Commodity trading enters new era

India’s expanding commodity derivatives market is set to strengthen price discovery, attract wider investment and accelerate its emergence as a global benchmark

Commodity Desk MUMBAI

India's commodity derivatives market is entering a decisive phase of growth, with wider participation expected to strengthen price discovery, deepen liquidity and broaden investment opportunities beyond traditional asset classes. 

Industry leaders believe the market is evolving from a niche hedging platform into a strategic pillar of India's financial ecosystem, capable of supporting manufacturers, exporters, traders and retail investors while enhancing the country's influence in global commodity pricing.

As India's economy expands and demand for raw materials rises, market participants argue that commodity derivatives will play an increasingly important role in risk management and capital allocation. A deeper derivatives market is also expected to provide more transparent domestic benchmark prices, reducing dependence on overseas exchanges for price signals.

Ajay Garg, Alternate President of the Commodity Participants Association of India, said commodities are steadily becoming an essential component of diversified investment portfolios because they offer a natural hedge against inflation. He suggested investors should allocate 7-10% of their portfolios to commodities, noting that ETFs in gold and silver have already expanded access to the asset class, while similar products linked to other commodities are likely to emerge in the coming years. He added that innovations such as Electronic Gold Receipts and delivery-based commodity derivatives have widened investment choices by allowing investors to take physical delivery of precious metals. Growing domestic consumption, coupled with rising retail participation, could eventually enable India to transition from being largely a price taker to becoming an influential global price reference for selected commodities.  MCX MD & CEO Praveena Rai said building a credible Indian price benchmark remains a key objective of expanding participation in commodity derivatives.  

A widely accepted domestic reference price would allow jewellers, manufacturers and metal traders to base commercial decisions on transparent exchange-traded prices, improving pricing efficiency and strengthening confidence across the value chain. The integration of derivatives with the physical market is also gathering momentum. 

Bharat Metal Exchange President Sushil Kothari said improvements in exchange delivery infrastructure have addressed long-standing challenges in accessing raw materials, making delivery-based contracts more practical and attractive for industrial users.