Commodity Market - 15 Mints Seminar Notes

Commodity  Market - 15 Mints Seminar Notes

A commodity market is a marketplace for buying, selling, and trading raw materials or primary products. Commodities are often split into two broad categories: hard and soft commodities.

Functions of Commodity Exchanges:

• Providing a Market Place
  
• Regulating Trading
  
• Collecting and Disseminating Market Information
  
• Grading of Commodities
  
• Settling Disputes through Arbitration
  

Types of commodity market

Broadly speaking, there are two types of commodity markets in India. These are Spot Markets and Derivatives. Spot markets are also called physical markets or cash markets, where traders exchange commodities for instant delivery. The Derivatives Market comprises Futures and Forwards.

Commodity market today 

Gold rate today: Yellow metal trades flat, silver slips below Rs 63,000. Gold futures on MCX gained 0.10 per cent or Rs 46 at Rs 47,956 per 10 grams. Silver futures gained by 0.15 per cent or Rs 92 at Rs 62,036 per kg.

Difference between stocks and commodities

Stocks denote company ownership, while commodities represent goods that include agricultural products, metals, oil, etc. Both these asset classes reserve sizeable profit-making potential. However, they are traded in different marketplaces.

Difference between equity and commodity market? 

Commodity refers to a basic and undifferentiated product on which traders can invest or take positions. Equity refers to an investment or some form of capital that is invested into a firm or a listed entity to acquire ownership and share in profits.

Most Actively Traded Commodities

• WTI Crude Oil.
  
• Brent Crude Oil.
  
• Natural Gas.
  
• Soybeans.
  
• Corn.
  
• Gold.
  
• Copper.
  
• Silver.
  

How many commodities are there in India

In 2016, apart from numerous regional exchanges, India had Six national commodity exchanges namely, Multi Commodity Exchange (MCX), National Commodity and Derivatives Exchange (NCDEX), Indian Commodity Exchange (ICEX), National Multi Commodity Exchange (NMCE), ACE Derivatives Exchange (ACE) and Universal Commodity .

NSC and BSC

The stock exchange is a marketplace where securities can be traded between investors/traders with the help of brokers. The BSE and NSE are the leading stock exchanges of the Indian market. BSE stands for Bombay Stock Exchange and NSE stands for National Stock Exchange.

Types of Commodities

• Things you drink, such as sugar, cocoa, coffee, and orange juice. These are called the "softs markets."
  
• Grains, such as wheat, soybeans, soybean oil, rice, oats, and corn.
  
• Animals that become food, such as live cattle and pork (called "lean hogs").
  
• Things you wouldn't eat, such as cotton and lumber.
  

Blue chip stocks

A blue-chip stock is a huge company with an excellent reputation. ... A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name.

Blue - chip companies

As per market capitalisation, India's leading blue chip companies today are State Bank of India (SBI), Bharti Airtel, Tata Consultancy Services (TCS), Coal India, Reliance Industries, HDFC Bank, ONGC, ITC, Sun Pharma, GAIL (India), Infosys, and ICICI Bank.

Why is it called blue chip?

The term "blue chip" comes from the game of poker, where blue chips are the highest value pieces. A company must be well-known, well-established, and well-capitalized to be a blue chip. Membership in certain stock indexes is important for determining blue chip status.

Blue chip worth

Blue chips are usually worth $10, but it can vary. They are the highest value chip in a classic three-colour poker chipset. In a classic poker chip set containing white, red and blue chips, blue chips are the highest chip denomination. A typical valuation might be as follows – white $1, red $5, blue $1

Here are the 10 best blue-chip stocks to buy for 2022:

• Chevron Corporation (NYSE:CVX)
  
• Apple (NASDAQ:AAPL)
  
• Walmart (NYSE:WMT)
  
• Tesla (NASDAQ:TSLA)
  
• Microsoft (NASDAQ:MSFT)
  
• Lockheed Martin (NYSE:LMT)
• Pfizer (NYSE:PFE)
  
• Freeport-McMoRan (NYSE:FCX)
  

List of Best Blue Chip Stocks to Consider

• Company Name    Industry    Share Price as of 2nd October (NSE)
  
• HDFC BANK    Banking    Rs 1,511.70
  
• Infosys    Information Technology    Rs 1,703.55
  
• ITC    FMCG    Rs 225.75
  
• Coal India    Mining/Minerals    Rs 156.10 

HEDGING   

What is called hedging?   

Hedging is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. The reduction in risk provided by hedging also typically results in a reduction in potential profits. Hedging strategies typically involve derivatives, such as options and futures contract

Financial hedge

A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting or opposite position in a related security

Hedging in commodity market

Hedging is a risk management strategy employed to offset losses in investments by taking an opposite position in a related asset. The reduction in risk provided by hedging also typically results in a reduction in potential profits. Hedging strategies typically involve derivatives, such as options and futures contracts.

How do you hedge a stock

Investors typically want to protect their entire stock portfolio from market risk rather than specific risks. Therefore, you would hedge at the portfolio level, usually by using an instrument related to a market index. You can implement a hedge by buying another asset, or by short selling an asset.

Types of Hedging Strategies

• Forward Contract: It is a contract between two parties for buying or selling assets on a specified date, at a particular price. ...
• Futures Contract: This is a standard contract between two parties for buying or selling assets at an agreed price and quantity on a specified date.
  

Presented By,

Gopinath

Banking Student

Magme School Of Banking