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Similar to any other market, the commodities market is either a physical or a virtual space, where interested parties can trade commodities (raw or primary products) at present or future date. The price is dictated by the economic principles of supply and demand. Commodities are traded on the spot market or exchanges. The commodities must meet minimum standards set by the exchanges to be able to trade. Traders can either buy these commodities on the spot market or through derivatives such as options or futures. Commodity trading offers portfolio diversification beyond traditional securities. since commodity price moves in the opposite direction of stocks, investors indulge in commodity trading during the periods of market volatility.

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Commodity Broking

There are two types of commodities in the market, i.e. hard commodities and soft commodities. Hard commodities are often used as inputs to make other goods and provide services while soft commodities are mainly used for initial consumption. Inputs such as metals and minerals are classified as hard commodities while agricultural products like rice and wheat are softer commodities.

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Steps to open an Account

Capital Markets is one of the ideal platforms to make long term investments. Peerless allows you to trade in equities at your fingertips with best in className technology & unbeatable research calls. Invest in Capital Markets with smart insights & recommendations from our research desk to get returns in multifolds.

Begin by visiting the official website of Peerless Securities Limited www.peerlesssec.co.in. On the homepage, you'll find the "Open an Account" option. Input your email address and mobile number as requested. This information will be used to generate a One-Time Password (OTP) that will be sent to your provided mobile number.

After receiving the OTP on your mobile, proceed to verify your Permanent Account Number (PAN). Enter your PAN number and date of birth as per your PAN card details. Additionally, you'll receive an email verification mail from Peerless Securities Limited (PSL).

You can choose the KYC verification method that suits you best. Options include fetching KYC data from the KYC Registration Agency (KRA), offline Aadhaar XML-based eKYC, sharing KYC documents via Digilocker, or opting for Video KYC, and access a pre-filled registration form. You'll need to provide the remaining details required to finalize your account registration.

Fill in your bank account number, along with the corresponding IFSC code and any other essential bank details. Additionally, you'll have the opportunity to select the specific trading segments you're interested in. In the same section, you can indicate if you already have an existing demat account that you'd like to use. If you choose this option, provide your existing client ID and DPID or otherwise proceed with new demat account procedure.

Prepare and upload the necessary documents as part of the account opening process. The documents typically include your signature, a selfie photo with your PAN card, a scanned copy of your PAN card, a cancelled cheque or bank statement, and any other relevant documents. Be sure to adhere to the specified size and format guidelines for smooth processing. Additionally, this is the stage where you can choose to nominate a beneficiary for your account.

Carefully read and agree to the provided terms, review all the information you've provided, and choose to e-sign using Aadhaar OTP. Await confirmation regarding your account opening status from Peerless Securities Limited.

Pricing and Charges Details

Capital Markets is one of the ideal platforms to make long term investments. Peerless allows you to trade in equities at your fingertips with best in className technology & unbeatable research calls. Invest in Capital Markets with smart insights & recommendations from our research desk to get returns in multifolds.

Charges Equity Intraday Equity Delivery Equity Futures Equity Options
Brokerage 0.02% 0.2% 0.02% ₹ 25 per Lot.
STT 0.025% on the sell side 0.1% on buy & sell 0.0125% on sell side 0.0625% on sell side (on premium). In case of Options Exercise 0.125% on (Settlement Price * Quantity) to be paid by Buyer
Transaction charges NSE/BSE: 0.00325% NSE/BSE: 0.00325% NSE: Exchange transaction charge: 0.0019% Clearing charge: 0.0005% NSE: Exchange transaction charge: 0.05% Clearing charge: 0.002%
GST 18% on (Brokerage + Transaction Charges) 18% on (Brokerage + Transaction Charges) 18% on (Brokerage + Transaction Charges + Clearing Charges) 18% on (Brokerage + Transaction Charges + Clearing Charges)
SEBI charges ₹ 10 / crore ₹ 10 / crore ₹ 10 / crore ₹ 10 / crore
NSE IPFT Charges ₹ 10 / crore ₹ 10 / crore ₹ 10 / crore ₹ 50 / crore (On Premium)
Condition Applied* : Above charges are applicable for clients who have registered online. These charges will vary for our offline clients (who can avail extended facilities such as a higher margin and a dedicated RM/Dealer).

