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Commodity Markets: Myths v/s Reality

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The Indian online commodity futures trading markets have been around for a decade and a half and still there is a sense of discomfort about them in the minds of some of the investors. This is particularly true of the individual retail investors who are not willing to participate in the commodities market due to a lot of factors which are nothing but myths. In fact, the overall volumes and liquidity in the local commodity derivatives market is likely to improve tremendously in coming months as the Securities and Exchange Board of India (SEBI) has recently allowed mutual funds and portfolio managers to invest in commodity derivatives.

Here are a few myths about the commodities market:

It is all about speculation: Most of the investors feel that commodity trading is undertaken by traders only for speculative purposes. However, there is more to the commodity derivatives than pure speculation. All financial markets consist of hedgers, arbitrageurs and speculators, helping in efficient price discovery and price-risk management. In this regard, the commodities function pretty much like stock markets. Also it is important to note that speculation does not necessarily mean pure gambling. Speculators are important market participants who inject liquidity and help hedgers transfer their price risk.

Read the entire blog here: https://www.ajmeraxchange.co.in/blogs/commodity-markets-myths-vs-reality


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