The commodity market in India has seen a sharp increase in the volumes over the past few years. Commodities are just another asset class like the bond and equity market. Commodities come from the earth and act as raw material for all types of manufacturing businesses. There are many types of commodities that can be traded in the market. In this article, you will learn about commodity trading in India, types of commodity market and other aspects of the commodity market in India.
Let us begin by understanding the meaning of commodity.
Meaning of Commodity
A commodity is a group of goods or assets that are used in our day to day lives such as metals, agriculture, energy, etc. A commodity can be categorised as movable good that can be purchased and sold, except for money and actionable claims.
There are various types of commodities that are traded in India. Let us look at the types of commodities.
Types of Commodities Traded In India
- Agriculture: Wheat, Cotton, Rice, Corn, etc.
- Metals: Copper, Zinc, Gold, Silver, etc.
- Energy: Natural Gas, Crude Oil, Heating Oil, etc.
- Meat and Livestock: Cattle, Egg, etc.
Let us now learn how you can invest in the commodity market in India.
How to Invest in Commodity Market in India?
You can commence commodity trading in India in any of the six major commodity trading exchanges as listed below;
- Indian Commodity Exchange – ICEX
- Ace Derivatives Exchange – ACE
- National Multi Commodity Exchange – NMCE
- The Universal Commodity Exchange – UCX
- Multi Commodity Exchange – MCX
- National Commodity and Derivatives Exchange – NCDEX
From the above MCX and NCDEX are the most popular exchanges.
List of Commodities Traded on Multi Commodity Exchange (MCX)
- Metals: Aluminium, Brass, Copper, Zinc, Lead, Nickel.
- Bullion: Gold, Silver.
- Agri Commodities: Rubber, Black Pepper, Mentha Oil, Crude Palm Oil, Palmolien, Cardamom, Cotton, Castor Seed.
- Energy: Natural Gas, Crude Oil.
List of Commodities Traded on National Commodity and Derivatives Exchange (NCDEX)
- Fibres: Cotton, Guar Gum, Guar Seed, Kappa’s
- Oil and Oilseeds: Crude Palm Oil, Cotton Seed Oil Cake, Castor Seed, Mustard Seed, Refined Soy Oil, Soybean
- Soft: Sugar
- Cereals and pulses: Wheat, Barley, Paddy, Chana, Maize Rabi, Maize Kharif / South
- Spices: Jeera, Turmeric, Coriander, Pepper.
Let us now learn about the commodities that are most traded.
Most Traded Commodities
Natural gas, crude oil, gold, silver, cotton, corn, wheat are among the most traded commodities globally. Crude oil and gold are among the most favourite commodities among the traders and investors community. Crude oil is used for producing diesel, petroleum, etc. It is very volatile during global tensions. OPEC is the consortium of oil-producing nations that determine the supply of crude oil. The main oil-producing nations are Russia, US, Saudi Arabia, etc. Just like crude, gold is among the most popular commodity Indian people invest in. The price of gold has an inverse relationship with the US dollar. When the price of the US dollar falls, the prices of gold increase and when the price of the US dollar increases, the prices of gold falls.
Let us now learn about the participants in the commodity market.
Participants of Commodity Market
Speculators are traders that constantly monitor the price of commodities and predict the future price movement. If the speculators expect the prices of the commodity to move higher, they purchase commodity contract and sell them when the price goes up. Similarly, when they expect the price to go low, they sell commodity contracts and purchase back when the price falls. Thus, the intention of speculators is to make a profit in any type of market.
Hedgers are the producers, manufacturers, etc. who safeguard their risk by using the commodity futures market. Like for example, if a cotton farmer expects price fluctuation during crop harvesting, he can hedge his position. To hedge the risk, the farmer enters into a futures contract. If the price of the crop falls in the local market, the farmer can compensate for the loss by making profits in the future market. Similarly, if there is an increase in the price during crop harvesting, the farmer can book loss in the futures market and compensate it by selling his crop at a higher price in the local market.
Let us now learn about the benefits of trading in the commodity market.
Benefits of Trading in the Commodity Market
- Management of Risk
The Securities and Exchange Board of India (SEBI) ensures that the exchanges have proper risk management procedures in place to protect the investors. Therefore, trading in commodities is regarded as very safe.
Trading on the commodity exchanges is very transparent and the buyers or sellers cannot manipulate the price. The price discovery is done without any manipulation and orders are executed only when there is a match between a buyer’s and seller’s order. The margins in commodity markets are low, therefore traders use this market to hedge their position and for higher leverage.
