Most Actively Traded Commodities in India

Commodities are an important aspect of most Indian’s daily life. A commodity is a basic good used in commerce that is interchangeable with other goods of the same type. Traditional examples of commodities include grains, gold, beef, oil, and natural gas.

For investors, commodities can be an important way to diversify their portfolio beyond traditional securities. Because the prices of commodities tend to move in opposition to stocks, some investors also rely on commodities during periods of market volatility.

In the past, commodities trading required significant amounts of time, money, and expertise, and was primarily limited to professional traders. Today, there are more options for participating in the commodity markets.

A History of Commodities Trading

Trading commodities is an ancient profession with a longer history than the trading of stocks and bonds. The rise of many empires can be directly linked to their ability to create complex trading systems and facilitate the exchange of commodities.

In modern times, commodities are still exchanged throughout the world. A commodities exchange refers both to a physical location where the trading of commodities takes place and to legal entities that have been formed in order to enforce the rules for the trading of standardized commodity contracts and related investment products.

Some commodities exchanges have merged or gone out of business in recent years. The majority of exchanges carry a few different commodities, although some specialize in a single group.

Special Characteristics of the Commodities Market

In the broadest sense, the basic principles of supply and demand are what drive the commodities markets. Changes in supply impact the demand; low supply equals higher prices. So, any major disruptions in the supply of a commodity, such as a widespread health issue that impacts cattle, can lead to a spike in the generally stable and predictable demand for livestock.

Global economic development and technological advances can also impact prices. For example, the emergence of China and India as significant manufacturing players (therefore demanding a higher volume of industrial metals) has contributed to the declining availability of metals, such as steel, for the rest of the world.

Types of Commodities

Commodities that are traded are typically sorted into four categories broad categories: metal, energy, livestock and meat, and agricultural.

Metals

Metals commodities include gold, silver, platinum, and copper. During periods of market volatility or bear markets, some investors may decide to invest in precious metals–particularly gold–because of its status as a reliable, dependable metal with real, conveyable value. Investors may also decide to invest in precious metals as a hedge against periods of high inflation or currency devaluation.

Energy

Energy commodities include crude oil, heating oil, natural gas, and gasoline. Global economic developments and reduced oil outputs from established oil wells around the world have historically led to rising oil prices, as demand for energy-related products has gone up at the same time that oil supplies have dwindled.

Investors who are interested in entering the commodities market in the energy sector should also be aware of how economic downturns, any shifts in production enforced by the Organization of the Petroleum Exporting Countries (OPEC), and new technological advances in alternative energy sources (wind power, solar energy, biofuel, etc.) that aim to replace crude oil as a primary source of energy, can all have a huge impact on the market prices for commodities in the energy sector.

Livestock and Meat

Livestock and meat commodities include hogs, pork, live cattle, and feeder cattle.

Agriculture

Agricultural commodities include corn, soybeans, wheat, rice, cocoa, coffee, cotton, and sugar. In the agricultural sector, grains can be very volatile during the summer months or during any period of weather-related transitions. For investors interested in the agricultural sector, population growth–combined with limited agricultural supply–can provide opportunities for profiting from rising agricultural commodity prices.

Using Stocks to Invest in Commodities

Many investors who are interested in entering the market for a particular commodity will invest in stocks of companies that are related to a commodity in some way. For example, investors interested in the oil industry can invest in oil drilling companies, refineries, tanker companies, or diversified oil companies. For those interested in the gold sector, some options are purchasing stocks of mining companies, smelters, refineries, or any firm that deals with bullion.

Stocks are typically thought to be less prone to volatile price swings than futures contracts. Stocks can be easier to buy, hold, trade, and track. Plus, it is possible to narrow investments to a particular sector. Of course, investors need to do some research to help ensure that a particular company is both a good investment and commodity play.

Investors can also purchase options on stocks. Similar to options on futures contracts, options on stocks require a smaller investment than buying stocks directly. So, while your risk when investing in a stock option may be limited to the cost of the option, the price movement of a commodity may not directly mirror the price movement of the stock of a company with a related investment.

An advantage of investing in stocks in order to enter the commodities market is that trading is easier because most investors already have a brokerage account. Public information about a company's financial situation is readily available for investors to access, and stocks are often highly liquid.

There are some relative disadvantages to investing in stocks as a way of gaining access to the commodities market. Stocks are never a pure play on commodity prices. In addition, the price of a stock may be influenced by company-related factors that have nothing to do with the value of the related commodity that the investor is trying to track.

