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Commodity Markets vs Equity Markets in India

05 Jan 2023

Financial markets exist all over the globe, in all major cities. They constitute several kinds of instruments that serve the purpose of investment. Right from a corporation that is listed on a stock exchange, to oil, gold and a host of products of an agricultural nature, any investor can place their wealth in a massive range of assets. The most popular assets that work as investment instruments for many investors of today, are commodities and equities. The top commodity for any investor today may be gold or oil, or any other raw material product, depending on their purpose for portfolio diversification. 

Commodities and Equities

You can grasp the meaning of equity if you are a shareholder with a stake in any given company. The equity of a company is the total of what shareholders receive after minusing any liabilities from the full assets of any company. On the other hand, what a commodity is, is any product that forms the raw material for a finished product. Commodities include crude and refined oil, gold and agricultural products. These are purchased and sold in quantities of bulk, like cotton, for instance. Concerning both commodities and equities, when we trade in equities, and the markets are open, we refer to stock markets as being ‘open’. In the case of commodities, when commodity exchanges are open for trading, we talk of commodity market live trading. 

Commodity Markets vs Equity Markets

In India, commodities and equities are compared, based on a number of factors, and you may pick the best equity broker, or the best commodity broker to conduct your investment with. With regard to this, a broker like Motilal Oswal handles both investment in commodities and equities, so you are covered as far as diversification is concerned. Anyway, it's time to view the comparison between commodities and equities: 

  • Based on Ownership - Where equity is concerned, an investor who buys stocks or shares gets ownership of the company whose shares are bought. In the market of commodities, however, traders commonly deal in futures contracts. The deliveries of these futures are hardly ever owned.
  • Trade Duration - Equities can be held by investors for days, or in some cases, for years. There is no expiry. Commodities are bought with contracts and a time-stamp. Hence, stocks may be purchased for long-term investment and commodities for short-term goals. 
  • Hours of Trading -Equity trading is undertaken for a shorter number of hours than commodity trading is. Stock markets are open all day, but live commodity prices can be accessed almost 24 hours a day. 
  • Margin Requirements - For trading in commodities, margin requirements are lower compared with equities. Traders can, therefore, be highly exposed and this could prove risky in times of sharp fluctuations. 

Which One is For You?

Whatever you choose to invest in, your investment depends entirely on your individual financial goals and your behaviour as an investor. If you are more prone to risk, you may choose to invest in commodities on a multi-commodity exchange. With equities, your long-term aims can be met as you can buy stocks and hold them till they bear you profits. Whichever the case may be, you can find help in a broker like Motilal Oswal, leading you on the right road to efficient investment. Hence, you should open a Demat account today and get started pronto!

Related Articles: Can the commodity markets provide cues for equity trading | Beginners Guide to Agri Commodity Trading | 5 Successful Commodity Trading Strategies | Role of Commodity Markets In India 


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