Sharekhan Blog

Why Should You Go For Commodity Intraday Trading?

  • Jun 30, 2024

The necessity for Investment in the commodity is exacerbated by inflation. If there isn't a comparable increase in output pricing, the rising cost of inputs puts further pressure on management. 

Sharekhan provides a wide range of specific advantages for your joint success in the commodity intraday trading market as a brokerage and consultancy company. The administration may restrict or at least reduce the rising thrusts for more Investment in a commodity by taking numerous steps on the production front, keeping a careful eye on managed costs, growing collection of credit sales, etc. The management should ensure that the Investment in a commodity is used appropriately and effectively.

It should be noted that while selecting the channels for an investment of any idle cash balance for a short duration,

(i) The Investment is free from default risk, which is the risk associated with the potential for late interest payments and principal repayments.

(ii) The Investment will reach maturity quickly; and

(iii) The Investment's marketability was sufficient. The ease with which assets may be turned back into liquid funds is referred to as marketability. Price and time, two corresponding elements of marketability, were present.

Advantages of Commodity Investment Potential Returns

Individual commodity prices may change depending on some variables, including supply and demand, inflation, and the state of the general economy. Large-scale international infrastructure projects have increased demand in recent years, which has, in turn, affected commodity prices. Due to the favourable effect on corporate stocks, allied sectors have seen an increase in commodity prices.

Potential Protection against Inflation

Commodity prices may rise as a consequence of inflation, which has the power to change bond and stock prices. Even though commodities have performed well during high inflation, investors should know that they are much more volatile than other investments.

Investment Portfolio with a Wide Range

A diverse portfolio indicates the best asset allocation strategy. To have a diversified investment portfolio, commodities are essential. If you already invest in stocks and bonds, it is advised to do so together with raw material investments. Similar to how stock market shares fluctuate in value, commodities also do. They respond differently under varied geopolitical and economic circumstances. Therefore, it would help if you thought about diversification to provide risk-adjusted returns and lower volatility.

Openness to the Process

Commodity futures trading is meant to be a transparent procedure. Your actions will enable you to receive a fair price, which is then governed by widespread participation. In turn, it reflects the various viewpoints and outlooks of a larger group of individuals who deal with the commodity.

Effective Returns

When there is a lot of liquidity, commodities as investments are riskier. Either a significant profit or significant loss is probable for businesses. Therefore, if you invest wisely, you can reap substantial rewards from the commodity market.

Protecting against market turbulence

If the value of the rupee drops, you will need more cash to purchase commodities from various regions of the globe. Price increases for commodities are caused mainly by investors selling their equities and bonds to invest in commodities during periods of inflation. So, the only commodities that will be profitable for you are those that will serve as a hedge against market risks.

The best option for pricing security and certainty

Commodity prices often increase during periods of inflation when the economy is weak; hence, raw materials prices are also expected to increase. As a result, a select few commodities will be profitable for you.

Trading with Reduced Margin

Compared to other asset classes, you are only required to deposit 5 to 10% of the contract's entire value with your broker as a margin. Due to the low margins, one may invest and take on more significant holdings with less cash. 

When decisions about investments and transactions on the commodities market are being made, Sharekhan attempts to keep your money safe and deliverable.



These articles have been prepared by Sharekhan and is not for any type of circulation. Any reproduction, review, retransmission, or any other use is prohibited. Sharekhan shall not be responsible for any unauthorized circulation, reproduction or distribution of this material or contents thereof to any unintended recipient. Kindly note that this page of blog articles does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The value of the investments may be affected generally by factors affecting financial markets, such as price and volume, volatility in interest rates, currency exchange rates, changes in regulatory and administrative policies of the Government or any other appropriate authority (including tax laws), or other political and economic developments. Please note that past performance of financial products and instruments does not necessarily indicate the prospects and performance thereof. The investors are not being offered any guaranteed or assured returns. The securities quoted are exemplary and are not recommendatory. While we would endeavour to update the information herein on a reasonable and timely basis, Sharekhan, its subsidiaries and associated companies, their directors and employees are under no obligation to update or keep the information current. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of use of the trading platforms mentioned herein. The trading avenues discussed, or views expressed herein may or may not be suitable for all investors. This information is only for consumption by the client, and such material should not be redistributed.

 

Team Sharekhan
by Team Sharekhan

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