Dive Into the Water Market: A Guide to Investing in Water in India9-min read

Introduction to Investing in Water Commodities

The necessity of water cannot be put in words and amid the increase in the exploitation of the environment and water resources by humans, the precious liquid is expected to grow scarcer in the coming years. As a result, the concept of trading water as a commodity like silver, oil, and gold was introduced recently and now billions of dollars are being traded on the Chicago Mercantile Exchange (CME) in water futures.

It is crucial to note that India, one of the biggest economies in the world, has around 18% of the world’s population and around 4% of the global water supply. The demand for water in the Southeast Asian country is bound to increase in the coming years amid the increasing heatwave and irregular rainwater pattern.

Water’s scarcity is already being predicted and as a result, investors are willing to bet on the future price of this commodity. Interestingly, trading water is simply related to the price of the commodity and the investors involved do not get water rights from municipalities or indigenous groups. A water futures trade is a contract between two parties on a futures exchange which allows the parties to bet on the price of water in a region in the future.

This futures market for water allows investors to take the best guess at the future price of the commodity and take advantage of the same. Additionally, there are many benefits of investing in water. Firstly, water is a very scarce commodity and gradually, it is becoming harder to find fresh usable water due to the pollution of the essential liquid in India as well as other regions of the world.

A major population in India involves agriculture and considering the shortage of water and increase in heatwaves in the recent period, the importance of water cannot be stressed enough. Also, the popularity of hydropower has also recently surged as the world is looking into additional sources of producing electricity except burning fossil fuels.

Even municipal corporations can invest in water commodities and use the funds to construct better infrastructure and take care of their respective regions. It is imperative to mention here that the physical delivery of water futures does not make sense and therefore, they need to be traded in indexes and the final trade should be settled in cash.

Moreover, a physical settlement of water can be a costly venture due to transportation issues and as a result, liquidity can decrease significantly.

Now investing in water as a commodity possesses many benefits with a major upside being diversification of portfolio. Investing in stocks, crypto, gold, and other assets along with water can benefit the portfolio of an investor in many ways. Assets like crypto and stocks are volatile while gold can be considered as a long term investment. On the other hand, water is a sure-shot long-term commodity that will remain dominant regardless of the time period since the scarcity of water is a real issue for many regions.

There is a huge long-term potential in water futures as there is a huge need for the liquid in agriculture industry along with hydroelectric industry and many other sectors also require water in huge quantities. Therefore, this is a sector whose demand continues to grow amid a weaker stock and crypto market.

Best Brokerages for Buying Water Stocks and CFDs in India: 

Both Admiral Markets and Libertex can be used by Indian customers to buy water stocks or otherwise invest in water as a commodity in India.

Admiral Markets

Admiral Markets is one of the biggest globally regulated online brokerage platforms that offers trading on more than 8,000 financial instruments, ranging from forex, commodities, shares, cryptocurrencies, CFDs, indices, etc. It offers as low as 0.5 pips of competitive spreads and up to 500:1 leverage to its forex traders.

Founded in 2001, Admiral Markets is an easy-to-use platform with reliable customer support. While serving more than 40,000 users from over 110 nations, it offers registered traders instant access to multiple MetaTrader platforms.

Notably, Admiral Markets is regulated by the multiple financial regulatory agencies around the world, including Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC), the Australian Securities and Investments Commission (ASIC), and the Jordan Securities Commission (JSC).

In collaboration with MetaQuotes Software Corporation, this top online brokerage platform in India offers a variety of trading tools to its customers, including MetaTrader 4 (MT4), MetaTrader 5 (MT5), MetaTrader Supreme Edition, and MetaTrader Web Trader. The platform also offers a Demo Account to its users with virtual funds worth $10,000.

Admiral Markets offers leverage up to 1:30 to all its retail users:

• Forex – 1:30 maximum leverage
• Indices & commodities – 1:10 maximum leverage
• Stocks, ETFs & bonds – 1:5 maximum leverage
• Cryptocurrency – 1:2 maximum leverage

While most of the methods for withdrawal and deposit are easy and instant, bank transfers take about 3-4 business days. Users can start trading different financial instruments with a minimum deposit of $100. Most of the deposits involve zero fees except e-wallets Skrill and Neteller, which cost 0.9% of the deposit amount (minimum $1).

Furthermore, transfers can be handled via various popular ways, including bank transfers, PayPal, Skrill, and Neteller. Bank transfers usually take up to three days to process, but the latter three are processed immediately. Admiral Markets allows its traders two withdrawals per month with a minimum withdrawal amount of $1.

Interestingly, despite the worsening macroeconomic conditions worldwide, Admiral Markets is gradually increasing its global presence. The platform has recently expanded its offerings for the Indian investors and has become one of the best training platforms in India.

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Libertex

Libertex is an online trading platform that offers trading on a variety of financial instruments, including commodities, Forex, cryptocurrencies, ETFs, among others. Funded by Indications Investments Limited in Cyprus, the platform is operated by Forex Club International LLC.

Libertex allows users to start trading on the platform with a minimum deposit of as low as $50. It has support for a variety of flexible methods to pay through wire transfer, including VISA, credit cards, and electronic payment gateways like iDeal, Giropay, Neteller, Sofort, Trustly, Rapid Transfer.

