How Essential is the Role of Commodity Market in India

Dec-23-2021Blog by – Mr. Dhruv AjmeraRead Time: 3 Min.Word Count: 541
111How Essential is the Role of Commodity Market in India

Apart from equity, the Indian financial market offers a variety of alternatives for better investment and portfolio management, and commodity trading is one such way. In addition, India is an agro-based country with high demand for agro-based commodities in consumption, production, and trade. Therefore, one of the essential components that enable every country`s economy to prosper is its commodity market.

This blog will explain why these marketplaces are essential for India`s economic development.

Commodity markets can help you achieve food security.

In India, the commodities market ensures that commodity producers can be shielded from dropping prices by using commodities futures contracts to lock in a price for their goods that they think is appropriate. As a result, it assures that there will be a sufficient supply of goods across the country. Due to inadequate warehousing facilities, farmers in India are being forced to take risks with their agriculture products. However, farmers can avoid this by utilizing the futures market to sell their grains and lock in prices. This will ensure that price changes have no negative impact on expenses.


Investors may diversify their portfolios by using commodity markets.

The modern-day investor is intelligent and is always on the lookout for enticing investment opportunities to diversify their portfolio. Traditional instruments like investment in bonds, stocks, mutual funds, and gold, on the other hand, remain popular among many investors. On the other hand, commodity markets broaden the investment opportunities by offering a diverse selection of commodities to investors and dealers, including agricultural products, gold, silver, crude oil, base metals, etc. Moreover, small and medium investors can engage directly in these new asset classes through a regulated commodity exchange (MCX, NCDEX, ICEX).


Better investments for the agricultural ecosystem.


The complete lack of post-harvest facilities is currently one of the most significant difficulties the agriculture sector faces. Despite creating a large number of goods, businesses are forced to lose money due to a lack of suitable warehousing, transportation, and other facilities. A well-regulated commodities market can benefit all stakeholders, including farmers, brokers, intermediaries, consumers, and investors. This will encourage further investments in the agricultural environment, such as better warehousing and transportation networks. Thus, a functioning commodities market can help catalyze this ecosystem`s growth.

Commodity markets can improve aggregation and finance processes.

 Farmers in India are not only small but also widely distributed. Thus, the farmers` dispersion is posing yet another issue. An aggregator may address this challenge; however, middlemen are now filling the aggregator`s role, reducing the mechanism`s transparency.

 Farmers can benefit from organized commodity markets because they can aid with the efficient and successful aggregation and sale of agricultural goods. Furthermore, finance, a crucial part of commodities markets, might also be improved.

 The commodity market plays the most crucial role in India since it directly impacts the economy`s growth and positively impacts agriculture and also the industrial sector. Furthermore, India`s contribution to global commodities trade is estimated to be 5%; even though it is still in its nascent stage and has a long way to go, it has progressively increased over the years. As a result, it is an excellent opportunity to diversify your portfolio by investing in the commodity market through some of the best commodity brokers in India, such as Ajmera x-change.

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