Best Financial Markets to Trade: Are you looking to explore the best financial markets to trade in 2024? If yes, then don’t worry, you are at the right place. It is obvious that we may occasionally get confused in our decision-making when faced with the many different pieces of advice regarding financial planning, trading, and investments.

Whether you are a novice trader or an expert trader, this article on the best financial markets to trade in 2024 will assist you in making smarter investing selections by educating you on the major financial markets. Therefore, without further ado, let’s begin!

The fundamentals, such as what financial markets are and their significance, must be understood properly before moving on to choose the best financial markets to trade in 2024. To begin with, let’s study the wide range of financial markets that an investor can choose from based on their financial goals and risk tolerance right from dynamic cryptocurrency markets to risk-free debt markets. To learn more about the best financial markets to trade in 2024, keep reading.

What are Financial Markets?

Financial markets in simple terms refer to the place where different financial assets or financial products such as shares, currencies, derivatives, etc. are bought and sold. Financial instruments include instruments like stocks, bonds, treasury bills, etc. 

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In a broader sense, the term financial market includes different market segments based on the type of financial instruments. For example, the stock market, bond market, forex market, derivatives market, etc come under the concept of financial market.

The financial markets are usually supervised by the regulatory bodies of the country which aims to protect the interest of retail investors like us. For instance in India, the stock market is governed by a regulatory body called SEBI (Securities and Exchange Board of India).

Further, the existence of financial markets helps in bringing together the buyers and sellers to deal in their desired financial assets. Above all, the regulated financial market system helps to maintain a disciplined framework for trading financial instruments.

Until now, we understood, in brief, what financial markets are and how they are useful to us. Now, let us move on to see the best financial markets to trade and their current scenario.

Best Financial Markets To Trade in 2024

1. The Stock Market

The stock market is one of the financial market types, which sounds familiar to most people, even though they are unaware of it. A stock market is a place where the shares of listed companies are traded. 

Here, the companies initially get listed on the stock exchanges by issuing (Initial Public Offerings) IPOs where they issue the shares for the first time. Later, the shares are traded on the stock exchange. 

In India SEBI is the regulatory body and the two main stock exchanges are NSE (National Stock Exchange) and BSE (Bombay Stock Exchange). The NIFTY 50 of NSE and SENSEX of BSE are the benchmark indices of the Indian stock market.

In recent years, with the growing digitization and awareness of financial planning, stock markets are attracting more people towards it. According to the reports of the IMF( International Monetary Fund), global economic growth may fall from 3.4% in 2022 to 2.8 % in 2023. After the overall financial crisis that occurred over the last 3 years due to the factors like COVID-19 pandemic, the Ukraine-Russia war, etc. growth is said to be uncertain in the financial sector.

More specifically if we talk about the Indian stock market, despite geopolitical facts causing havoc in the final quarter of FY22, the Indian equity market delivered strong gains in the financial year 2022. The Nifty50 earned an astonishing 19% year-over-year increase in FY22, according to research by Motilal Oswal Financial Services, and finished the fiscal year with the second-best returns in seven years. 

The domestic market experienced volatility in FY23 due to various reasons like strong monetary policy stances by global central banks, the Russia-Ukraine war, and increased inflation. The indices Nifty 50 and Sensex gained roughly a 2.5% rise at the end of May 2023. As the FMCG, Auto, and Bank stocks among domestic sector indices turned out to be the best performers, the  Pharma, Energy, Metals, Realty, and IT stocks were the poorest performances till date in FY23.

Annual Performance of nifty 50
Best Financial Markets To Trade - World Economic Outlook

2. The Derivatives Market

The Derivatives are the set of financial assets whose value is derived from the underlying assets. It is a contract between two or more parties to buy or sell an asset in the future at a predetermined price. 

There are mainly 4 types of derivatives namely Futures, Options, Forwards, and Swaps.

The derivatives can be traded on an exchange or over the counter. In the case of an exchange-traded market standardised contracts are traded whereas direct negotiations between the parties happen in the over-the-counter market.

The derivative market has a way back history of several decades when the Japanese rice traders used future contracts to secure their production. 

With respect to Indian markets, the NSE commenced trading in the derivatives segment by launching the Index Futures in 2000. Later on, it expanded itself into the options segment a year later in 2001. 

The futures and options can even be traded for individual securities that meet the eligibility criteria given by SEBI. As of now, The NSE has emerged as the world’s largest derivatives exchange in 2022 with the highest number of contracts traded. The daily average turnover of equity derivatives has increased by 4.2 times in the last decade indicating the growth in the derivatives market with a value of Rs 1.41 lakh crore in 2021.

