Commodity Trading
Buy any commodity from the comfort of home.
Commodity Trading
Commodity Advisory Services
Commodities may be classified into agri-commodities such as spices, soyabean, corn, cocoa and so on. Bullion and other metals may also be traded. Crude oil, natural gas, furnace oil as well as vegetable oils are also traded on commodity exchanges.
Commodity exchanges in India, are basically electronic trading and settlement systems, with a nationwide presence. A number of brokers are associated with these commodity exchanges who offer online trading in commodities. Electronic trading enables even retail investors to participate in the markets by purchasing small quantities of precious metals and other commodities and holding them in electronic form.
Why Invest In Commodity Account?
Easy Transactions
You can buy and sell commodities very fast. All transactions are electronic. There is no need of physical buying and selling of commodities.
Diversification
Traditionally the prices of commodities move in a direction opposite to equity. Commodities are a good alternate investment.
High Liquidity
You can easily buy and sell commodities unlike real estate. There is always a buyer and a seller for the commodity.
Margin Finance
Invest only a fraction of the cost of the commodity and take home huge profits, through margin financing.
Commodity Exchanges in India
The forward market commission (FMC) functions as a regulatory authority in the commodity market. The National Commodity and Derivative Exchange (NCDEX), Multi-Commodity Exchange (MCX) and National Multi Commodity Exchange (NMCE) are the commodity exchanges present in India.
How to open a commodity trading account in India?
In order to open a commodity account you need to submit an address and an identification proof, such as a copy of the voter’s card or the passport, a bank account statement, copy of the PAN card which form a part of the know your customer (KYC) norms. This is similar to the opening of a demat account in the equity market.
A trading account will have to be opened with National Spot Exchange Limited (NSEL) and a demat account with a depository such as National securities depository limited.
A minimum amount of INR 5000 is sufficient to trade in most commodities. The brokerage charges are in the range of 0.1-0.3% of the contract value. Transaction charges are in the range of INR 5-10 per Lakh per contract. The brokerage varies based on the type of commodity.
FAQ
What is a Commodity Trading Account?-Commodity markets are markets where raw or primary products are exchanged. Indian commodity market consists of both the retail and the wholesale market in the country. Commodity trading is one facility that investors can explore for investing their money. One can trade these commodities by having commodity trading account.
What are commodities?
A commodity is a physical good which has a demand for itself and the market treats all sources of supply equally without any differentiation. The price for a commodity is determined purely by global demand and supply. Commodities basically include food grains, crude oil, precious metals, spices ,raw materials for industries such as cotton, iron, rubber and so on.
Who are eligible for opening a commodity trading account?
Any individual, Hindu undivided family (HUF), proprietary firm, partnership firm, or a company can open an account.
What are the prerequisites of trading?
- PAN Card
- Operating bank account and commodity trading account
- Demat account is not mandatory for trading, however commodity Demat account is mandatory for all delivery based transactions
- Sales Tax number is not mandatory for trading. However, it is mandatory for all delivery based transactions
What are the costs involved in trading of commodities?
While trading in commodities, with any registered broker, client has to pay certain charges (apart from margin requirements for trading) which are as follows:
- Brokerage
- Service tax
- Education Cess
- Exchange Transaction Charges To learn more about these charges, call us on 080 67974000 and ask for our experts!
What is a lot Size? Do the trading & delivery lot sizes differ from each other?
It is the quantity of a commodity specified in the contract as tradable units. The lot size is different for each commodity. The details about lot sizes / delivery lot can be obtained from the respective exchanges’ website. Each contract has a lot size and a delivery size, which are not the same; in the case of gold, the lot size on the NCDEX is 100 gm while the delivery size is 1000 gm. If a person wants to enter into a delivery settlement for gold, he will have to enter into a minimum of 10 contracts or multiples thereof. Market participants are required to negotiate only the quantity and price of the contract, as all other parameters are predetermined by the exchange.