Commodity Trading in India

Commodities - Future Trading

Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators.  Retail investors, who claim to understand the equity markets may find commodities an unfathomable market.  But commodities are easy to understand as far as fundamentals of demand and supply are concerned.  Retail investors should understand the risks and advantages of trading in commodities futures before taking a leap.  Historically, pricing in commodities futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option.

Commodity Market in India

In fact, the size of the commodities markets in India is also quite significant.  Of the country’s GDP or
Rs.13,20,730 crore, commodities related and dependent industries constitute about 58 per cent.

Currently the various commodities across the country clock an annual turnover of Rs.1,40,000 crore.  With the introduction of futures trading, the size of the commodities market grow many folds here on.

Like any other market, the one for commodity futures play a valuable role in information pooling and risk sharing.  The market mediates between buyers and sellers of commodities, and facilitates decisions
related to storage and consumption of commodities.  In the process, they make the underlying market more liquid. 

Here’s how a Retail Investor can get Started :

1. Where do I need to go to trade in Commodity futures ?


2. How do I choose my broker ?


3. What is the minimum investment needed ?


4. Do I have to give delivery or settle in cash ?


5. What do I need to start trading in commodity futures ?


6. What are the other requirements at broker level ?


7. What are the brokerage and transaction charges ?


8. Where do I look for information on commodities ?


9. Who is the regulator ?


10. Who are the players in commodity derivatives ?


11. In which commodities can I trade ?


12. Do I have to pay sales tax on all trades ? Is registration mandatory ?


13. What happens if there is any default ?


14. Are any additional margin / brokerage / charges imposed in case I want to take
    delivery of goods ?


15. Is stamp duty levied in commodity contracts ? What are the stamp duty rates ?


16. How much margin is applicable in the commodities market ?


17. Are there circuit filters ?