AN OVERVIEW OF COMMODITY MARKET IN INDIA

INTRODUCTION
India, a commodity based economy where a large population depends upon agricultural commodities, but surprisingly has an under develop commodity market. Here future markets trades in commodity are largely used as a risk management mechanism on physical commodity itself or open position in commodity market. The idea is to learn about the whole commodity market from Indian point of view. The development and growth have shunted down due various reasons and numerous restrictions in the early 70s which have resulted into vibrant market.

WHAT IS COMMODITY MARKET?

A commodity market is a place where trading in commodities takes place. Mostly commodity market is similar to equity market, but instead of investing in equity market, we invest in commodity market. Here one buy or sell commodities instead of equity shares. In short commodity includes all kinds of goods. In the current scenario all kind of goods i.e agricultural, fossil and minerals are allowed for commodity trading in Indian market. The National Commodity Exchange recognized by the Central Government permits commodities trading. Over the whole world one will find that market exists for all types of commodities which are known to us. These commodities can broadly classified into the following: Precious Metals Gold, Silver, Platinum etc Other Metals Nickel, Aluminum, Copper, Zinc etc Agro-Based Commodities Oilseeds, Wheat, Corn, Cotton etc Energy Crude oil, Gasoline etc. Now the Government has allowed national commodity exchange to come up and deal in commodity in the electronic trading environment. These exchanges are expected to offer nation-wide, order driven, screen based trading system to trade. The Forward Markets Commission will regulate

this system. Consequently four commodity exchanges have been approved to to commence the business regarding this and they are as follows: 1. 2. 3. 4. Multi Commodity Exchange (MCX) in Mumbai National Commodity and Derivatives Exchange Ltd (NCDEX) National Board of Trade (NBOT) in Indore National Multi Commodity Exchange (NMCE) in Ahmadabad.

The commodities market is one of the fastest-growing areas in the investment world. And it offers some major advantages over stocks that you might not have considered before. Recently, commodity market is booming irrespective of global meltdown and recession. When equity market is underperforming, this commodity market has given tremendous returns in gold, silver, zinc and in other metals and agro-products; hence people have withdrawn their funds from equity market and shifted their investment in commodity market. Commodity investing was initially received well only by a few sectors. Such investments were first restricted to the trade and exchange of commodities meant for regular and day to day use. However, the awareness in the subsequent stages has brought all sectors into the manifold of commodity investing and has enabled speedy movements, transfer and transaction of goods and services.