Commodity trading can be an opportunity to diversify your investments and potentially earn positive returns. In India, commodity trading offers a wide range of opportunities, from trading gold and silver to crude oil and agricultural products. If you're new to trading, it is essential to understand the basics of commodity market timings. This can help you plan, strategise, and improve your chances of success in commodity trading.
Let’s get to know the commodity market timing in India and also what factors tend to impact these timings.
The commodity market in India operates on a standard schedule from Monday to Friday, excluding weekends (Saturdays and Sundays) and any designated holidays announced by the commodity exchanges.
The two main recognised commodity exchanges in India are:
1. Multi Commodity Exchange (MCX)
2. National Commodity and Derivatives Exchange (NCDEX)
Here’s a breakdown of the timings for trading in commodities on the MCX.
- Opening Time: 9:00 AM (this is when trading begins)
- Closing Time: 11:30 PM (this is when trading concludes)
Further, the trading sessions on MCX are divided as below:
1. Morning Session: 9:00 AM to 5:00 PM
2. Evening Session: 5:00 PM to 11:30 PM/11:55 PM (depending on US daylight saving time)
During daylight saving (DST), which typically starts in March and ends in November, clocks are set forward by one hour. Thus, the closing time of the evening session extends to 11:55 PM. The evening session closes at 11:30 PM when DST is not in effect.
3. The trading times for internationally linked agricultural items are 5:00 PM to 9:00/9:30 PM.
MCX has also segregated trading hours based on commodity categories. Refer to the table below for exact timings. For updates on trading hours, visit the MCX website.
|
Commodity Type |
Trade Start Time |
Trade Closing Time (after the start of DST in the US) |
Trade Closing Time (after the end of DST in the US) |
|
Non-agricultural commodities |
9:00 AM |
11:30 PM |
11:55 PM |
|
Trade modification |
- |
11:45 PM |
11:59 PM |
|
Position limit/Collateral value setup |
- |
11:45 PM |
11:59 PM |
You should also take note of the Muhurat Trading Session and its timings. This is a special commodity trading session held on Diwali. According to the Hindu calendar, it is considered auspicious since it marks the beginning of a new financial year. It typically lasts an hour in the evening, usually from 6:00 PM to 7:15 PM.
Read More - MCX launches 2 new Commodity Options Contracts
Some of the factors that can influence commodity market timings are:
1. Global supply and demand
Commodity market timings are often influenced by global supply and demand. For instance, the trading hours could be extended if there is a supply disruption of crude oil globally. This is primarily because the commodity's demand could aggravate and increase market activity.
2. Market regulations
Different markets have different regulations that can affect trading times and conditions. The Securities and Exchange Board of India (SEBI) regulates commodity markets in India. SEBI establishes guidelines and monitors the functioning of commodity exchanges, including the market timings.
3. Time zone differences
Commodity markets operate globally, and time zone differences are crucial in trading. The overlap of trading hours with major international markets like the US and Europe can significantly influence price movements and trading volumes in Indian markets. Knowing these overlaps helps you anticipate market fluctuations and plan your trading strategy more effectively.
4. Economic and Political Events
Global economic data releases, political events, and natural disasters can significantly impact commodity market timings. In case a major event is likely to impact commodity prices and result in volatility, commodity exchanges may extend the trading hours.
Now that you know the commodity market timings, you can strategically plan your trading activities. Optimal results in commodity trading are often achieved by trading during the most favourable times. So, what exactly are the best times for commodity trading? Let’s find out.
In the first hour of commodity trading, prices can change significantly, and there is usually a lot of trading activity. This makes it a good time to buy or sell because there are many buyers and sellers. You can take advantage of these price changes as traders respond to news and events from the previous night.
When Indian markets overlap with international markets, especially the European and American markets, trading volumes usually increase. This overlap typically happens in the evening session, providing better liquidity and more trading opportunities.
Like every market, commodity markets too experience volatility when prices change rapidly and unpredictably. These periods can offer profitable trading opportunities if you can manage the risks. For instance, economic data releases or geopolitical developments can increase market activity and price volatility. You can use short-term price movements to make profitable trades as prices move quickly.
Before trading during any of these times, ensure proper risk management is in place. One essential tool for risk management is a stop-loss order. If you buy a commodity, a stop-loss order will automatically sell it if the price drops to a certain level, limiting your loss. Similarly, if you sell a commodity, a stop-loss order will buy it back if the price rises to a certain level, also limiting your loss. Additionally, you can limit the amount of capital allocated on each trade to avoid significant losses.
Commodity trading involves multiple costs that you should be aware of to effectively manage your trading expenses. Here are the main costs associated with trading in the commodity market:
- Brokerage Charges: Fees paid to your broker for executing trades.
- Commodity Transaction Tax (CTT): A tax on the transaction value of commodities traded.
- Stock Exchange Transaction Charges: Fees charged by the exchange for facilitating trades.
- Goods and Services Tax (GST): Applicable on brokerage and service charges.
- SEBI Turnover Fee: A small percentage fee on all trades charged by SEBI
- Stamp Duty: A government tax on trading contracts.
- Other Statutory Levies: Additional regulatory charges as applicable.
If you take or make delivery of commodities, additional charges for storage, handling, and delivery in exchange-accredited warehouses may apply.
The contract note from your stock broker generally provides detailed information about these costs. So whenever you trade in commodities, review the contract note carefully to understand and manage your trading expenses effectively.
Additionally, commodity trading requires substantial capital compared to equity trading, mainly due to the contract sizes and margin requirements. Margin is the minimum amount you must maintain in your trading account to enter into and hold positions. They are designed to cover potential losses and ensure market stability.
While dealing in commodity markets, you must know the specific market timings. You can improve your chances of success by staying informed and choosing the right times to trade. It's important to note that commodity markets operate on different schedules than equity markets. Sometimes commodity trading may see extended hours and varying trading sessions. Before delving into commodity trading, you can explore the educational resources and live classes offered by Sharekhan Education.
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