When trading commodities, liquidity should be the number one factor to consider. This is because the liquidity of a commodity is linked to the ease with which a trader can Buy and Sell the commodity. To put it simply, liquidity is a measure of how many buyers and sellers are present and whether transactions can take place easily.

When there is a significant level of trading activity and where there is both high supply and demand the relevant market would be very liquid. A liquid market is generally associated with less risk, as there is usually someone else willing to take the other side of a position. High liquidity also means less probability of slippage for the trader.

Slippage is defined as the difference between the price quoted to the trader and the actual price at which the trade is executed. Slippage can work both in your favour and against you - for example, trading in commodities with low liquidity could potentially lead to greater losses.

In addition, commodities with low liquidity often face sharp price swings. As such, if you are looking to trade the commodity market, you should try to focus on commodities with high liquidity. Some of these highly liquid commodities include energies such as Oil, Natural Gas, precious metals such as Gold and Silver and agricultural products such as Cotton, Soybeans and Wheat (i.e., commodities with high trading volumes).

One way to manage liquidity risk is through the use of guaranteed stops, a type of stop-loss that ensures your position is closed at your pre-selected price level.

Most Actively Traded Commodities

Crude Oil

Crude oil is one the world’s most in-demand commodities as it can be refined into products including petrol, diesel and lubricants, along with many petrochemicals that are used to make plastics. Brent crude is one of the two major types of oil used to benchmark global prices, along with West Texas Intermediate (WTI). It is a high-quality ‘sweet light’ oil, meaning it has a low sulphur content and density, and is therefore relatively easy to refine into usable end products. It is drilled from oil fields in the North Sea’s Brent, Oseberg, Forties and Ekosfisk fields, off the shores of the UK and Norway. This proximity to the coast makes it relatively cost effective to transport internationally.

Like all commodities, the price of Brent crude is dependent on supply and demand factors. Historically, demand for oil has been correlated with global economic performance. Prices generally rise during boom periods – as more oil is needed to manufacture and transport products – and fall during economic slowdowns. On the supply side, global supplies of oil – rather than the supply of Brent crude specifically – has the most influence over this commodity’s price. Here the Organisation of the Petroleum Exporting Countries (OPEC), which sets production quotas for member countries, has historically had a great deal of influence. However, this has waned in recent years as the US, which is not an OPEC member, has increased shale production. 

Aluminium

Aluminium is another best commodity to trade as it is a lightweight metal and is used in various industries.

Aluminium is used in manufacturing industries like automobiles, construction, electronics, etc. and is in huge demand.

The metal is versatile and used in abundance in various industries.

Aluminium is obtained from Bauxite and China is the biggest producer and consumer as well. The prices of aluminium are affected by Chinese demand in the transportation and construction industry.

The cost of making aluminium also varies according to the prices of oil and electricity.

Thus, aluminium becomes a great commodity to trade in as it has a wide score of price fluctuations.

Nickel

Nickel is a lustrous metal which is strong. ductile and resistant to corrosion. It also has a high melting point and catalytic properties. Because of these factors, nickel becomes one of the widely used metals in the industries of the world, thus becoming one of the top commodities to trade in. Nickel has become an integral part of the growing economy as it plays an important part in the electroplating process and in the manufacturing of stainless steel. Because of its worldwide use, nickel is largely affected by the demand and supply and shows significant price movements.

India does not manufacture much nickel but has a high demand as it finds its use in the development of the country.

Nickel is traded on the Indian exchanges like MCX, NMCE and NCDEX but is mainly controlled at the London Metals Exchange and is traded in a lot size of 250 kilograms.

Natural Gas

Natural Gas is a non-renewable hydrocarbon used as a source of energy for heating, cooking, and electricity generation. It is also used as a fuel for vehicles and as a chemical feedstock in the manufacture of plastics and other commercially important organic chemicals.

Gold

Throughout recorded history, Gold (ticker: XAU) has been highly sought after for its beauty as well as a storehouse of value. While the traditional uses of gold have not changed, it nowadays is also regarded as a key component in the manufacture of electronics.

Copper

Like Gold, Copper is widely used in the electronics industry in light of it being a good conductor of electricity. Due to its wide usage in the manufacturing industry, the price of copper can fluctuate according to economic output. The key producers of this metal are Chile, China and Peru.

Silver

Similar to Gold, Silver is highly sought after as a precious metal. However, silver is also widely used in the manufacture of solar panels and photographic films. Although Silver is also regarded as a precious metal, most people prefer gold as it is a more reliable store of value.

