Commodity market has very good potential in future to earn money from stock market.
Commodity Market vs. Stock Market –
It is believed that the future of the commodity market is to become a bigger market than the stock market. Therefore, commodity market it is not only hard commodity, agricultural products in the future when they trade in the commodity market, it will be the biggest platform of trade in Indian economy, where political and social structure is the barrier due to which it is not getting out of traditional agriculture. Is.
In the stock market the seller is the investor and the buyer is the investor, but the insider is the third part that separates the stock market and the commodity market. In commodity market, there is production, product and there are investors who buy, there is no third component like an insider in the commodity market. The third component in the stock market can manipulate the stock market, but there is no possibility for it in the commodity market.
In today’s date, hard products like metal, crude oil, etc., are sold in the commodity market. Companies that produce and provide services in the stock market raise money for the business and later in the stock market the same shares are available for the investor to buy. There are contracts in the commodity market under which the commodity is traded.
Types of Commodity –
There are mainly two types of commodity production in the commodity market, which are natural and they are useful for the society.
Hard Commodities –
Precious Metals – Gold, Copper, Silver, Platinum
Energy / Energy – Crude Oil, Natural Gas, Gasoline
Soft Commodities –
Agricultural production – soybean, wheat, rice, coffee, corn, salt
animal husbandry agricultural production
In the commodity market, 80% of trading is done on hard commodities and in agricultural production there is trading on a few selected products like wheat, rice, maize, the evidence of which is very less, which is traded on all agricultural products in America and Europe and its Prices are dependent on demand and supply. Futures contracts are made in the commodity market on events like cyclones of natural calamity and provisions are made to avoid its losses.
Just like the production of potatoes, it is important for the company that its price does not increase, the same farmer who produces it, he wants that his price should not fall down so that he does not suffer. For the same tomato production farmer jam making company, increasing its price can have consequences on production.
In the same way, both of them secure their business in the commodity market by doing a futures contract so that the farmer does not fall in his price.
Advantages of Commodity Market –
- The prices of production, traded in the commodity market are based on demand and supply, which creates control over the unnatural price and people get the commodity at the right price.
- Through hedging, one can manage the risk of future price movements, which is called the spot market, in which the opposite position is taken in the futures market.
- Exporting companies can secure the price of their product in their market with the contract of hedging their product.
- In the traditional market, the producers who used to control the price of any product themselves, keep the price constant in the commodity market to position themselves because of the free market.
- The Commodity market is a very safe medium for farmers, in which production is dependent on changes in nature, the risk of which can be reduced by the commodity market.
- To buy any product through hedging, no interest is required to be paid, but the credit limit facility is available by the broker in the commodity market.
- Through the speculator, the money of those who are not a part of the commodity market is available in the market through investment, due to which the liquidity in the commodity market increases.
Disadvantages of Commodity Market –
- The credit facility available to the investor in the commodity market is very high, due to which the investor loses a lot of money in case of loss.
- Due to the complex process of commodity market, the common farmer cannot get its training, and also cannot take advantage of the commodity market.
- In the commodity market, other than the farmers, only other people earn money on such products.
- One lot is very expensive in the commodity market, so it is very difficult to work here on small investments like in the stock market.
- The commodity market for trading in India on agricultural produce has so far been unsuccessful.
- Hard commodity products are mostly dependent on the international market, due to which its prices in India are not controlled.
- There are other benefits like bonus shares, dividends on investment in the stock market, but there is only one source of income in the commodity market.
- Due to the volatility of the commodity market, there is a lot of risk in the commodity market, due to which it is necessary to be an expert in it.
Features of Commodity Market –
- The dealings in the commodity market are mostly in hard commodities, but a lot of production comes out in the agricultural sector which does not use this platform.
- Commodity market has the potential to become the largest trading center in India, a market bigger than the stock market is available for this market.
- Commodity market prices, being dependent on the international market, are determined on the demand and supply of all commodity markets.
- It is very difficult in such a market to get a good price for the perishable produce in the agricultural sector, but through speculation and hedging, that money is available to the market, which makes the cost of storage available.
- Agricultural production in the commodity market is dependent on the environment, which can be secured through futures contracts.
- In the commodity market, like the stock market, there is no buying on a small scale, it is in the size of a large lot, for which the credit limit is very high.
- Just like in insurance, we are secure the future results through money, the same way is done by hedging in the commodity market.
The commodity market is run on the largest scale in America and agricultural production is almost all the products in America. America is an ideal model of a capitalist democracy on which its economy is based. Till now no government has been successful in making the commodity market successful in India, its important reason is traditional farming and socialist model.
The important reason for this is our socialist structure, due to which most of our population is still dependent on agriculture. She wants to do farming in the traditional way, she does not want to do her production on the economy, the most important reason is the lack of education and training is needed to understand the commodity market, it is not available to the farmers.
The middlemen who buy and sell the produce take advantage of this, due to which the farmers do not get the benefit. The farmers of India like America are not trained in economic and education. Big companies want to take out this production commercially and through the policy from the government, it is starting all over the world.
From the point of view of the investor, the commodity market is going to be a bigger market than the stock market. The investor can get better returns from the stock market in the future from the commodity market and this market is still in the initial stage. It does not involve long investments, it is a contract base transaction that requires training.