Safe Haven Investment in Trouble Times

Commodity prices will likely rise again once the world economy starts growing and we suggest you to invest some of your money in commodities. It is must for you to be mastered before you begin trading because futures trading involve complications like margins and mark-to-market. Investing in commodity futures is not suited for an investor who is new or inexperienced.

Another option for you is to buy gold directly or through gold exchange traded funds (ETFs). Investors used to buy gold in a troubled economy because it is perceived as a safe investment. But gold may give only average returns whenever economy recovers.

Perhaps the best way to invest in commodities is through a commodity based mutual fund. Here the investment is in the companies that are related to commodity business – e.g. metals, oil, gas and more. The prices of commodities increase the profits of these companies and their share prices will also rise. Thus it is relatively safe and diversified way where an investor is indirectly investing in commodities. Following are some advantages of investing through mutual funds rather than directly through individual commodity based stocks:

1.       Diversification– You are exposed to a wide range of companies in different commodities.

2.       Relying on Expertise of Funds – This is for the analysis of demand and supply conditions in several commodity markets to determine which have the greatest potential upside.

The safest and most convenient way of investing in commodities for the average investor is “Commodity-based Mutual Funds”.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell AbansGroup is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

Gold – A Strategic Asset

Gold is one of the oldest asset known to mankind. The price of Gold is derived by the quantum of demand for the lustrous metal. T In market downturns, Gold has always acted as a portfolio hedge and the recent pullback was no exception. The longer corrections or wider corrections in the market improves the effectiveness of Gold. Gold as a Commodity has shown that it is the only secure refuge for investors in years 2008, 2011 and 2015. As per your risk profile, the allocation of your portfolio to gold may be around 5% to 10% and this is possible through a variety of instruments such as gold equity funds, sovereign gold bonds, gold exchange-traded funds etc. As a safe haven, gold typically benefits from the flight of quality flows. Gold has the widespread acceptance and Indian households hold one of the highest quantities of gold in the world.

There are four advantages of Gold in any investor portfolio:

1.       Delivers positive long term returns.

2.       Improves Diversification.

3.       Especially in downturns, it provides much needed liquidity.

4.       Enhances portfolio performance through higher risk adjusted returns.

Gold is better than treasuries and stocks because it has gained over four percent in less than three months (year to date). Gold has been the best-performing asset classes year-to-date. Investors can actually enjoy price appreciation and fixed interest rates if they buy Sovereign Gold Bonds (SGBs). The transaction cost for gold ETFs is comparatively low but unlike gold bonds, gold ETFs cannot be used as collateral for loans. Gold deserves a rightful place in the portfolio of any investor.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

ABans Commodity India Pvt Ltd (ACIPL), Founded by Mr. Abhishek Bansal is a SEBI registered Co, ABans Group of Companies, Comprises of companies having businesses like commodity trading, futures trading, gold futures and futures market, operating on platforms like BSEL, MCX, NSEL and more, which constitute the Indian share market.

Abhishek Bansal NSEL

SEBI the Regulator for Commodity Exchanges, Spot Exchanges, and the prominence of NSEL

In today’s demanding world it is very necessary for a financial service conglomerate to have an overall portfolio of services. Today’s Investor is not just investing in the traditional mediums like gold, stocks and FD’s but has expanded his portfolio to trade in Commodities &  also currency. 

There are various ways to trade in these markets like Futures trading, Forwards trading and also trading in spot.

In India the regulator SEBI, has authorized commodity Exchanges to trade in Futures and Forwards. The prominent commodity exchanges are MCX , NCDEX. For spot trading the exchanges have set up specialized spot trading entities. The most prominent amongst the spots exchanges in India are National Spot Exchange Limited, NSEL and NCDEX Spot. NSEL and NCDEX Spot compete with each other to again share of the Spot trading market. NSEL is having an overall spread in the Spot markets while NCDEX is focused towards agricultural commodities.

Commodity Trading drives interest from the investors and traders based on the type of commodity:

Precious commodities: Gold commodity trading, Gold Futures, Silver commodity trading etc are a subset of Precious metals commodity basket.

Base Metal Commodities: Trading in metals like Iron, Copper, Nickel, Aluminum, and Zinc are part of Base metal commodity basket.

Agricultural commodity Trading: All Commodity Trading in farm produce of agricultural goods are from the agricultural commodity basket.

Energy commodities: All commodity contracts which are based on on crude oil, heating oil, natural gas and gasoline are Energy Commodities.

SEBI is one of the most dynamic market regulators that the Futures trading market has seen, SEBI is always very agile and vigilant for keeping the market healthy and Scam free and introduces regulations and methods that can develop and grow the market.

Commodity Trading Companies are companies that deal with commodities market. Nowadays, many of these companies are offering traders with several attractive benefits. ABans Commodity (I) Pvt ltd , ACIPL as a commodity trading company relays on latest technology, market research, Information and Innovative trading techniques to keep its customers updated with latest strategies to invest in the market.

ACIPL is the flagship company of ABans Group of companies , which was founded by Mr Abhishek Bansal, Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

Voluntary Disclosure: ABans Commodity India Pvt Ltd (ACIPL), Founded by Mr. Abhishek Bansal is a SEBI registered Co, ABans Group of Companies, Comprises of companies having businesses like commodity trading, futures trading, gold futures and futures market, operating on platforms like BSEL, MCX, NSEL and more, which constitute the Indian share market.