The Bottom Line

Both novice and experienced traders have a variety of different options for investing in financial instruments that give them access to the commodity markets. While commodity futures contracts provide the most direct way to participate in the price movements of the industry, there are additional types of investments with less risk that also provide sufficient opportunities for commodities exposure.

In the most basic sense, commodities are known to be risky investment propositions because they can be affected by uncertainties that are difficult, if not impossible, to predict, such as unusual weather patterns, epidemics, and disasters both natural and man-made.

You can know more about Commodity tips or MCX tips intraday here and you can be on the path of making huge money in the commodity market every day.

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India has No Dearth of Talent : Mobile House in 1 Lakh

Kudos to this man who has shown to the world that creativity may not necessarily be the birthright of rich people. We salute this person by the name Anand from Southern India and he has won accolades from Anand Mahindra of M&M group and he has also invited him to do some miracle with his SUVs.

We look forward to your choosing stock market as a career and activate your second stream of income using our Bank Nifty option tips for intraday and be a part of the elite club of 10% who make money in the stock market as making money is an art which needs to be inculcated.

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State of Market in March Month in Past 10 Years

MARKET IN MARCH IN LAST 10 YEARS

Mar-21: ? ? ?
Mar-20: Slips 23% (aberration due to corona pandemic and can be discarded)
Mar-19: +7.7%
Mar-18: Slips 3.61%
Mar-17: +3.3%
Mar-16: +10.7%
Mar-15: Slips 4.6%
Mar-14: +6.8%
Mar-13: Slips 0.18%
Mar-12: Slips 1.66%
Mar-11: +9.3%
Mar-10: +6.6%

Have a look at this image to understand the impact of world markets in the past 10 years and do remember to make money in the month of March using our Best Bank Nifty option tip for intraday as we generally make money in less than 2 hours.

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Nifty Crucial level for the Next Week Explained with Chart

We can keep the fingers crossed and hope that the level of 14427 is maintained on Monday which happens to be a key support level as any break on Monday of this level opens the gate for the next leg of the wave correction. All know that today's fall in Nifty was caused due to Biden's direction of attacks on Syria. Have a look at the chart below to understand the same with Retracement and Harmonic pattern and likely projections for the index. 

The Break in Nifty 14427 can lead to support at 14333 level and 14000 and break of 14000 means Nifty will find support at 13400 level.

According to pivot charts, the key support levels for the Nifty are placed at 14,358, followed by 14,187. 

If the index moves up, the key resistance levels to watch out for are 14,810 and 15,091

Overall trend is bearish in Nifty and Bank Nifty. 

With us you need not worry as we take care of all kinds of global activities and this is the reason we had bought put today in Bank Nifty and our clients using the Bank Nifty option tips got more than 500 points in a single tip for the day. The 500 point per lot today translates into a profit of Rs 500*25=12500. Just remember that this profit was achieved on the capital of less than Rs 10000 as this is the only capital which is required for trading in the Bank Nifty option and no tension of any reduction in margin.

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How Rising Bond Yields in US Affects Indian Stock Market?

A gradual rise in bond yields globally has created a panic in the equity markets. Indian frontline benchmarks - the S&P BSE Sensex and the Nifty 50 - lost nearly 2 percent in intra-day trade.

At the global level, US Treasury yields vaulted to their highest since the pandemic began on expectations of a strong economic expansion and related inflation. Back home, the 10-year government bond yield jumped to 6.18 percent on Thursday, February 25.

The benchmark bond (10-year tenor) yields had fallen to 5.6 percent during the peak of the pandemic crisis but have since been rising and jumped 31 bps since the Budget. Year to date, the yields have crept up 16 bps in 2021 so far.

Acuit Ratings now expects the 10-year sovereign yields to rise from 6 percent in March 2021 to 6.40 percent by March 2022 given that the Reserve Bank of India may hike the repo rate by 25 bps going forward given the likely rate and liquidity normalisation expected next fiscal.

What is bond and bond yield?

Simply put, bonds are loans the one makes to a corporation or government. The interest payments remain largely unchanged over the life of the loan. Moreover, one receives the principal at the end of the loan tenure if the borrower doesn't default.

Bond yield, on the other hand, is the return that an investor gets on that bond or on particular government security.

Bond yield and bond prices

A fall/rise in interest rates in an economy pushes up/pulls down bond prices. However, bond yields fall/rise in this situation.

This happens because if RBI, for example, decides to increase interest rates, the bond's price (which is offering similar return as the current interest rates) would fall because its coupon payment is less attractive now on a relative basis. Therefore, investors would chase new bonds with better risk-free return.

Why do bond yields rise?

