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Commodity Stocks in India

Commodity stocks are stocks of companies that produce the underlying commodity. So an iron ore mining company will be an iron ore commodity stock...and so on.

These stocks comprise a large segment of the stock market. Despite getting a lot of attention, these stocks are notoriously hard to invest in successfully.

These stocks tend to rise and fall with the price of the commodity. For example, the stock of a crude oil producer will rise along with the price of crude oil and vice versa.

These are cyclical stocks. They move up and down in cycles. This is all common knowledge in the market, yet investors regularly make mistakes in these stocks.

They buy them after the price has gone up a lot and then don’t sell quickly when the tide turns. The reason is the difficulty in timing the commodity cycle. Investing in these stocks demands an in-depth knowledge of the underlying commodity and its global market.

This is difficult even in normal situations. But it can get worse if there are any disruptions due to recessions, supply shocks, natural disasters, changes in government policies, and wars. Yes, that’s right, wars can give a boost to commodity stocks.

This is why retail investors often get burnt in these stocks and also why Equitymaster recommends extreme caution while considering these stocks for you long-term investment portfolio.

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Shares of the company rallied over 18% in the past one month, only to fall in the subsequent sessions, erasing almost all the gains.

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Metal stocks are looking good on the charts, but which one should you buy?

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The metal index has been underperforming against the broader markets in 2022 as commodity prices have corrected.