Commodities Trading for NRIs
Overview
Commodities trading involves trading in physical commodities such as metals, crude oil, and agricultural products, similar to stock trading. This asset class is considered riskier than stocks and requires an understanding of supply, demand, and price movements.
Key Commodities Exchanges in India
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Multi Commodity Exchange of India (MCX)
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National Commodity and Derivatives Exchange (NCDEX)
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National Multi-Commodity Exchange of India (NMCE)
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Indian Commodity Exchange (ICEX)
Trading for NRIs
NRIs are permitted to trade in commodities under the Portfolio Investment Scheme (PIS) of the RBI. This involves specific steps and requirements:
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Authorized Banks: Certain banks are authorized to open PIS accounts for NRIs, which need to be linked to an NRO account. Funds in these accounts are managed on a non-repatriation basis.
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Accounts Required:
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NRO Account: To handle the funds.
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Demat Account: To hold the securities.
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Trading Account: For executing trades.
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These accounts must be linked for seamless transactions.
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Trading Restrictions:
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All trades must be done on a delivery basis.
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Day trading, short selling, and similar activities are not permitted.
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Regulatory Framework
The regulations for commodity trading are similar to those for trading in derivatives, governed by SEBI (Securities and Exchange Board of India) and RBI (Reserve Bank of India).