Potential of Futures Trading

Commodity futures are going to dominate the investor’s horizon in times to come and they are on the front lines of all panel discussions as well as business journals. Their bull run lasts for a cycle of around 15 to 20 years and their movements are not linked with those of securities. Thus commodity futures are in fashion these days.

Commodities as an Investment Tool: Investors are preferring commodities like gold and silver which have been traditionally investment avenues. Considering commodities, investors can expect returns in the region of 15 to 25 percent. But it is important for you to study the market carefully before investing in commodities such as wheat, sugar, chana, urad, guar seed etc. Indices are not permitted by the domestic regulatory structure but have a major role to play in guiding markets. Indices help you to take a view on the entire metals group instead of trading on a single metal.

Future Drivers: Even if global influences could have an impact on products, companies can assure themselves fixed prices by selling part of the products forward on exchanges. Also there are larger number of farmers participating on the exchanges.

Commodity market so far has been encouraging and its future is certainly very exciting. Rapid growth in commodities is obvious because there is a lot of interest being shown by foreign participants. Thus the demand for metals and energy products will always rise in future. Such opportunities need to be leveraged by market participants.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

How Commodity Trading Works?

Do you think that prices of gold will go up further or crude oil prices are going to fall? You can try entering the commodity futures market if you believe that these predictions have a good chance of coming true. Commodity markets have changed a lot since the age old time and today, fully computerized commodity exchanges – NCDEX and MCX have been set up. If you decide to buy gold today sell gold at a profit after some months then you have to be sure that the gold you buy is pure,  would also need a secure place to store and many more such hassles. Alternatively you can buy gold futures from commodities exchange if you want to invest in gold. Whenever you buy a gold futures contract, you will have to consider the following three points:

1.       Buy the amount of gold specified in contract.

2.       Buy it at the price specified in the contract.

3.       Sell it on the expiry of the contract. You don’t have to worry about actually buying the gold if you sell the gold futures contract before it expires.

We all know that stock futures prices or stock prices are quoted on a daily basis in the stock markets and it is the same way commodity futures prices are quoted on the commodity exchanges.

Margin - you just need to pay a fixed percentage of cost and not the entire amount while you buy a futures contract. Margins are much lower in commodities trading and thus it is cheaper as compared to stocks. You can analyze the commodities that are offered for trading, their contract size and other criteria by getting onto the commodities trading exchange – NCDEX and MCX

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Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

Futures Trading Simplified

Now-a-days futures trading in commodity market is a booming business in India. Following are the technical terms of commodity futures trade explained in simple language:

1.       Cash Commodity–It is the actual physical commodity as distinguished from the futures contract based on the physical commodity.

2.       Settlement of Cash–According to a procedure specified in the contract, it is where the seller pays the buyer the cash value of the commodity traded.

3.       Carry Forward Position–This is the situation in which client carries his open positions to the next day.

4.       Arbitrage – Here similar commodities are on simultaneous purchase or sale in different contracts or in different exchanges of the same commodity in one exchange.

5.       Clearing Member – A non clearing member should settle all the trades through a clearing member.

6.       Day Trader – It is within a single trading session, a speculator will normally initiate and offset a position.

7.       Default–As per the exchange rules, it is the failure to perform on a futures contract.

8.       Derivative–It is traded on or off the exchange and its price is directly dependent upon the value of one or more underlying securities, equity indices, debt instruments or any agreed upon arrangement.

9.       Hedging–Hedgers take advantage of adverse price changes in the market and protect their businesses.

10.   Long – It is one who owns a cash commodity or has bought futures contracts.

11.   Price Discovery–The price level of commodity is determined on the basis of supply and demand factors.

12.   Short – One who has sold cash commodity or futures contracts.

13.   Speculator–One who anticipates future price movements and tries to profit from buying, selling future contracts.

14.   Trade Account – It is an account with the broking organization to trade in the futures market.

15.   Volatility – A measurement of the change in price over a given period of time.

16.   Warehouse Receipt – The client receives a Warehouse Receipt when the commodity sold in the futures market is taken the warehouse.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell Abans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.

Commodity Futures Markets

India has a long history of commodity futures trading from more than 125 years. There are several commodity exchanges including Multi Commodity Exchange, the National Commodity and Derivatives Exchange and the National Multi Commodity Exchange. Following are the points that will help you to understand Commodity Futures Trading:

1.       The commodity exchanges and commodity futures contracts are regulated by the government under the Forward Contracts (Regulation) Act, 1952. Since Sept 2015 after FMC was merged with SEBI, SEBI is the regulator of Futures Market.

2.       A commodity includes several goods that are allowed for futures trading under the platform of the commodity exchanges recognized under the FCRA.

3.       A company or an association or any other body corporate organizing futures trading in commodities is termed as “Commodity Exchange”.

4.       Futures contracts is a standardized Forwards contract which is exchange traded and is legal agreement to buy or sell a particular commodity at a Specified future time. There are many types of Futures contracts.

5.       Speculators can benefit from changes in prices with respect to futures contracts that mostly offset before their maturity and therefore scarcely end in deliveries.

6.       Price risk management and price discovery are two major economic functions of a commodity futures market. Price risk management is the backbone of a commodity futuresmarket. The need for Hedging (Price Risk Management) arises from price risks in most commodities.

Founded in 2005, ABans Group has grown from being a trading house to a dynamic and diversified business group. We provide expertise in Broking Services, Merchant Banking, Non-Banking Financial Dealings, Gold Refining and Realty and Infrastructure. In a nut shell ABans Group is a comprehensive Financial Services and Solution Provider, which aims to provide an end-to-end financial solution to all its clients.