There are many benefits of trading in the commodity market. However, there are some important things that you must know while trading in such a market.
Things to Know While Trading in Commodity Market
- The demand and supply chain determines the prices of commodity and you must have a clear idea about it.
- The prices of commodities depend on various factors and your strategies must be framed after understanding those factors.
- As a beginner, it is always advisable to take the help of experts before starting commodity trading.
- The risk in commodity trading is higher because you get higher leverage.
The above mentioned are a few things that one must know before indulging in commodity trading in India. As a beginner or seasoned investor, you can contact IndiaNivesh for any assistance relating to the Indian commodity market. Our experts and professionals can help you in finding the best commodity to trade in India according to your risk-taking ability and financial goals. Our aim is to exceed the client’s expectation in all endeavours and we will be glad to serve you.
Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
NFO – All about New Fund Offer (NFO) in Mutual Funds
Fund raising is an important aspect of financial planning for any company. There are many ways through which a company can raise capital from the market. However, in the case of an Asset Management Company, they can raise the capital through New Fund Offer (NFO). In this article, you will learn all the important details about NFO and its related concept. Let us begin by learning NFO meaning. What is NFO? When an Asset Management Company launches a fund, a New Fund Offer is launched to raise capital in order to purchase securities. The securities include equity and bond. During an NFO, mostly new mutual fund schemes are launched. NFO is similar to IPO expect for the fact that it is launched by an Asset Management Company. The NFO remains open for a specific period of time and the investors can apply for it during the stipulated price. On conclusion of the NFO period, the investors get the funds at the prevailing Net Asset Value (NAV) of the fund. Many times investors get confused between an NFO and IPO. In this section of the article, we will clear all your doubts regarding the same. Difference Between NFO and IPO Since IPO and NFO both aim to raise money, the investors often get confused between the two. A company brings IPO to raise capital for improving its operational efficiency. On the other hand, an Asset Management Company brings NFO for purchasing the stocks of the company, commodities, bonds, etc. The price of the IPO is much higher than its face value. But in the case of NFO, the fund's price is Rs.10 per unit in general. Let us now learn about the types of NFO. Types of NFO A New Fund Offer is of two types; Open-Ended Funds As the name suggests, the investor can enter or exit the open-ended fund at any point in time after its launch. These funds are launched when the NFO ends. When there is a New Fund Offer, the open-ended funds announces the purchase of new units on a specific date. You can purchase any number of units of these funds. The NAV of the open-ended mutual funds is reported regularly after the closure of the stock market. Close-Ended Funds A close-ended fund is one that does not allow you to make an entry or exit after the NFO period is over. They have a fixed maturity period that ranges from 3 to 4 years from the launch date. Theoretically, you can buy or sell these funds in the market, but it is not possible to do so because of lower liquidity. Let us now learn about the advantages of investing in NFO. Advantages Of Investing In NFO Close-ended funds provide you with the opportunity to invest in new and innovative products that are not available in the case of other funds. The close-ended funds come up with hedging strategies that protect you from the downside in the market by using the put options. However, being a close-ended fund, you can invest only when the NFO period is open. The close-ended NFO mutual funds often outperform other investment avenues. This is because when an NFO is launched during the peak of the market and you invest in it, the fund manager has the authority to hold the funds and invest when the markets are favourable or more attractive. Since close-ended NFO mutual funds have a lock-in period, the fund managers are not required to sell their stocks out of panic leading to losses to the unitholders. The fund managers in close-ended funds have the time to carry out research for stock selection and accordingly invest in securities. The lock-in period of NFO immunes the investors from market panic. With a lock-in period in place, the investors would not fall for bad investment decisions. Therefore, as an investor, you would make higher returns in these funds as you remain in the market for the long term. Since there are many advantages of investing in the NFO, you must select it carefully. To help you with the NFO selection, we list down certain points that you may follow. Things to Consider Before Investing in NFO You must make a background check of the fund house. You must ensure that the NFO has a positive history of mutual fund investments and has the potential to offer good returns in the long run. Before selecting any fund for investing, you must read about the risk, returns, allocation of the asset, etc. of the NFO. Always make sure that you read the offer document carefully and understand the fund manager’s investment process. The minimum amount for NFO subscription ranges from Rs. 500 to Rs. 5,000. So choose your funds accordingly. Some of the NFOs have a lock-in period. So invest in them after considering that factor. The above mentioned are a few things to consider before investing in New Fund Offer. Investing is all about selecting the right avenues and making good returns in the long run. If you are a beginner in the market or seek any assistance in investing, you can contact IndiaNivesh. We understand your financial needs & goals and accordingly suggest the right investment option for you. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
