Things to know while investing in commodity market

Oct 14, 2013, 02.24 PM IST

Dharmesh Bhatia, Deputy Vice President-Research at Kotak Commodities Services advises to keep an eye on factors like geopolitical tension, rupee fluctuation and any of the demand-supply changes who want to invest in commodity market.

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Things to know while investing in commodity market

Dharmesh Bhatia, Deputy Vice President-Research at Kotak Commodities Services advises to keep an eye on factors like geopolitical tension, rupee fluctuation and any of the demand-supply changes who want to invest in commodity market.

Like this story, share it with millions of investors on M3

Things to know while investing in commodity market

Dharmesh Bhatia, Deputy Vice President-Research at Kotak Commodities Services advises to keep an eye on factors like geopolitical tension, rupee fluctuation and any of the demand-supply changes who want to invest in commodity market.

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Q: When I step into any commodity be it bullion, edible oils or crude oil or metals like copper or agri commodities, what all do I need to know because unlike equities and derivatives trading which expires on a particular day, you have a lot size which is determined by the exchange etc, here there are a lot of factors that come in, agri commodities don't trade in certain months at all, when there is harvest time etc, they all have different expiries, sometimes the expiry is linked to the international market. How do I shortlist the commodities that I am interested in and what all do I need to know before I decide to step into it?

A: We will segregate in two different things one is agri and one is non-agri. We will start with non-agri, talking about bullion market; bullion market is not a trendy market. It usually grow in a very volatile manner especially because of geopolitical rupee/dollar fluctuation, I am talking about international market demand-supply and consumption. Talking about last four-five years, I am seeing the volatility is really high. Two things have come into picture. Main thing is geopolitical tension and volatility in rupee and dollar. This has come into picture and we have seen the last three-four years, gold has started giving the negative returns, compared to the decade run which we have seen, the tremendous movement which we have seen in the price. So currently, people are keen to invest in gold but they are not able to get that much return. So they are little worried about where to invest. 

The second commodity we will think about energy. Currently energy we are completely a price taker not a maker since we consume a lot of energy but then still we are a price taker and we see the price benchmark on NYMEX and Brent. So currently international market has seen some kind of fluctuation like is currently holding very flat but in domestic market if you have seen the run was exponential and it has almost doubled the price and it has made a lifetime high. The main reason is because of INR. So people who want to invest, they have to keep an eye on all these factors like geopolitical tension, rupee fluctuation and any of the demand-supply changes.

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