National Commodity Market

National Commodity market & Derivatives Exchange Limited (NCDEX) is an online commodity exchange based in India. It was incorporated as a private limited company incorporated on 23 April 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement of Business on 9 May 2003. It has commenced its operations on 15 December 2003. NCDEX is a closely held private company which is promoted by national level institutions and has an independent Board of Directors and professionals not having vested interest in commodity markets.NCDEX also offers as an information product, an agricultural commodity index. This is a composite index, called NCDEXAGRI that convers 20 commodities currently being offered for trading by NCDEX. This is a spot-price based index. NCDEX also offers as an information product, the index futures, called FUTEXAGRI. This is essentially a what-if index. It indicates, that if futures on the index could be traded, then the current FUTEXAGRI value should be the no-arbitrage value for the index futures.Commodities in very simple terms are defined as natural resources, chemicals and physical products one can touch, taste, smell, grow, mine, consume or deliver. Commodities are interchangeable with other products of the same type, and which an investor can buy or sell.Commodities have value which is mainly subject to supply and demand.Commodities are being traded for money or other commodities for many centuries in local and international markets. For as long as people have engaged in trade, they have needed a system to organize the delivery of goods and make commerce more efficient and predictable.Exchanges to trade commodities were setup for this purpose. Till 1970′s the commodity trading in these exchanges were very straight forward. It was a market place where people use to come to buy & sell commodity products.In 1971′s, a significant change happen in US commodity trading when modern ‘Commodity Future Trading’ was introduced. This has changed the way commodities were being traded for centuries.Commodity as an Investment Option-* Commodity is an excellent investment option for many reasons. Some of them are described as below: Portfolio Diversification – Commodity adds another asset class to an investor’s portfolio and thus reduces the risk on overall investment. Pricing in commodity futures has been less volatile compared with equity and bonds, thus providing an efficient portfolio diversification option. Also commodity has a global presence and hence, it’s a good portfolio diversifier. * Commodities are much easier to understand as far as fundamentals of demand and supply are concerned then stocks. * The size of the commodities markets in India is also quite significant. * Commodity trading requires less initial investment as all an investor need is money for margins payable upfront to exchanges through brokers. The margins range from 5-10 per cent of the value of the commodity contract. * Unlike equity, commodity prices cannot become zero. This reduces the risk in holding them as an investment. * Indian commodity market operates for more than 12 hours a day covering timings of all major international commodity exchanges, thus giving traders ample time to earn profits. * Commodities can be hold in Demat form. There is no need to hold commodities physically in warehouses.A commodity futures contract represents an agreement to buy or sell a specific type and grade of commodity for delivery at a specific time in the future at an agreed upon place at a market-determined price. In reality, commodity futures rarely lead to the delivery of an actual product, because the contract positions are typically closed out before the delivery date.In India National Multi Commodity Exchange of India Limited (NMCE) got acceptance from Government of India to start commodity future trading in year Nov 2002. In year 2003, another exchange, Multi Commodity Exchange of India (MCX) was established for Bullion & Energy sectors.* In modern commodity exchanges, few different types of trading are available to investors. Some of the popular commodity trading types available in exchanges across India is as below: Spot Trading: In spot trading, commodities are sold for cash and delivered immediately to the buyer. As name suggest all the transactions in this are on the spot. Spot trading is available in NMCE, NCDEX.* Future (Derivatives) Trading: In future trading an investor doesn’t buy / sell commodity or own it. He speculate on the future direction of the price would be going up in the future. Future trading is a bet on future price direction. Future trading is done in lots, a predefine unit of commodity. Only margin money is paid by investor to secure a trade. The margin varies by commodity and exchanges.Commodity Marketbrokers are authorized members of commodity exchanges (i.e. MCX, NCDEX). They work as commission agents between sellers and buyers. There are many local as well as online brokers who facilitate individual investors to trade in commodity for small commission/fees.Choosing a correct broker could be challenging task for many investors. This article provides list of few popular online commodity trading brokers in India. * Following are few critical things one should consider when choosing an online commodity broker: Recommendations from friends or family members * Commission (Brokerages) and Fees * Trading Platforms (Features and capabilities) * Quality of information in Newsletters, Market Research and Reports * 24×7 Customer Support * Exchanges available for trading inCommodity Today is an international monthly trade journal that showcases the Indian commodity market. Apart from current import and export trends, it provides regular information on issues of interest to trade and industry by way of articles and overviews of policies, prospects and emerging trends in commodity trade.