How does one deal with commodities in volatile environment?

Dharmesh Bhatia, Deputy Vice President-Research at Kotak Commodities Services advises how to deal with commodities in volatile environment.

October 14, 2013 / 14:23 IST
Story continues below Advertisement

Your browser doesn't support HTML5 video.

Q: The first thing that comes to everyone's mind is that we have so much of volatility in the geopolitical arena, in our own domestic politics, how does one deal with commodities in such an environment, how do you safeguard yourself?

A: Talking about commodity markets, it is volatile, it is vulnerable. If there is no volatility, there will be no return, so the market is completely stable. People want to invest where there is huge volatility and they can make good money. Currently, commodity market is like 24-hour market, it runs throughout the day, so volatility is there in short-term or medium-term or long-term. I would rather suggest investor to think about the market in case talking about equity is 1:4 ratio, talking about international market, the commodity market is four times the equity market, the volatility and the volume is four times. In India, it is a niche market, it is only 7-8 years old, people still don't understand how the market runs. Talking about agri commodity, people can stop having stuff but then talking about agri, people want to have food. The intrinsic value of the agri commodity will never be zero, so volatility will always be there. I would suggest people to think that it is a cyclical commodity. There are ways where you can predict the market like depending upon monsoon how the volume is there, how the rainfall in particular area is there. On that basis you will get to know the judge that where the news and where the information comes and you can see the price movement in the market.
first published: Oct 14, 2013 02:23 pm

Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!