1. Bullion

Bullion generally refers to coveted metals that have been refined to a high degree of purity. The term is generally associated with gold and silver and unsurprisingly, those are the commodities included in this category. 

Commodities: Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI, Silver M.

2. Metals

This category includes a wide variety of base metals and alloys that are mostly used for heavy machinery or industrial activities. 

Commodities: Aluminium, Brass, Lead, Copper, Nickel, Tin, Zinc, Sponge Iron, Steel Flat, Steel Long.

3. Cereals & Grains

The commodities from this category are essential for both individual and business entities.

Commodities: Mentha Oil, Guar Seeds, Guar Gum, Gur Chaku, Potato, Sugar (M-30 & S-30), Maize.

4. Energy

Energy-related commodities are coveted by investors since they have a direct impact on major economies around the globe.

Commodities: Crude Oil, Natural Gas, Brent Crude Oil, Furnace Oil, M. E. Sour Crude Oil.

5. Fiber

Fibers from this category are mainly used for textile engineering but their use is found in individual homes as well.

Commodities: Cotton Staple (L, M, S), Cotton Yarn, Kapas.

6. Plantations

This cateogry includes commodities that are harvested on a large or small scale and are crucial to the economy.

Commodities: Rubber, Arecanut, Cashew, Coffee.

7. Petrochemicals

Petrochemicals are manufactured on a large scale and are derived from petrol and natural gas.

Commodities: PVC, HDPE, Polypropylene(PP).

8. Spices

Spices are crucial to almost every region in India. Hence, their production and even trade holds high value in the country.

Commodities: Red Chilli, Cardamom, Turmeric, Jeera, Pepper.

9. Oil & Oil Seeds

India is a major producer of oil and oil seeds and as a result, these commodities are traded on the commodity exchange.

Commodities: Mustard Oil & Seeds, Soy Bean & Seeds, Soymeal, Soy Oil, Rice Bran DOC & Refined Oil, Castor Oil & Seeds, Coconut Oil & Cake, Crude Palm Oil, Groundnut Oil, Cotton Seeds, Sesame Seeds, RBD Palmolein, Refined Sunflower Oil, Kapasia Khalli.

10. Pulses

Pulses are just as popular and widely produced in India as cereals and grains.

Commodities: Chana, Masur, Yellow Peas. You can consult a Cube Wealth Coach or download the Cube Wealth App.

1. Physical Ownership 

An investor may choose to buy a commodity in its physical form, like gold or silver, hold it for a certain period of time, and then sell it off to another trader. 

Read this blog to learn more about the best ways to invest in gold in India.

2. Commodity Exchange 

The other way is to trade commodities listed on a commodity exchange by entering into a futures contract. A commodity exchange is like a stock exchange but for hard and soft commodities.

There are 3 main national commodity exchanges in India in terms of market share (apart from numerous regional exchanges):

1. Multi Commodity Exchange (MCX)

2. National Commodity & Derivative Exchange (NCDEX) 

3. National Multi Commodity Exchange of India (NMCE)

You can invest in approximately 100+ products listed on several Indian commodity exchanges. 

Watch this video to know the benefits of long term investing

1. Speculators

Speculators are seasoned traders who thrive on taking risks. Speculators use the price movements of commodities to generate short term profits frequently. 

A speculative trader will have no intention of owning the commodity at the end of the futures contract. Instead, a speculative trader will enter into a futures contract at a low and sell it for high.

The overall aim of speculators is to beat the downsides of a long term investing strategy. 

2. Hedgers

Hedgers are conservative or safe traders who mostly deal in futures contracts. These traders use hedging techniques to protect themselves from erratic prices and future losses. 

A hedger may make lower profits compared to a speculator. However, a hedger will look to offset losses with inversely correlated investments and conservative strategies.

1. Demand And Supply

The commodity market functions on supply and demand which may affect prices. If the demand for a commodity is high, the price of the commodity may be high. 

Conversely, lower demand may lead to lower prices. This principle holds true for both commodities and equities.  There’s also a chance that speculations may have an impact on the prices of commodities.

2. International Factors

We live in a global economy that is largely dependent on import and export. So certain commodities are influenced by international market conditions and trade relations.

If India imports a commodity from China, any negative trend in either China’s economy or the particular sector may affect the price of the commodity in India. 

3. Domestic Factors

A downward trend in a particular sector within the country or a slump in the country’s economy may have an impact on the price of the commodity.  

1. Predetermined Prices

Commodity exchanges function on futures contracts where buyers and sellers agree to trade a commodity at a predetermined price. The process of determining the price of a commodity known as “price discovery”. You can consult a Cube Wealth Coach or download the Cube Wealth App.

2. Diversification

The commodity market is negatively correlated with the equity market. Moreover, the Indian commodity market is relatively broad and contains oil, natural gas, silver, and even sugar, 

Thus, it offers investors a chance to diversify their portfolio and hedge against losses that they may experience in the equity market. 

However there are many better ways the Cube Wealth app helps you diversify your portfolio internationally. Download the Cube Wealth to invest in US stocks for as little as $1, invest in international mutual funds, digital gold & more!

1. Why invest in commodity markets? 

Ans. Investing in commodity markets offers several benefits, including portfolio diversification, hedging against inflation, and potential for profit. Commodities often have a low correlation with traditional assets like stocks and bonds, making them a valuable addition to an investment portfolio.

2. How can I invest in commodity markets? 

Ans. There are several ways to invest in commodity markets. The most common methods include buying physical commodities, trading commodity futures and options, investing in commodity-based exchange-traded funds (ETFs), or purchasing shares of companies involved in the production or distribution of commodities.

3. What are the risks associated with commodity market investments? 

Ans. Commodity market investments carry risks, such as price volatility, geopolitical factors, and supply and demand fluctuations. Additionally, investing in commodity futures involves leverage, which can amplify both gains and losses.

4. Are there different types of commodities to invest in? 

Ans. Yes, commodities are typically categorized into two groups: hard commodities and soft commodities. Hard commodities include natural resources like oil, gold, and metals, while soft commodities comprise agricultural products like wheat, sugar, and cotton.