Bond yield is the return an investor gets on that bond or on a particular government security. The major factors affecting the yield is the monetary policy of the Reserve Bank of India, especially the course of interest rates, the fiscal position of the government and its borrowing programme, global markets, economy, and inflation. With the pandemic upsetting the calculations, Finance Minister Nirmala Sitharaman has pegged the fiscal deficit for 2021-22 at 6.8% of GDP (the original target was 3.5%), and aims to bring it back under 4.5% by 2025-26.

A fall in interest rates makes bond prices rise, and bond yields fall — and rising interest rates cause bond prices to fall, and bond yields to rise. In short, a rise in bond yields means interest rates in the monetary system have fallen, and the returns for investors (those who invested in bonds and govt securities) have declined.

Inflation expectation and bond yields

A rally in the stock market tends to raise yields as money moves from the relative safer investment bet to riskier equities. However, if the inflationary pressures begin to look up, investors tend to move back to bond markets and dump equities.

How bonds affect stock markets?

When valuing equities, investors add the equity risk premium they seek to a risk-free rate to compute the expected rate of return. Usually, the easiest way to estimate the risk-free rate is to default it to the long government bond yield. This is why long bond yields matter to equities.

Now, theoretically, given that the long bond yield is the risk-free rate, a higher bond yield is bad for equities and vice versa. But one must also remember why bond yields are changing and not just the direction of change.

“Long bond yields reflect the growth and inflation mix in the economy. If growth is strong, bond yields are usually rising. They also rise when inflation is going higher. The impact of these two situations is different for equities,” explains Ridham Desai, equity strategist at Morgan Stanley, in a co-authored note with Sheela Rathi and Nayant Parekh.

When growth is strong, the impact of higher growth in terms of cash flows or, more precisely, dividends more than offsets the negative impact of the rise in yields, causing equity share prices to trade higher.

“The gap between real GDP growth and the 10-year bond yield correlates well with share prices, underpinning the point made above. Indeed, to the extent that growth accelerates in the coming months faster than the rise in bond yields, share prices should be fine,” says Desai, adding that Indian equities/bond valuations are at the top end of their 2010-21 ranges.

“If growth accelerates from here, as we expect, it is likely that equities break this range on the upside, consistent with the fundamental relationship,” he believes.

How should investors trade?

Morgan Stanley suggests two scenarios for investors. Under the first scenario, where growth accelerates, portfolios should be positioned in domestic cyclicals, rate-sensitives, and mid- and small caps.

Under the second scenario, where inflation makes a rapid return, the brokerage advises investors to bet on technology, healthcare, and consumer staples.

Why are bond yields rising?

Inflation

For many, rising inflation expectations are the simplest reason for the yield ascent.

The combination of a recovering U.S. economy thanks to vaccination efforts, trillions in fiscal relief and accommodative monetary policy are expected to deliver the kind of inflation that hasn’t been seen since the 2008 financial crisis.

Bond-market forecasts of consumer prices are suggesting inflation could surpass the central bank’s target for a protracted period, and some investors are penciling in at least 3% inflation this year even if they are less sure if such sustained price pressures could last.

The 10-year break-even rate spread, which tracks expectations for inflation among holders of Treasury inflation-protected securities, or TIPS, was at 2.15%. That is well above the Fed’s typical annual target of 2%.

Scott Clemons, chief investment strategist at Brown Brothers Harriman, says another factor that could push prices higher later this year is the pent-up savings among U.S. households forced to stay at their homes and restrain their spending in restaurants, leisure and travel.

Once the COVID-19 pandemic is put to bed, consumers would unleash their savings upon the economy, spurring prices for services higher and leading to the kind of elevated price pressures that would usually prompt the central bank to raise rates.

But as part of the central bank’s new average inflation targeting framework, the Fed is likely to stand pat and allow the economy to run hot, adding to concerns that the Fed won’t protect longer-dated Treasury’s from reflationary forces.

Insufficient Fed action

Indeed, the lack of willingness on the part of the central bank to lean against rising bond yields has emboldened the bond bears this week.

Fed Chairman Jerome Powell underlined that the central bank would support the economy for as long as necessary, and that the Fed would clearly communicate well in advance when it starts to contemplate tapering asset purchases.

"It’s all just talk,” said Ed Al-Hussainy, senior interest rate and currency analyst at Columbia Threadneedle Investments, in an interview.

Al-Hussainy said until the central bank backs up its words with concrete actions, such as tweaking its asset purchases, yields could keep moving higher.

Some market participants were unimpressed by the Fed’s nonchalant tone, noting that senior central bankers like Kansas Fed President Esther George kept repeating that higher bond yields reflected improving economic fundamentals and were therefore not a cause for concern.