Charges Currency Futures Currency Options
Brokerage 0.02% ₹ 20 per Lot
STT No STT No STT
Transaction charges NSE Trans. Chgs.: 0.0009% Clearing charge: 0.0005% NSE Trans. Chgs.: 0.035% Clearing charge: 0.002%
GST 18% on (Brokerage + Transaction Charges + Clearing Charges) 18% on (Brokerage + Transaction Charges + Clearing Charges)
SEBI charges ₹ 10 / crore ₹ 10 / crore
Condition Applied* : Above charges are applicable for clients who have registered online. These charges will vary for our offline clients (who can avail extended facilities such as a higher margin and a dedicated RM/Dealer).

Charges Commodity Futures Commodity Options
Brokerage 0.02% ₹ 50 per Lot.
CTT 0.01% on sell side 0.05% on sell side. In case of Options Exercise 0.125% on (Settlement Price * Quantity) to be paid by Buyer
Transaction charges Exchange txn charge: 0.0026%
Clearing charge: 0.0003% ,
RMS Charge 0.005% (Only NCDEX)
Exchange txn charge: 0.05% Clearing charge : 0.002%
GST 18% on (Brokerage + Transaction Charges + Clearing Charges) 18% on (Brokerage + Transaction Charges + Clearing Charges)
SEBI charges ₹ 10 / crore ₹ 10 / crore
Condition Applied* : Above charges are applicable for clients who have registered online. These charges will vary for our offline clients (who can avail extended facilities such as a higher margin and a dedicated RM/Dealer).


Securities/Commodities Transaction Tax

Tax levied by the government while transacting on the exchanges. Charged as above on both buy and sell sides when trading equity delivery. Charged only on selling side when trading either intraday or in F&O.

Transaction/Turnover Charges

Exchange transaction charges + Clearing charges. Charged by exchanges (NSE,BSE,MCX) and clearing member.

BSE: Flat Rate per Trade Rs 1.50 & Clearing Charges Rs 0.01 per Trade.

Stamp Charges

Charged as per Stamp Duty Act 1899 levied for transacting in Securities on exchanges or depositories

DP (Depository participant) Charges

Please refer DP Section for details

Minimum Contract Note Charges

Peerless Securities Doesn’t Charge any Minimum Contract Note Charges

GST

Tax levied by the government on the services rendered. 18% of ( brokerage + transaction charges)

SEBI Charges

SEBI fees Rs. 5 per cr for cash & Non agri-commodities and Rs. 1/- per crore for Agri-Commodities


*In case no scheme is selected by you then by default AMC as per annual plan will be charged at the end of the first year. For a Corporate Account, the AMC charges applicable from the 1st year are - 1000/- + GST per Annum Plan

Buyback, OFS and NFO Order Charges

No Extra Charges for participating in Buyback, OFS & NFO Orders.

Request for Physical CMR, Contract Note, Ledger, etc.

No Charges for Physical CMR, Contract Note or Ledger Etc.

Disclaimer

Brokerage will not exceed the rates specified by SEBI and the exchanges. All statutory and regulatory charges will be levied at actuals. No Brokerage is charged on expired, exercised, and assigned options contracts.

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Frequently Asked Questions

Commodity trading may be considered as the lesser-known cousin of stock trading. Instead of equity, it gives investors access to 100+ commodities like sugar, cotton, silver, etc. nvestors trade commodities like crude oil, natural gas, silver, cotton, etc. in the commodity market The commodity market can be a physical or virtual marketplace. If it’s a physical marketplace, investors will usually own the commodity and trade it for cash or cash equivalent commodities. A virtual commodity market, however, generally includes commodity exchanges.

Investing in commodities helps diversify your overall investment portfolio, which means that the allotment of funds is broadened. This helps create a balanced portfolio and also helps mitigate the chances of any unwanted risk, generally associated with equity investment. Moreover, investment in commodities acts a cushion against future inflation as the commodity trade generally increases in volume during times of high inflation. Also, commodities constitute an economically cheap category of investment vehicles when compared to other future based alternatives.

Financial specialists emphasize the need to include commodities in your trading portfolio because they act as a hedge against inflation and at the same time, diversify your fund allocation to increase the degree of safety of investment. Therefore, commodity trading is fairly safe and low risk mode of trading.

