1. Overview
Commodity market has carved its space in the minds of investors who were earlier unaware about this exciting asset class. Commodity trading is not new to the world and its roots are dated to historic times when other financial instruments were not even in existence. Derivative instruments were originated from Commodity trading and found usage in other financial markets as well.

Even in India, many of us think that commodity trading has just started in the year 2003 but it has been in existence from pre-independence days. Though, the real growth of commodity trading started after MCX and NCDEX took initiative and created awareness among investors. Since then, volumes have increased manifold and commodities like Gold, Silver, Copper and Crude Oil have become the subject matter of discussion even with retail investors. Commodities offer immense potential to become a separate asset class for all sections of investors as success minded investors are always alert for ideas & avenues to grow their wealth.

2. Why to Trade in Commodities?
Traders and investors used to shy away from Commodities but the impressive rally shown by bullions since the year 2008 has silenced all and has drawn attention of a large number of market participants. Apart from the attractive returns offered by various commodities, there are numerous other reasons to trade in commodities out of which we are mentioning a few as under:

Base Value – Unlike other asset classes, commodity trading is unique in the way that each and every commodity has some base value (a price point which can be seen as minimum price) and commodity price can never become “ZERO”. Base value generally tends to be the cost of production of that commodity and investments made around base value of a commodity do fetch handsome returns with negligible risk.

Fewer variables - To understand commodity market, one does not need to go deep into ratio analysis, multiple formulas, management strengths or industry visits as all one must know is the demand and supply of the commodity and the factors affecting either of them. Increase in Demand or decrease in supply is favorable for prices while any decrease in demand or increase in supply puts prices under pressure.

Multiple investment opportunities - Each commodity provides standalone investment opportunity as the usage and the demand and supply situation of that commodity differs from other commodities. Some commodities like Gold are even considered hedge against inflation and provide a safe haven for investors during political unrest, natural disasters and even financial crisis. Even other commodities might become attractive and offer good opportunities, if their demand and supply situation gets affected by any factor.

Universal appeal - Being natural resources, commodities have universal appeal as the investors can easily relate to them. There is no need to tell about the features of Gold and Silver to anyone as they are already aware about them. What makes commodities universal and appealing is that one can take commodities to any part in the world and they can be easily exchanged for cash or goods.

Huge volumes - Financial markets are successful when there is ample volume to support transactions and to reduce impact cost. Volumes in Indian Commodity Exchanges are increasing every year and that is when there is limited number of participants with institutional players still not able to trade due to regulations. Once they are provided entry into this asset class, volumes will increase tremendously as volumes on global commodity exchanges are nearly 10 times higher than that of equity markets.

High leverage – Perhaps the greatest appeal of commodity trading is high leverage. This means that to buy or sell a commodity having a high contract value of say Rs. 5,00,000, the client needs to pay a small portion of the contract value for trading, may be Rs. 25,000 – 30,000.

Portfolio Diversification – A well known proverb highlights the benefit of diversification by stating that "don't put all your eggs in one basket." Diversification of portfolio means reducing risk by investing in a variety of assets. If one asset class does not perform well, the other asset class may provide good returns or at least better returns than other asset class; thereby balancing the portfolio and reducing the risk. Hence, an investor can reduce his risk by allotting some portion of his portfolio to commodities.

3. Available products
Over the years, Commodity Exchanges in India have allowed trading in many products. Some of these are mentioned below:
4. About E-series Products
For the first time in India, National Spot Exchange (NSEL) has introduced E-Series products in commodities. E-series products are small-size commodity contracts wherein client can invest to take benefit of the price movement of various commodities. Retail investors can use these products to trade and investment in commodities like they invest in the equities. This is a unique market segment, which functions just like cash segment in equities, but offering commodities in the Demat form in smaller denominations.

NSEL has launched its first product under the E-Series as E-Gold on 17th March, 2010. Later, the product portfolio in E-series has been expanded to include:-

• • E-Gold
• • E-Silver
• • E-Copper
• • E-Zinc
• • E-Lead

Systemic investments in e-series products promote savings in a secured way offering ease of transaction and flexibility of trade timings. This instrument provides ample opportunity to the mass as secured investment in their product basket diversification. NSEL has made necessary arrangements with National Securities Depository Limited (NSDL) and Central Services Depository (India) Ltd. (CDSL) as the depository for holding commodity units in the electronic form.

Key features of E-series products are:-

• • Start with a small investment amount
• • Direct investment into commodity
• • Hassle free custody and no risk of theft
• • Option to have physical delivery of commodity
• • Quality assurance
• • Long trading hours and higher number of trading days
• • No Security Transaction Tax
• • Promotes Systemic investment and savings
• • Invest in smaller denomination (1 gm gold and 100 gm Silver)
• • Transparent and uniform pan India pricing
• • Convenient and secure online buying and selling
• • No storage or holding costs
• • Extending trading hours from 10 am to 11.30 pm.

5. About Arbitrage Opportunities
There are many ways in which investors can take benefit out of the commodity market. Apart from earning money by taking positions according to the price trends of the various commodities, investors also have the option to earn attractive returns by exploiting the arbitrage opportunities available in the market. Arbitrage is the possibility of a risk-free profit at zero cost by taking advantage of a price difference between two or more markets. Arbitrage is not simply the act of buying a product in one market and selling it in another for a higher price at some later time. The transactions must occur simultaneously to avoid exposure to market risk, or the risk that prices may change on one market before both transactions are complete. In Indian commodity market, investors can find arbitrage opportunities between various exchanges, various contracts as well as between contracts on commodity exchanges and the goods traded in the physical commodity market. However, spotting and taking benefit of such opportunities require experience and skills and hence clients can seek the advice of professionals for this task.

6. Our Strengths (Almondz Commodities)
Almondz commodities strive for providing the best services to our clients and we try to ensure that the customer expectations are duly met. Our team comprises of professionals who have rich experience in commodity market and they try to come up with best products for clients. Our strength lies in the following:-

• a. Excellent research to guide client
• b. Integrity & honesty in all dealings
• c. Personalized service at all levels
• d. Vast product portfolio
• e. Pan India network
• f. Online & Offline trading available
• g. Online back-office software
• h. Centralised helpdesk
• i. Efficient grievance redressal system
• j. Real-time risk management
• k. Emphasis on training and development of client

For detailed product information or contract specification, visit:
MCX - www.mcxindia.com
NCDEX - www.ncdex.com