Thursday’s moves helped to drive selling in equities, with investors repricing those investments as rates jolt higher. The Dow Jones Industrial Average,  the S&P 500 index and the Nasdaq Composite Index all finished sharply lower on the session.

Forced sellers

Market participants also suggested yields were moving beyond fundamental forces, and that inflation fears weren’t enough to explain why rates were moving up at such a ferocious pace.

“A lot of this move is technical,” Gregory Faranello, head of U.S. rates at AmeriVet Securities, told MarketWatch.

He and others suggest the yield surge may have been a case of selling causing more selling, as investors caught offsides were forced to close their bullish positions on Treasury futures, in turn, pushing rates higher.

Ian Lyngen, a rates strategist at BMO Capital Markets, pointed the finger at so-called convexity hedging.

The idea is that holders of mortgage-backed securities will see the average maturities of their portfolio rise in line with higher bond yields, as homeowners stop refinancing their homes.

To offset the risk around holding investments with higher maturities, which can increase the chance of painful losses if rates rise, these mortgage-backed debtholders will sell long-term Treasurys as a hedge.

Usually, selling associated with convexity hedging isn’t powerful enough to drive significant bond-market moves on their own, but when yields are already moving swiftly, it can exacerbate rates swings.

How has the rise in yield affected stock markets?

The sudden rise in domestic and global bond yields recently moderated the enthusiasm of equity market participants around the world. The “taper tantrum” of 2013 showed the relationship between bond yields and stock markets — a sudden rise in bond yields caused markets to slide, as mass bond selling was witnessed. “Bond yields are inversely proportional to equity returns; when bond yields decline, equity markets tend to outperform, and when yields rise, equity market returns tend to falter. This could be one of the reasons for the Nifty’s correction this week,” said Nirali Shah, Head of Equity Research, Samco Securities.

Traditionally, when bond yields go up, investors start reallocating investments away from equities and into bonds, as they are much safer. As bond yields rise, the opportunity cost of investing in equities goes up, and equities become less attractive.

Also, a rise in bond yields raises the cost of capital for companies, which in turn compresses the valuations of their stocks. That is something that investors see when RBI cuts or raises the repo rate. A cut in the repo rate reduces the cost of borrowing for companies, leading to a rise in share prices, and vice versa.

How will the borrowing program and economy be impacted?

When bond yields rise, the RBI has to offer a higher cut-off price/yield to investors during auctions. This means borrowing costs will increase at a time when the government plans to raise Rs 12 lakh crore from the market. However, RBI is expected to stabilise yields through open market operations and operation twists. Besides, as government borrowing costs are used as the benchmark for pricing loans to businesses and consumers, any increase in yields will be transmitted to the real economy.

A number of aspects need to be kept in mind while trading stock market and the Bond market is one of the key factors which helps us to provide Best Bank Nifty option tips to the clients and we have been rightly voted as #1 Bank Nifty tips provider in India.

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Indian Share Tips Bank Nifty Option & Commodity Tip Service Review by Mr Sanjay (Bangalore)

Mr. Sanjay is from Bangalore and is associated with an NGO and has come to the stock market so that the profit earned by him can be utilized for the betterment of society. We feel proud that we are a part of a cause through a medium that is helping society at large. We wish him all the success in his ventures 

Mr Sanjay has undertaken a review of our Bank Nifty Option Tips and Commodity tips and we would like to see max traders get benefitted with Bank Nifty Option Tips service as one just require a small capital of Rs 10,000 and you are good to get started to make money from Indian stock market.

Have a look at the video below

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Stock Market is Like this : Pic worth a Look

The market has its own mood and one can not challenge it and thus one needs to keep this pic in mind to understand that market is supreme and it has its own mind.

Thus, there is no harm in taking the help of an expert, mentor or Best SEBI Registered Advisory service and you are good to get going in the stock market with reliable information and we feel elated when we are voted as #1 Bank Nifty Option tips provider in India. So, are you ready to start making additional money in your life to start moving towards your financial goals?

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How Much You are Taxed on Fuel?

Have a look at this chart image to understand that why fuel prices are higher in India vs the rest of the world as we are taxed more.

We will call on the govt to reduce some taxes as crude is likely to touch $5000 per barrel and thus we will be seeing rates firm up further. This analysis is based on our research for MCX crude tips as we are seeing that for the past so many years it is for the first time that crude has crossed the crucial 76.8 retracement level. Thus sooner or later $5000 per barrel in the international market is going to be a reality in market.

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