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Best Commodity Stocks in India 2022 -How to Buy Commodity Stocks?

Best Commodity Stocks in India 2022

We have learned about Commodity Market and Stock Market. In addition, we have understood how both markets work. However, some investors are not comfortable with commodities, where one has to take a bet through the route of the futures which is a little uncertain. Hence, commodity stocks come as a haven for such investors to earn the returns of commodities by investing in stocks. So in this article, we will cover the best commodity stocks in India 2022. Along with that, we will understand what does commodity stocks means and how you can buy them?

Also Read What is MCX in Zerodha? – Charges & Trading Time | How to Activate?

What are Commodity Stocks in India?

Commodity stocks refer to the stocks of the companies which deal in the commodities such as energy, metals, agricultural products & livestock directly or indirectly. As per statistics, commodity price movements have a multiplier effect on related stocks. This means if the price of the commodity i.e. raw material moves up or down by 10% in the same proportion the companies engaged in manufacturing or processing rise or fall by 10%. Therefore, if you don’t have enough knowledge to deal with the commodity market then you choose the stocks of the companies engaged in dealing with those commodities.

Thus, a disciplined way of investing in such stocks can help you reap the benefits. Most importantly, the price of the commodity and its related stocks shows a positive correlation. Therefore, if the price of the commodity goes up then the related stock price will rise or vice-versa. That indicates the two move in the same direction.

However, there are other factors also which affect the returns of commodity stocks over commodities such as capital structure, capital valuation, hedging policy, and government regulations.

Also, Read What is the difference between Small Case and Mutual Fund? – What is Small case and Mutual Fund?

Reason for Preferring Commodity Stocks over Commodities

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There are many reason investors prefers commodity stocks over commodities, let’s check out the same:

  • Prime reason is that retail investors understand the stocks market better than commodity markets. As you can buy and sell stocks at current market prices, without taking the route of the future which opens the door for uncertainty. Without complete knowledge, future bets can lead to huge losses.
  • Secondly, futures trading is most commonly seen in the commodity market whereas the spot market is not well developed still in India therefore the trading volumes are quite low on commodities exchanges.
  • Minimum amount that can be invested in commodities is quite high as compared to stocks so suitable to traders than retail investors.
  • The biggest risk is the basis of the margin in which you take higher bets by paying a part of the total price.

Also Read How to Open Demat Account in SBI-YONO?

Best Commodity Stocks in India 2022

If you’re ready to take exposure indirectly in the commodity market by buying commodity stocks in India then here is the curated list of stocks you can buy in 2022:

Stock NameMarket Capitalization (Cr)1 Year Return (%)
Hindalco1,10,470.95241.54
Vedanta1,19,136.2392.52
Tata Chemical23,148.4381.28
ONGC2,08,895.5480.79
SAIL39,157.3867.38
Venkys3,665.7464.3
Indian Oil Corporation1,15,841.2329.96
Reliance Industries Ltd16,62,835.9322.27
Kaveri Seeds3,210.6115
Tata Steel133090.228.83

Before you buy these stocks ensure your investment horizon should be limited to the short term as these stocks are volatile like commodities. These stocks can be risky for a longer duration so try to hold for a shorter duration and book your profit.

Also Read What is Commodity Trading in Zerodha? | How Does Commodity Trading Works?

How to Buy Commodity Stocks?

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You’re going to buy stocks of commodities so there is nothing new I’m going to tell you. The practice of buying stocks be it a commodity or other stocks remain the same. You need to have a Demat cum trading account with a saving account to buy stocks. The process of buying /selling shares remains the same as you’re doing day in and day out. Still not sure then here are the steps you can follow on Zerodha to buy the commodity stocks:

Time needed: 1 minute.

Here are the simple steps involved in buying or selling Currency in Zerodha. So let’s get started

  1. Open the Zerodha App on your device

    To start with trading you can use Kite login either on mobile or on desktop as per your convenience.
    Key in your Username, Password followed with a Pin.

  2. Search for the Commodity Stock

    Type the commodity stock name in the universal search bar tab on Kite App. For example, you can type the stock name you will see all available contracts in the dropdown. To add them to a watchlist just click on the sign “+” and it will add to a watchlist.

  3. Click on the Buy option

    Fill in your order details. For example, if you want to buy this stock at a limited price then you choose that price and quantity. After that, click on the buy button and your order will be sent to exchange for execution.

  4. Similarly, you can place Sell Order:

    Fill in your order details and click on a Sell order. You need to choose the quantity, limit price, or market price in case want to buy a contract on the ongoing rate.

  5. Order Placed

    Once you swipe Buy or sell, depending upon the limit price, it will send the order to exchange for execution. By day end, your limit price strike then only order will execute or else it will stand to cancel.

Hope you like this article while we make your life a little easy with this simple & detailed article.

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