Step by Step Guide on how to file ITR (Income Tax Returns)
Over the last few years, the income-tax department of the country has been very dedicated to making the process for filing of ITR returns easier to ensure robust compliance by the taxpayers. However, many people find still find it intimidating and prefer to pass it on to professionals. How to file ITR online? Filing your ITR online is mandatory, and only super senior citizens who are 80 years or above can file their returns in a paper format. As filing the ITR online has simplified the process manifold, here is a step-by-step guide on how to file ITR- Step 1- Register/Login on the Income Tax Department Portal The first step to filing your ITR online is to register yourself on the Income Tax portal www.incometaxindiaefiling.gov.in. Your Permanent Account Number is your user id for registration, and you are required to set an alphanumeric password for it. Once you have registered on the official website, you need to log in with the same ID and password, and you will get secure access. You will be prompted to put a captcha each time you log in. Step2 –Collect the relevant documents needed to file your returns Before you start filing your ITR, all your documents must be organised and handy at the time of filing returns. Here is a list of documents you will need for filing your ITR online- PAN Card Aadhaar Card Bank Account Statements Bank Account Details TDS certificate( Form 16/Form 16A) Apart from these basic documents, if you have any other income such as rental income, capital gains/losses, then keep all such documents handy. Step 3- Click on the "Filing of the income tax return" to begin the process of ITR filing online Once you have registered yourself on the e-portal, login to your account and click on the “Filing of income tax return” tab on the dashboard. Step 4 - Download the correct form for ITR filing There are different ITR filing forms available based on your source of income. Choose the relevant form based on your income. The various available based on the nature of income are- ITR-1 Form- Individuals earning income from salary, income from house property, and income from other sources. ITR-2 Form- Individuals and HUFs who do not conduct business or profession as proprietors ITR-3 Form- Individuals and HUFs earning an income through business or profession as proprietors ITR-4 Form- Individuals earning income as business professionals ITR-5 Form- It is for firms, Limited Liability Partnerships (LLPs), co-operative societies, body of individuals ITR-6 Form- Those companies that are not claiming tax exemptions under Section 11 of the Income Tax Act ITR-7 Form- It is for trusts, colleges, institutions and political parties It is essential that you choose the correct form for ITR filing as filling in the wrong form will make it invalid, and you will have to re-file it. Step 5- Fill in the relevant information in the ITR form Once you have downloaded the appropriate form, then enter all the relevant details like name, PAN details, address, date of birth, investments, bank details, etc. in the form and validate the details entered by you. Step 6- Compute your taxable income Once you have entered all the relevant information in the form, compute your total taxable income for the financial year by adding the income from all the five heads of income. Step 7- Calculate your tax liability After you compute your taxable income, calculate your tax liability as per your income tax slab. Step 8- Verify your Form 26 AS The next step is to verify your Form 26 AS, which shows all the taxes that you have already paid in the year. You have to go on the quick link menu and open your Form 26 AS where you find details of TDS, advance tax, self-assessment, etc. Form 26 AS is a consolidation of tax credit statement. Step 9- Calculate your final tax liability Calculate your final tax liability after deducting the taxes that have already been paid by you. If there are any additional tax that needs to be paid then you can pay it online. Step 10- ITR filing after paying your dues Once you have paid your taxes in full, you can file your ITR in Excel or Java software utility. ITR1 and ITR 4 forms can be submitted online only. Step 11- Verification of your ITR filing This is the last step in filing ITR. You are required to verify your ITR either electronically or physically. If you opt for electronic verification, then you will receive the acknowledgement receipt immediately. You can also send the ITR for verification by sending a signed copy by post to the Income Tax Department in Bangalore within 120 days, and they will email you the acknowledgement for the same. After the verification is over, the Income Tax Department will process your ITR to cross-check the details and tax paid by you. On completion, they will communicate the same to you via email on the registered email id. Conclusion Over the years, the process of ITR filing has been simplified, and now it is mandatory to e-file your returns except in the case of super senior citizens. If you have any queries or doubts about filing your ITR online, then you can get in touch with our tax experts at IndiaNivesh to help you file your returns. Disclaimer: Investment in securities market / Mutual Funds are subject to market risks, read all the related documents carefully before investing.
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