Recently, the NSE has changed the expiry of the Bank Nifty Futures and Options from Thursday to Friday with effect from July 7 2023 and all the existing contracts’ expiry dates will be revised subsequently. This move of NSE after its counterpart BSE is introduced to lower the trading charges. As far as traders are concerned, this move may help in reducing the volatility to some extent as the expiry is extended.

3. Commodities Market

A commodity market is a place where physical commodities like agricultural products, metals, crude oil, spices, etc are traded within the bye-laws of regulatory bodies. In India there are 4 major commodity exchanges namely MCX, ICEX, NCDEX and NMEX, these are exchanges similar to NSE and BSE for stocks.

Commodity trading helps in diversifying and mitigating the risk, as it allows the trader for hedging in the commodities.

The Indian commodity market has been through a series of fluctuations over the last few years due to global geopolitics like the Ukraine-Russian War, the Covid-19 Pandemic, and many more. The trade volumes in the agriculture commodity segment had dropped significantly after SEBI ceased trading 7 Agri commodities including wheat, paddy, mustard, chana, and others till December 2023 to control the inflation. 

However, in a recent interview, the MD of the National Commodity and Derivatives Exchange (NCDEX) said that “the commodities market will do very well in 2023 as NCDEX is scouting for the new products which will be interesting for markets as well as investors”

Additionally, the Indian gold commodity market hit its high in the third quarter of FY23 from 2020 and MCX gold is trading at a 30-month high. Like an added feather to the cap, the country launched India International Bullion Exchange (IIBX) in 2022 to provide an opportunity to import bullion into the country.

To sum up, investors can expect better trading opportunities in the Commodities market.

4. The Foreign Exchange Market

Forex trading refers to trading in the currencies of different countries against each other. For example, Indian Rupee against the US Dollar. The Foreign Exchange market, also known as forex or currency market has gained a lot of importance due to growth in international trade, ease of access to different markets via digitization, and many such factors. As per recent studies, the CAGR of the forex market is expected to grow by 7% during 2023-2028. 

Among the various currencies, we see a major bull run of the US Dollar in the last year. This is due to several factors like the rise in interest rates by federal banks has led to an inflow of more international capital resulting in the dollar’s appreciation. The forex trading market is a highly volatile market that depends upon several factors like geographical, political, and economic changes across the world. Hence it requires more knowledge and experience to get into forex trading.

5. The Crypto Currency Market

A cryptocurrency is a virtual currency secured by the process of cryptography. It is designed to work as a medium of exchange through a computer network of blockchains. Unlike the regular currencies, which are governed by the central bank of the country like the RBI, there is no specific authority to govern the cryptocurrency that is traded across the world.

The data of cryptocurrency traders remain accessible to the users of the network only. The underlying blockchain technology is today used in many sectors like banking, insurance, and many more. Growing at a compounded annual growth rate of 12.8% since 2021, the cryptocurrency market is estimated to reach $4.94 billion by 2030. Bitcoins, Litecoins, Ethereum, etc are examples of cryptocurrencies.

In spite of the fast-paced growth, most people find it a risky platform as it lacks legal supervision by authorised bodies.

6. Money Market 

A Money Market is a place where short-term (typically within a year) financing instruments are traded. The basic motto behind money markets is to increase the financial liquidity of businesses. In India, RBI oversees the operations of the money market. Instruments like Certificates of Deposit, Commercial Paper, Treasury Bills, etc are traded in the money market.

Need To Understand the Financial Markets

To become a successful investor or trader it is essential to have knowledge of all kinds of markets which may be the stock market, derivatives market, bonds market, etc. 

But, most people focus on one kind of market only, which may not be fruitful in the long term as all the financial markets are interconnected with each other.

For example, if you only want to trade stocks and you are unaware of other market pieces of information like current forex rate, recent national and international economic updates, etc then you may not be able to trade properly in the stock market as any of the above-mentioned reasons could be the cause for the price fluctuation.

Hence it is essential to have a basic knowledge of all types of financial markets. This helps in a comprehensive approach to decision-making.

Closing Thoughts

In the article on the best financial markets to trade in 2024, we have discussed in detail what are financial instruments and what we need to know about them. Later, we discussed in detail about what is the current scenario of the financial markets in. Hope this adds value to your investment journey. Happy reading!

Written by Bhagyalakshmi Patil

By utilizing the stock screener, stock heatmap, portfolio backtesting, and stock compare tool on the Trade Brains portal, investors gain access to comprehensive tools that enable them to identify the best stocks also get updated with stock market news, and make well-informed investment.

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