It all depends on what your specific goals are. Equity markets in India and elsewhere are known for the higher rate of returns over a period of time. However, equity stocks come with a higher volume of risk as well, when compared with commodity trading. On the other hand, the earnest profits in commodity market are lesser, but so is the risk involved. If you prefer high risk trading, then equity is the right channel for you. On the other hand, if you prefer low-risk but steady ventures, then you should allot more funds towards commodities.

A good commodity trader must fulfill the following criteria:
  1. He/she must be well versed with the technicalities involved in pricing mechanisms of commodities.
  2. He/she must be aware of the global scale supply-demand ratio of the commodities.
  3. He/she must have the required dedication and patience to gradually divulge and create a sustainable trade base.
  4. He/she must have the ability to take informed and quick decisions and must be able to make strategies as per the market dictums.

Commodity trading proves beneficial in several ways. Firstly, traders benefit from the inflation of commodity prices. During inflation, the cost of commodities and raw materials increase substantially, which helps commodity traders book maximum profits. Traders can also hedge their commodity portfolios against a declining USD and save their assets. Furthermore, they can take advantage of various socio-economic and geopolitical events and uncertain global and economic periods, during which time the supply of goods is constricted. They can speculate or hedge their trades and book significant profits resulting from shortages.

The ‘commodity futures contract’ is the agreement that a trader will buy or sell a certain amount of their commodity at a pre-decided rate at a certain time. When a trader purchases a futures contract, they are not required to pay the whole price of the commodity. Instead, they can pay a margin of the cost which is a predetermined percentage of the original market price. Lower margins mean one can buy a futures contract for a large amount of a precious metal like gold by spending only a fraction of the original cost.

  • Protection against inflation, stock market crash and other black swan events: When inflation rises, it makes borrowing expensive for companies and impacts their profit-making abilities. As a result, stock prices fall during a period of high inflation. On the other hand, the cost of goods increases, meaning the price of primary goods and raw materials would rise, causing commodity prices to move higher. Hence, when inflation is rising, commodity trading becomes profitable.
  • High leverage facility: Traders can accentuate their profit potential by investing in the commodity market. It allows traders to take a significant position in the market by paying a 5 to 10 percent margin. This way, even an insignificant price increase can increase profit potential exponentially. Although the minimum margin requirement varies from one commodity to another, it is still less than the margin required in equity investment. There is affordable minimum-deposit accounts and controlled full-size contracts
  • Diversification: Commodities allow investors to diversify their portfolio as raw materials have a negative to low correlation with the stocks.
  • Transparency: The commodity market is developing and highly regulated. The modern electronic trading suite has added to the transparency and efficiency of the market, eliminating any risk of manipulation. It enabled fair price discovery by broad-scale participation.

Despite several advantages, commodity trading has a few disadvantages, which you should know before investing.
  • Leverage: It can be a double-sided sword, especially if you are inexperienced in margin trading. Leverage, as discussed before, allows traders to bid big in the market. If the margin is 5 percent, then one can buy commodity futures worth Rs 100,000 by paying only Rs 5000. It means that with the slightest fall in price, traders can end up losing a significant amount.
  • High Volatility: Higher returns from commodity trading is due to the high price volatility of commodities. The price is driven by the demand and supply when the demand and supply of goods are inelastic. It means despite changes in price, supply and demand remain unchanged, which can significantly alter the value of commodity futures.
  • Not necessarily immune to inflation: Despite the negative correlation between securities and commodities, the latter is not suitable for portfolio diversification. The theory that commodity price moves in the opposite direction with the stocks doesn’t hold as experienced during the economic crisis of 2008. Increasing inflation, unemployment, and reduced demand halt companies production and impact demand for raw materials in the commodity market.
  • Low returns for buy-and-hold investors : Commodity trading needs bulk investment to generate significant returns. The Bloomberg Commodity Index, which is considered the gold standard, showcased that even the most secured government bonds have historically garnered more returns than commodity trading. It is primarily because of the cyclical nature of the products, which erodes the value of an investment for buy-and-hold investors.
  • Asset concentration: Even when the primary reason to invest in commodities is to diversify the portfolio, commodity investment tools often concentrate on one or two industries, meaning a higher concentration of assets in one segment.

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