If you will look for the present market in India, then you can find that a new platform is set for the retail investors as well as traders to join, and to participate in the commodity derivatives. This is known as MCX or multi commodity exchange. For the traders and retail investors who want to diversify the portfolios they currently have apart from the shares, real estate, and bonds; commodities have appeared as the better option for them. A few months back, this was not really there. This type of option was having no sense during that period. It was the time when the retail investors were just able to do very little effort in terms of investing in the commodities like silver and gold. Apart from silver and gold, there were no other options for the retail investors to invest in. practically there was no such avenue to invest in the commodities.
But this picture has changed when the multi commodity exchange was announced for the country. This has made it possible for the retail investors to invest in the commodity futures and for this they don’t even need to have the physical stocks. As far as the commodities are concerned, they really offer a great potential to appear as a unique asset for the market and with the MCX, savvy investors have managed to receive this opportunity now. It has also benefited speculators and arbitrageurs a lot.
However, retail investors claiming to have a good understanding about equity markets may say that commodities have offered produced an uncomfortable market for them to deal with. It’s true that commodities are still considered as the less understood market elements. Understanding the fundamentals related to supply and demand of commodities can even produce some kind of challenge. So, it’s always better for the retail investors to have a good grasp about the advantages and risks associated with the investment in commodities futures.
They need to equip themselves with such knowledge before they can actually take a leap into this business. History even suggests that commodities futures pricing has always remained less volatile with comparison to the bonds and equity. This is the big reason why commodities futures have managed to produce such a groundbreaking option for the retail investors to go for portfolio diversification.
The market size for commodities futures in India is really significant. As per the recent data different commodities in this country have come up with Rs 1, 40,000 crore of annual turnover. And as the future trading is introduced now for the MCX market, the commodity market size will also grow exponentially in the future. Just similar to the other markets, the market for commodity futures also plays an important role for risk sharing and information pooling. This market has offered a great platform for the sellers and buyers of commodities to meet and to facilitate the decisions for consumption of the commodities and storage. This process is also what making the market for commodity futures more liquid.