For a long time, the Indian investor’s idea of a portfolio was simple: some equities, some fixed income and gold bought as jewellery or coins. Commodities as a financial asset sat on the edge of that picture, seen as something for traders, not long-term investors. That is changing. Increasingly, commodities are being treated as a core part of a balanced portfolio, rather than a peripheral allocation.
The reason is straightforward. A portfolio is only as strong as its diversity. When every holding rises and falls on the same news, the whole portfolio swings with it. Commodities help because they tend to move on a different set of forces. Over the past decade, MCX Gold has moved almost independently of the Nifty50 — the correlation of their returns over long periods has been quite low. Industrial metals have behaved differently again. They often do well in the exact conditions that trouble equities and bonds — high inflation, a weak rupee, a geopolitical shock. The aim of holding them is not a concentrated position on one outcome. It is a smoother ride across many.
There is also a point about inflation that is easy to miss. Commodities are not just a hedge against inflation; in a real sense they are the inflation being measured. The price indices that define inflation are built substantially from energy, metals and food. Owning them is one of the most direct ways to protect a portfolio’s real value when prices are rising broadly.
Another useful quality
For an Indian investor, commodities have another useful quality. They are among the few asset classes you can hold in rupees while gaining exposure to global forces. Gold, silver, crude and industrial metals are priced in world markets, yet you can take a position in them at home, in your own currency. And you no longer need a vault to do it: through exchange-traded futures and options, an investor can take a considered view without handling the physical metal. That matters in a market like ours, already the world’s second-largest gold consumer, which imported roughly 721 tonne last year worth close to $72 billion — most of it still bought as physical metal.
We have set much of this out plainly in “Achieving a Balanced Portfolio: The Commodity Advantage,” a retail investor’s handbook we unveiled at the Global Commodity Conclave 2026. It takes a first-time investor from the basics — what a commodity is, and why it behaves differently from a stock — through the mechanics of trading on MCX and the discipline of managing risk.
Commodities as a distinct investible asset class does not remove the need for care. Commodity derivatives are leveraged instruments, and leverage cuts both ways. They reward discipline — sensible position sizing, stop-losses and the use of risk capital rather than money an investor cannot afford to lose. Approached this way, they are no more dangerous than other leveraged and regulated products already familiar to Indian investors. And they are a complement to equities and bonds, not a replacement for them.
What can disrupt overnight
The shift of commodities investment from being a ‘side interest’ to ‘portfolio staple’ is real, and we believe it will last. It is being driven by high growth trajectory of a commodity-intensive country like India, persistent inflation, by a world where stocks and bonds move differently from commodities, and by supply chains that geopolitics can disrupt overnight. It is also being facilitated by rapid technological advancements that make entry and access to commodity markets, easy. The task of institutions like Regulators, Exchanges and intermediaries, is to keep the market for this asset class accessible, well understood, resilient and safe to use.
The author is Head of Research, MCX. Views expressed are personal
Published on November 14, 2026
