Raghunandan Money – Investment Khushiyon Ka.

Commodities

Commodities

In the last decade, Indian markets have thrown open a new avenue for retail investors and traders, and that is Commodity Derivatives. For those who want to diversify their portfolios beyond shares, mutual funds, bonds and real estate, commodities are the best option today. There are commodity exchanges like stock exchanges where various commodities are traded as derivatives/ future products. At these exchange platforms you can now trade in commodity futures without buying the physical stocks of the commodity. Compared to stocks, Commodities are easy to understand because the fundamentals of demand and supply can be easily understood.

What is a Commodity?

A commodity means a product & it includes all kinds of goods. Forward Contract Regulation Act (FCRA) which governs the principle of commodities trading defines "goods" as "every kind of movable property other than actionable claims, money and securities". These commodities which are traded in the future market range from agricultural products to spices, from metals to precious metals & much more. The list of commodities being traded varies from exchange to exchange but Raghunandan Money being a leading registered member of MCX, NCDEX, NMCE, ICEX gives you an option to trade in almost any of the commodities futures which are permitted in India.

What is a Commodity Exchange?

Just like stocks or shares are traded at the stock exchange, similarly Commodity Exchange is the place where the trades of commodity futures contracts are done. Typically a commodity exchange is an association, or a company or any other corporate body which is managing & supervising the futures trading in various commodities. These exchanges further have brokers registered with them who facilitate the trading in commodities for clients.

What are the differences between the physical and futures commodities markets?

The physical commodities markets, generally referred as Mandis, deal in either cash or spot contract for ready delivery and payment. The physical markets are essentially party-to-party contracts, and are fulfilled by the seller giving delivery of goods of a specified variety of a commodity as agreed to between the parties. Rarely are these contracts for the actual or physical delivery allowed to be settled otherwise than by issuing or giving deliveries of the commodities.

Unlike the physical markets, commodities futures markets trade in futures contracts which are primarily used for risk management (hedging) on commodity stocks or forward (physical market) purchases and sales. Commodity Futures contracts are mostly settled before their expiry and, therefore, very rarely end in deliveries. Speculators or even retail clients also use these futures contracts to benefit from changes in prices and are hardly interested in either taking or receiving deliveries of goods as they are not concerned with the commodity. There are cases when buyers or sellers intend for making delivery based transaction on commodity exchange platform & such transactions require an in-depth understanding of the trading mechanism. Raghunandan Money, being a leading commodities brokerage house facilitates all sorts of trading and delivery transactions as permitted within the regulatory framework.

What type of commodities can be traded in India?

Though the government has the onus & right to decide the list of commodities which can be traded but exchanges individually can select the commodities which they wish to enable on their own platform. Hence the commodities available for trading vary from exchange to exchange. The NCDEX has a large number of agriculture commodities followed by metal and energy products as well. MCX, the leader among the commodities exchanges, covers metals, precious metals, energy, agriculture products for futures trading. For all the commodities which are available for trading, futures contracts of various months expiry are live at different prices to opt for. One important thing to note is that in Equity Derivatives there are 2 products- Futures & Options, whereas in Commodities, Derivatives on Futures contract are permitted for trading at present.

How can you start trading in commodities markets in India?

For trading in commodities market, a trading account is mandatory & your don’t require a commodities demat account unless & until you wish to get into delivery based transactions. If you wish to start trading in commodities, all you need to do is just give us a call or drop us a message. Our executives will get in touch with you to complete the formalities required for you to open a commodities trading account. You will require to give some KYC documents like PAN card, identity proof, address proof, bank proof & photographs. You will have to fill & sign up the Account Opening Form and that’s it. You will receive a welcome call, along with a welcome mail & letter from Raghunandan Money informing the details of your commodities trading account and instructions on how to use it. What’s more; our executives will be there to give you a product demonstration and will help you just in case if you wish to buy or sell over phone. With this account you will be able to trade at MCX, NCDEX & NMCE, and in the product you wish.

Who can trade in commodities markets in India?

A Commodity Trading Account to trade at Indian commodity exchanges can be opened with Raghunandan Money by any Resident Individual, HUF, Trust, and Corporate. The account owner has to be 18+ years of age and necessarily have a PAN Card. NRIs are not permitted to trade in commodities markets in India at present.

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