Type of Commodities traded in Indian Stock Market

1. Commodity Bullions:

Commodity Bullions are also known as precious metals in the trading language. As the name signifies they include the valuable metals Gold and Silver. These commodities are considered as a form of currency owing to their scarce availability in nature. It should be noted that metals such as gold, silver, palladium and platinum still possess an ISO 4217 currency code, which means that they are not just commodities but they are de facto money.

The major constituents under the Commodity bullions category are:

• Gold – One of the most precious metals which is valued equal to a global currency, gold is traded on the MCX in the form of following products:
  • Gold
  • Gold Mini
  • Gold Guinea
  • Gold Petal

• Silver – Silver is obtained through lead ore and is a by-product of base metal mining activities which include copper, zinc and gold. It is traded in the form of following products:
  • Silver
  • Silver Mini
  • Silver Micro

2. Base Metals:

Metallurgy dates back its origins to 6000 BC. There used to be seven metals in the history on which the ancient civilizations were based, they were – gold, copper, silver, lead, tin, smelted iron and mercury. As per chemistry, the metals which are prone to corrosion and oxidization easily and have a variable reaction with dilute hydrochloric acid to generate hydrogen are base metals. These are inexpensive as compared to bullions and are the key ingredient in almost every industrial and domestic application.

Base Metals: Metallurgy dates back its origins to 6000 BC. There used to be seven metals in the history on which the ancient civilizations were based, they were – gold, copper, silver, lead, tin, smelted iron and mercury. As per chemistry, the metals which are prone to corrosion and oxidization easily and have a variable reaction with dilute hydrochloric acid to generate hydrogen are base metals. These are inexpensive as compared to bullions and are the key ingredient in almost every industrial and domestic application. The Indian metallurgy has plenty of natural resources in minerals including bauxite, manganese, copper, iron ore and hold. Due to the advancement in technology, the output of the Indian metallurgy industry has got a further boost. The base metals can be traded in the form of following products on the multi Commodity Exchange (MCX):

• Aluminum
• Copper
• Lead
• Nickel
• Zinc

3. Energy:

The energy commodities are considered to be the driving force of the economy. Crude Oil with its by-products and natural gas constitute more than half of primary energy consumption of India. Crude oil is the most important source of energy to the world because of the high energy density, relative abundance and easy transportability from the 1950s. Almost all the liquid fuels like petrol, diesel, kerosene etc are extracted from crude oil.

Natural gas is also a combustible fuel and is a mixture if hydrocarbon gases. Natural gas is one of the cleanest and safest sources of energy. Natural gas was discovered by China as early as around 500 BC but the use of natural gas was first commercialized by the Great Britain in 1785. Natural gas was then used for domestic lightings and street lamps.

Energy can be traded on the MCX in the form of following products:

• Crude Oil
• Natural Gas

4. Agriculture Commodities:

India is an agricultural country which is ranked on the second position in farm production in the entire world. India exports more than $50 billion worth of agricultural goods and products every year which makes it one of the major exporters of agricultural products. Agricultural products accounts for over 38 per cent of the total exports of India.

However, there are numerous challenges associated with agricultural production some of which are distribution, supply and storage. Due to the volatile commodity prices and highly fragmented markets, earning a fair and remunerative price is a challenge for the Indian farmers. The government has introduced a number of reforms including the strengthening of existing institutions in sport and derivative trade. Commodity markets are influencing the lives of billions of stakeholders in the large and diverse ecosystem of commodities.

Agriculture commodities can be traded in the form of following products on the MCX:

• Black Pepper
• Crude Palm Oil
• Cotton
• Cardamom
• Mentha Oil
• Rubber

Trading in the commodities market has provided numerous opportunities to the traders and investors. Commodities are considered to be the best instrument for diversification from stock market and bond market and provide a way for hedging. However, it is important to note that commodity market is a high return high risk market and therefore it is very important to get your risk profile analysis evaluated before entering the world of commodities. Trading in commodities requires experience and knowledge, If you are not confident enough, HNI commodity is a service which offers you a dedicated research analyst which provides you research based recommendations for trading in the commodity market.