Trading in the commodity market can seem lucrative as you get to earn high returns against minimal investment. But in this process, you don’t want to get involved in any illegal matter, right? To restrict illicit trading in the commodity market, the Forward Markets Commission (FMC), the regulator, has notified the exchanges to impose a penalty between a range of Rs. 1lac to 5 lacs.
So, to stay away from such hassles, it is always recommended that you should gather legit information about the legalities of commodity trading in your country before you invest in any commodity(s).
Commodity trading in India started back in the 20th century for certain commodities before it was introduced in many other countries. But, due to certain factors like foreign invasions and ruling, government policies and their amendments, natural calamities, there was an inevitable decline in commodity trading.
Then again, since the introduction of electronic trading, India’s commodity trading market has grown by a massive margin of 120 times.
Commodities can be classified into four types, i.e. energy, livestock or meat, metals and agriculture. Crude oil, also known as “black gold, “ is one liquid commodity that falls under energy. Mostly, crude oil futures trading takes place based on speculation.
The IOC, ONGC, BPCL, etc., are some of India’s primary crude oil companies. The Indian Multi Commodity Exchange (MCX) ranks third in crude oil futures.
Yes, to answer your question, today, crude oil trading in India is legal and regulated by the RBI norms.
But you don’t have direct exposure to crude oil. As an investor, you can invest in specific oil companies like Hindustan Petroleum, Indian Oil, ONGC, etc. So, if you are based in India, you can safely buy shares of these companies as an investment in crude oil.
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