Indian Commodity Market

Constituents of Indian Commodity Market

Commodity market likewise the stock market is having two constituents namely the spot market and the derivative market.

• Spot Market – Market where the commodities are bought and sold for immediate delivery
• Derivative Market – various financial instruments are traded in the stock exchange.

Difference between Commodity Exchange and Stock Exchange

1. A commodity exchange deals in non-financial commodities, be it the agricultural commodities like cotton and wheat or non agro commodities like aluminum, oil etc.
2. On the other hand stock exchange deals in financial products like stocks and government securities.

Indian commodity market consists of both the retail and the wholesale market in the country. The commodity market in India facilitates multi-commodity exchange within and outside the country based on requirements. Commodity trading is one facility that investors can explore for investing their money. The commodities and future market in the country is regulated by Forward Markets commission (FMC).

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Wholesale Market

The wholesale market in India, an important component of the India commodity market, traditionally dealt with framers and manufacturers of goods. However in the present scenario, their roles have changed to a large extent due to the enormous growth that the economy has witnessed. The lengthy process of wholesalers buying from manufacturers; then selling it to retailers who in turn sold it to consumers, does not seem feasible today. An improvement in the transport facility has made the interaction between the retailer and manufacturer easier; the need for a wholesale market is gradually diminishing.

Retail Market

Indian Retail Industry is one of the pillars of Indian economy as it accounts for a large portion, to an extent of 13%, of the GDP. The retail market in India is currently witnessing a boom. The growth in the India commodity market is largely attributed to this boom in the retail market. Policy reforms and liberal government policies have ensured that this sector is growing at a good pace. Some of the reasons attributed to the growth of retail sector in India include the large population of the country who has an increased purchasing power in their hand. Another factor is the heavy inflow of foreign direct investment in this sector. More than 80% of the retail industry in the country is concentrated in large cities.

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The India Commodity market has undergone lots of changes due to the changing global economic scenario; thus throwing up many opportunities in the process. Demand for commodities both in the domestic and global market is estimated to grow by four times than the current demand, by the next five years. Commodity trading is an interesting option for those who wish to diversify from the traditional options like shares, bonds and portfolios. The Government has made almost all commodities entitled for futures trading. Three multi commodity exchanges have been set up in the country to facilitate this for the retail investors. The three national exchanges in India are:

• Multi Commodity Exchange (MCX)
• National Commodity and Derivatives Exchange (NCDEX)
• National Multi-Commodity Exchange (NMCE)

India Commodity Market – Global Scenario

Despite having a robust economy, India’s share in the global commodity market is not as big as estimated. Except gold, the share in other sectors of the commodity market is not very significant. India accounts for 3% of the global oil demands and 2% of global copper demands. In agriculture, India’s contribution to international trade volume is rather less compared to the huge production base available. With the increase in export of commodities like milk, coriander, and other food grains a hike is seen in the market. Inflation is also a reason for the rise of commodity prices.

Conclusion

Indian Commodity market has gained much of its importance in recent years. With the world getting integrated, interrelated, interdependent the commodity market is highly derived from the market across the globe and the global happenings. The regulation of prices of commodities is seen at large with the day to day happenings. Commodity trading in India is still at its early days and thus requires an aggressive growth plan with innovative ideas. Liberal policies in commodity trading will definitely boost the commodity trading and it surely has the potential to drive the future of the economy to greater heights.