Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

How to invest in cotton in India

A guide to investing in one of the world's most traded commodities in India.

Invest in cotton through a broker Compare online brokers

Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our opinions or reviews. Learn how we make money.

Cotton makes up around half of the fiber used in the production of clothes and other fabrics in India and around the world. 20 million tons is harvested and traded each year; for comparison, that is around 20 T-shirts for each human being annually.

Due to its demand, cotton has a large and fairly stable presence on the stock market, making it a favorite for investors. You can buy or sell an interest in cotton through a variety of investment vehicles.

Cotton stocks

Stocks are a common option for investors, taking back the control you lose when investing in ETFs while also remaining less risky than futures. While stocks run a comfortable middle ground between the other options, they are still vulnerable to market movements and should be approached with a bit of market knowledge.

Cotton is a massive industry and will continue to be as long as we choose to wear clothes. In fact, India is the largest cotton producing country in the world for 2019/2020 according to Statista.

There are plenty of brokerages offering a selection of stocks of companies listed on Indian stock exchanges like the National Stock Exchange of India (NSE) or the Bombay Stock Exchange (BSE), and with its prevalence, cotton may be a good place to start. Here are some of the biggest names in the industry:

  • Arvind Ltd (ARVIND)
  • Himatsingka Seide Ltd (HIMATSEIDE)
  • K.P.R. Mill Ltd (KPRMILL)
  • Nitin Spinners Ltd (NITINSPIN)
  • Page Industries Ltd (PAGEIND)
  • Raymond Ltd (RAYMOND)
  • Rupa & Company Ltd (RUPA)
  • Trident Ltd (TRIDENT)
  • Vardhman Textiles Ltd (VTL)
  • Welspun India Ltd (WELSPUNIND)

Pros

  • A range of company stocks to choose from.
  • Withdraw from the market whenever you want.
  • Stable and conventional approach to investing.
  • Investment control.

Cons

  • While futures are certainly more dangerous, stocks still have their risks. Market fluctuations are unavoidable and can have a real impact on your investment.

Cotton ETFs

Instead of investing in the stock of one or two companies, ETFs give you the option of placing your money with a bundle of assets.

ETFs are a simpler way of entering the market. While they work much like regular stocks, ETFs are protected from market movements through diversification — they don’t rely on the performance of one company.

If you are still learning the basics of investing, then ETFs are a great introduction. Cotton is a massive industry that’s been around for a long time, so it may be a good place to start. However, there is no cotton ETF listed in Indian stock markets at the time of writing.

To invest in cotton ETFs, you need to turn your attention to international markets such as the US stock market. You will also need a brokerage account that offers access to US or global stocks. Here are a few options to consider:

  • Cotton price ETF
    • iPath Series B Bloomberg Cotton Subindex Total Return ETN (BAL), which tracks the price of cotton
  • Overall agriculture ETFs
    • Elements Agriculture Total Return (RJA), which tracks an index of agricultural commodities where cotton is a major component
    • Invesco DB Agriculture Fund (DBA), which tracks an index of agricultural commodities where cotton is a minor component

Pros

  • By bundling stocks from different companies together, ETFs give you access to a larger part of the industry.
  • ETFs are considered by some to be the safest choice for investors.

Cons

  • Because you are investing in a collection of stocks, you lose some of the control you might have had with a single company’s stock.

Cotton futures

Futures are one of the riskier methods of investing, and while they can be very profitable, they can just as easily lose you a lot of money. Futures trading is more commonly the domain of cotton farmers or manufacturers, though investors and speculators can also buy and sell futures contracts through select brokerage accounts. In India, only a few mainstream brokerage accounts allow futures trading alongside stocks, ETFs and options.

By investing in futures, you are agreeing to buy a commodity at an agreed price to receive directly at a later date. If the price you agree to buy at ends up being lower than the price of the commodity when you receive it, you will have made a solid return; however, the market may go against you and you could end up paying more than necessary.

Futures operate on both buyer knowledge and luck. If you are new to investing, it is recommended you learn the ropes before considering futures as an option.

Pros

  • Investing in futures gives you complete ownership over a commodity.
  • If you make the right investment, futures can bring you solid returns.

Cons

  • There is a real element of gambling present in futures, and you can end up paying dearly for a mistake.
  • Futures expire if they aren’t used within a certain period of time, becoming worthless.

Compare these providers for access to cotton stocks and more

Name Product Number of stocks CFDs Shares Available Markets Link
Axis Direct
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
Get brokerage cashback of up to Rs 500 on trades done online through Axis Direct website, Swift Trade, or Mobile app. Grow your investment portfolio and maximise your gains with AxisDirect’s 3-in-1 demat, trading and savings account.
TradeSmart
All NSE/BSE listed stocks
No
Yes
IN
Go to site
More info
CFD Service. Your capital is at risk.
Achieve your financial objectives and trade various financial instruments with India’s leading discount broker.
Saxo Bank
19,000+
Yes
Yes
AU, CN, CZ, DK, ES, FR, TW, HK, IT, HU, SA, NE, NO, PL, RU, SG, CH, UK, JP
Go to site
CFD service. Your capital is at risk.
More info
CFD Service. Your capital is at risk.
Trade 40,000+ financial instruments at market-leading prices with this powerful yet intuitive trading platform.
Zacks Trade
Access to global markets
No
Yes
US, AU, ES, FR, HK, IT, NO, RU, SG, CH, UK, JP, MX, DE, CA, AUT, BEL, NL, SE
Go to site
More info
CFD Service. Your capital is at risk.
Trade stocks, bonds, ETFs, options, and more on 90+ international exchanges. Offers customisable trading platforms with over 120 technical indicators for your charting needs.
loading

Compare up to 4 providers

Reasons to invest

  • Cotton is a staple commodity that is almost always in demand.
  • Demand in fast-developing countries like China and India is likely to outpace their ability to produce cotton.
  • Consequences of climate change could disrupt the production of cotton in various places around the world, stifling its supply and causing higher prices.

Is cotton a safe investment?

  • Stockpiles: Countries hoarding cotton can influence prices if they decide to withhold their stockpiles during a shortage or put them on the market when there is no domestic demand.
  • Subsidies: Policies to keep prices low and supply high can be altered over time, influencing prices both positively and negatively.
  • Substitutes: Synthetic materials such as polyester can undercut the price of cotton and weaken its market share. Large but struggling economies can drastically influence prices if they switch to a cheaper material.
  • Environment: Weather shifts will influence pollination, growth and yield, subsequently impacting supply.
  • External influences: Other industries can have an influence on cotton prices. If oil becomes more expensive, the harvesting and production costs for cotton can rise as a result. It is a good idea to keep an eye on relevant industries.

Bottom line

Cotton is an in-demand staple you can invest in by purchasing stocks, futures and ETFs. But keep an eye out for shifts in competing industries and commodities that could impact the market.

Explore your investing options across trading platforms and commodities before you make a decision.

Frequently asked questions

Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

More guides on Finder

Ask an Expert

You are about to post a question on finder.com:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder.com provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy Policy and Terms.

Questions and responses on finder.com are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site