Capital markets play a vital role in shaping the Indian economy. Their growth wouldn’t have been possible without key institutions like the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). But long before currency or stock trading became popular, commodity trading was already a common practice. In fact, it’s likely the earliest form of trade known to humankind.

Today, most commodity trading takes place through exchanges that deal in commodity derivatives. While millions of transactions happen daily on these platforms, they still aren’t as widely known as stock exchanges. This lack of awareness may be why fewer people participate in commodity trading. One major player in this space is the Multi Commodity Exchange (MCX), which has played a significant role in supporting India’s economy. In this blog, you’ll learn more about MCX and how commodity trading works.

What is MCX Trading?

Launched in 2003, Multi Commodity Exchange (MCX) is one of India’s largest platforms for commodity trading. It deals in both agricultural commodities like cotton and soybean, and non-agricultural ones such as gold, silver, copper and crude oil. MCX offers a wide range of futures contracts and gives you access to a solid, reliable trading platform.

MCX Trading Timings

  • On weekdays, you can trade between 09:00 am and 11:30 pm. (or up to 11:55 PM for international commodities).
  • MCX is closed on Saturdays and Sundays. There may be special sessions only during exceptional circumstances.
  • Also, special sessions may be held from Monday to Friday between 8.45 am to 8.59 am. These sessions are held for cancelling the pending orders before the market opens. 

Which commodities are traded on MCX?

Some of the key commodities traded on MCX include:

  • Metals: Nickel, copper, aluminium, and other metals are purchased and sold on MCX. 
  • Currencies: MCX trading also involves currency trading including Brazilian Real, South African Rand, and Mexican Peso. 
  • Energy: Natural gas, crude oil, and other energy resources also get traded on MCX. 
  • Agricultural Products: A wide range of products traded on MCX includes rice, soybean oil, black pepper, cardamom, wheat, cotton, and more. 
  • Bullion: Silver and Gold trading also takes place on MCX. 

Once you understand what MCX trading is, you can explore and analyse the full range of commodities available on the platform.

Benefits Of Commodity Trading with MCX Account

Here are some key benefits of trading in commodities with your MCX account: 

1. Helps in Diversification

Commodities can be a powerful way for you to diversify your portfolio, especially since they often show a low or even negative correlation with traditional assets like equities and bonds. The wide range of options available, from agricultural products like sugar, soy, and corn to metals like gold, silver, and steel, makes diversification even more effective.

For instance, during times of economic uncertainty when stock markets are under pressure, you’ll often see gold prices rise as investors shift their money into safer assets. This kind of behaviour makes commodities a valuable hedge in your overall investment strategy.

2. Hedging For Capital Protection 

Commodities can also be utilised for hedging. Commodities such as sugar, iron, corn or copper are a key input material for several industries. You can take opposite positions in the commodity futures market to protect yourself against price fluctuations. For example, an oil shock might hit the equity markets hard, but it usually drives up crude oil prices.

3. Protection From Inflation

In a country with high inflation, commodities can help prevent capital erosion to some extent. Inflation leads to erosion in the value of currency and hence affects the value of equity and bond capital. However, commodities like gold and silver retain their value as they have high intrinsic value.

4. High Liquidity

Many individuals think commodity trading involves physically handling large quantities of goods, which can be hard to sell quickly. Yet, trading through commodity exchanges works very differently.

While you have the option to take physical delivery, most investors like you typically trade in commodity derivatives. These contracts offer greater flexibility and can be liquidated just as easily as equities or bonds.

5. Transparent Trading Platform 

MCX offers a transparent and secure trading platform for commodity traders. You get real-time updates on commodity prices and market insights to create trading strategies. As the Securities and Exchange Board of India (SEBI) regulates this exchange, all your transactions are completely secure and encrypted. 

6. Provides Substantial Returns 

Commodities are poised for significant movements, enabling you to capitalise on market trends and book profitable trades. You can also manage the risks by using hedging tools. 

Factors That Influence Commodity Prices In MCX Trading 

The Multi Commodity Exchange has made trading in commodity futures straightforward and transparent. However, before you get started, you must understand the key factors that influence commodity prices in India:

1. Weather Conditions

The only bulk commodities traded through commodity exchanges are agricultural commodities. Weather conditions play a crucial role in the production of agricultural goods and directly affect commodity prices.

2. Economic & Political Conditions

The performance of the broader economy has a direct impact on the demand for commodities. If the economy is strong, commodities get more consumed which also increases their price. 

Along with economic conditions, political events also affect commodity prices. For example, the closure of a huge mine can reduce the supply of a specific commodity and increase prices.

3. Government Policies

The government can affect commodity prices both directly and indirectly. The government controls the production of many commodities like coal, and also purchases many commodities such as wheat and rice. Any change in the purchase or production pattern impacts their prices substantially. 

Final Thoughts 

When you trade commodities with a well-thought-out strategy and use trusted platforms like MCX, the experience can be both structured and rewarding. These exchanges ensure transparency and consistency, giving you a clear understanding of how each trade works. Platforms like Share.Market can be used to track the MCX charts in real time. This platform also provides helpful information and insights to help you participate in MCX trading without any issues.