Indian markets have recently thrown open a new avenue for retail investors and traders to participate in: commodity derivatives. For those who want to diversify their portfolios beyond shares, bonds and real estate, commodities are the best option. Till some months ago, this wouldn't have made sense. For retail investors could have done very little to actually invest in commodities such as gold and silver -- or oilseeds in the futures market. This was nearly impossible in commodities except for gold and silver as there was practically no retail avenue for punting in commodities. However, with the setting up of three multi-commodity exchanges in the country, retail investors can now trade in commodity futures without having physical stocks!
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.
Like any other market, the one for commodity futures plays 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.
[...] OBJECTIVES: Share market and Commodity market have many differences like: Open and Closing Time, Expire date, Nature, Taxable rate, Hedge conditions, Sell and Purchase factor, Demand and Supply factor. These differences have major impact on investor's investment and at the turnover rate of both markets. We have following objective for research: To identify the greater impact of Share market or Commodity market in the investor's mind. To analyze those factor which have major difference between Share market and Commodity market. [...]
[...] Some market Participant's default, which could cause the Financial or Commodity markets or Share market to fall down: Some market participant's default like Harshal Mehta kand and Mr. Zaveri had a position closed so there is a big volatility in the market and the top level participants leave their position and they sell off their position because of this the selling trend started. The market fell down and the capital market also suffered. Major Recent crisis(last 10 years) in the market which operated by the participant: 1. [...]
[...] The regulatory body for commodities trading The Forward Markets Commission (FMC) is the regulatory body for commodity futures/forward trade in India. The commission was set up under the Forward Contracts (Regulation) Act of 1952. It is responsible for regulating and promoting futures/forward trade in commodities. The FMC is headquartered in Mumbai while its regional office is located in Kolkata. Long & Short Positions In simple terms, long position is a net bought position, while short position is a net sold positions. [...]
[...] National Market System (NMS) The NMS links all the major stock markets in the U.S. and was developed to foster competition among them. Its electronic Intermarket Trading System (ITS) displays current bid and ask prices for stocks on each of those markets so that brokers can execute trades on any market where a stock is listed. Brokers can often get a better price or a faster turnaround on one market than on another, depending on the volume of trading or the size of the trade. [...]
[...] For example, in some markets citizens of the country are eligible to buy one class of share and non-citizens a different class. Typically, the shares have different prices and may not be exchanged for each other. Futures Contract An exchange traded contract generally calling for delivery of a specified amount of a particular financial instrument at a fixed date in the future. Contracts are highly standardized and traders need only agree on the price and number of contracts traded. Global depositary receipt (GDR) In order to raise money in more than one market, some companies sell their share on markets in countries other than the one where they have their headquarters. [...]
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