India is mainly an agricultural wealth, ranking second in the world in agriculture production. While keeping up with population enlargement, rising agricultural production over the last few decades has shaped considerable troubles in marketing, as well as supply, storage, and allocation.
Commodity trading in India: Agro commodity trade India dates back to 1875 when the Cotton Trade Association was founded in Bombay. Though, because of a lack of goods for domestic use, commodity futures trading was halted in 1952. As the markets developed and urbanized, the government allowed trade farming futures to begin in 2002.
Commodity trading regulator: In the early 1950s, the Forward Industry Commission (FMC) supplied a regulatory structure for India’s goods trading market. They later merged it with the Securities Exchange Board of India (SEBI) in September 2015 to form a market-wide monetary watchdog.
Following that, the SEBI enhanced the operational functionality of the market through a variety of actions such as allowing stockbrokers and a few segments of Foreign Institutional Investors (FII) to deal/contribute in goods derivatives, permitting the NSE and BSE to start derivatives on their trading platforms, and so on.
The following is the major distinctiveness of agricultural commodity trading:
Futures and spot prices are inextricably linked, and equivocation can help decrease the risks connected with unexpected cost swings. Futures trading and farmers abridged seasonal price fluctuations/producers profit from stable pricing. To trade agricultural commodities allows retail and business investors to branch out their portfolios.
Commodity trading processes are considered the same as those of traditional stocks and securities trading. One must open a Demat t and a Trading Account, as well as to accomplish the necessities. When investing or trading in agricultural stores, one should continually consider supply and demand considerations, as well as seasonal and weather-related fundamentals. Commodity exchanges have played a major role in developing an atmosphere in which farmers and other market players may enlarge their businesses with total confidence and faith. Farmers profit from a well-developed supply futures exchange because it allows them to calculate their profits and map their future investments correctly. A commodity future trading is serious for effective price detection and risk administration.