Indian stock market vs. Commodity market

Click here to Enjoy Live SHARE MARKET Commentary and for NSE & MCX

Indian stock market vs. Commodity market
Investment is not a new term. In fact, whether you attribute it to the individuals, tabloids or thank the marketing agency, there are more people than ever, trying to diversify their financial portfolio. In fact, it is the middle class, which is pursuing the process with complete interest. So, initially there were individuals really skeptical to invest in stocks, bonds and share market. However, now people are studying, taking online aid and learning to pursue the same. Yet again, there are those, who are getting interested to invest in a plethora of investment tools.

It was thus, not a surprise, when commodity market, opened new avenues in the form of 6 commodity exchanges, namely Multi Commodity Exchange, National Commodity and Derivative Exchange, National Multi Commodity Exchange, Indian Commodity Exchange and the ACE Derivatives Exchange.

There are many individuals who are still a bit skeptical with regards to trading in the commodity market. Hence, it will be best to compare both the investment tool and then come to a well informed decision. But, before that it will be better to understand some basics about both the tools.

What is stock market trading?
Trading in the stock market in India, takes place in two stock exchanges. There is the Bombay Stock Exchange also known as BSE and the National Stock Exchange also known as NSE. It is the share market, where the share is issued or traded. In the stock market, you will be able to trade financial instruments like the mutual funds, bonds, derivatives and the share of the companies. It is also imperative for you to know, that there are two types of stock market- Primary market and Secondary market.

What is a commodity trading?
If you are planning to diversify your investment portfolio, the commodity trading is the ace platform. It inculcates investing in live commodities like gold, silver, or oilseeds in the future market. In fact, pricing in this market is less volatile. In order to pursue trading in the commodity market, you will be required to invest a minimum of Rs. 5000/-. There is the requirement of separate commodity Demat account from the National Securities Depository Ltd. to trade in this market. Again, the systems have cash as well as delivery mechanisms. In fact, with time there has been witnessed a high demand. This aspect has attracted investors.
Comparison of stock market trading and commodity trading

It will be interested to know, the differences which govern the two:-

1. In the commodity market, the commodity or product has several varieties or grades. In fact, each lot in the grade is different from other lots in the same grade. However, in the stock market one unit of the stock market has no difference from another of the same type, whether it is in terms of face value or the characteristics.

2. Commodity derivatives have more implication for buyers and sellers, than just the payment or receipt of contractual price. The latter is witnessed in case of buying or selling of securities. In case of the stock market, the quality of the securities deteriorates owing to improper storage. And again, the impact of transport conditions cannot be obliterated.

3. In the commodity market, the future market has a very basic role. However, in the stock market, derivatives are a product which does not have any values of its own. In order to derive its value, it is determined with the aid of the underlying asset.

4. The commodity supply is not fixed. However, the stock market supply is fixed.

5. The time frame is again a difference between the commodity market and Indian stock market. There are a number of stocks which remain in the stock for a number of years, even when their issuing company continues to pursue their business. However, in futures contract the producer of a commodity is required to deliver a specific commodity to the buyer by a specific date.

In accordance with your priority and need, it is best to invest in the investment tool of your choice. However, make sure to read about all the terms and conditions. And again, it is best to be knowledgeable with regards to any investment toll you are planning to invest in.