The platform also offers a demo account to the users who are new to trading and want to get some experience on the platform before investing their money. Libertex, which currently provides services to around 3 million users globally, holds over 250 tradable assets and has recently shifted its attention to the Indian market.

Libertex has won more than 40 global awards, and in 2022 it won the Most Trusted Broker and Best Crypto CFDs Broker Awards. Similar to Admiral Markets, this fully regulated online broker also adheres to a standard fee structure and earns its revenue through spreads and commission. The commission starts at 0%, and the spread starts at 0.00003. In addition, all deposits are free except the fees imposed by the service providers.

It is important to note that Libertex charges transaction fees and rollover fees for traditional finance instruments. The transaction fee is charged when a user starts a trade while the rollover fee is charged for forex trading and CFD instruments at the end of the trading day (GMT 9 PM).

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How to Open an Account with an Online Broker

In order to open an account with an online broker like Admiral Markets, one needs to follow a few simple steps and gain access to the platform and invest in water as a commodity.

Interestingly, you will see an interface like the one below. Now, the first step to start your investment journey is to register with your mobile number or email and thereafter, input a password which seems fit for usage. If you already have an account, you can sign in with your credentials.

In order to register yourself, you will need to enter all the details regarding your residence and email along with your phone number. Consequently, you will be asked to sign up and then, you will have to verify your email.

A notification will come on your screen asking you to confirm the fact that you are aware of the risks associated with trading stocks and other commodities and assets. Financial markets are often prone to risks and it is imperative to tread with caution.

You will be asked if you are opening an individual account or if you are a corporate entity which will have a different set of limitations and account needs. Furthermore, in order to activate your account, you will be asked some other details regarding your investment experience.

Next, in order to activate your wallet, you will be asked to enter a few personal details like name, date of birth, and other things.

As shown above, you will need to mention your identity and address along with your mobile number and email in order to successfully start trading with Admiral Markets. Almost every online brokerage platform operates on a similar capacity and demands similar information.

Now, all that is left is for you to make your first deposit and claim your match welcome bonus, doubling your investment funds for free.

How to Invest in Water Commodities through Online Brokers

There are plenty of ways to invest in water commodities. These are in the form of water exchange-traded funds and water futures. As explained above, water futures involve the creation of a contract between two people who place a price tag on the future of the price action of the commodity.

Such futures contracts are common in the crypto and stock markets but are subject to significant losses in case investors are wrong. Therefore, investing in water futures is only advised when you have the knowledge and right tools. Interestingly, the long-term potential of water is endless and as time passes, the demand continues to increase and supply is decreasing due to human intervention in the climate.

The increase in hydroelectric projects and the gradual enhancement of agricultural needs confirms that water commodities will gain huge traction in the near future.

Investors can also purchase water exchange-traded funds or ETFs. Water ETFs are known for investing in companies involved in the treatment and purification of water, as well as its distribution. Some of the biggest water companies include Germany-based BASF SE (BAS.DE), 3M Co. (MMM), and ITT Inc. (ITT).

Currently, water ETFs are used as defensive positions in a portfolio but in the near future, if the scarcity of water worsens on a global scale, these ETFs can be used in an offensive position as well. However, currently the water trading industry is quite small but rapidly increasing as well. On the other hand, last year, water ETFs outperformed the S&P 500 as the global macroeconomic situation remains uncertain.

Investors can also put their bets on water commodity stocks which are described as the stocks of those companies that have businesses in the world of irrigation and utilities, water treatment, or other water-related industries. The demand for these stocks is only expected to increase as the world is gradually moving towards water management and increased agricultural needs.

Risks and Challenges of Investing in Water Commodities

Like investment in any other commodity, investing in water commodities has its own issues ranging from regulatory uncertainty, market volatility to the impact of climatic changes on the limited water resources on the planet.

It is crucial to note that water commodities are not regulated in the same way as other commodities due to the absence of physical settlements and the essential liquid being a birthright of every human. There are many regulators around the globe that believe water to be a human right and not a financial asset or commodity for investors to trade.

Recently, a United Nations human rights expert said that turning water into a commodity and investing in the same violates the rights of many. However, the regulators of the world have been unable to subdue the demand for water commodities due to many investors having faith in the long-term potential of water ETFs and commodity stocks.

However, the water market is a very volatile industry due to the continuous change in the climatic conditions of a region and the effects that these changes can have on the presence of water. Interestingly, experts believe that the entry of water as a commodity in exchanges exposes water to forces of financial speculation and to risks of speculative bubbles.

Recent Updates

According to a study conducted by Evolve Business Intelligence, the global market size for functional water was valued at USD 5,420.3 million in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 8.1% from 2023 to 2033. Functional water refers to bottled water that has been enhanced with additional health or wellness benefits beyond basic hydration, such as added vitamins, minerals, electrolytes, antioxidants, or other bioactive compounds.

The growth of the functional water market is driven by various factors, including increasing consumer awareness of the importance of hydration and health, rising demand for low-sugar and low-calorie beverages, and growing interest in natural and functional ingredients. The market is also influenced by changing lifestyles and demographics, as well as increasing interest in premium and specialty beverages.

The study suggests that the global functional water market is expected to reach USD 13.5 billion by 2033, indicating significant growth potential in the coming years.

Conclusion and Next Steps

Water is an industry with long-term potential and growth. Investing in water commodity stocks and ETFs can improve and diversify one’s portfolio and investors can get access to one of the rapidly expanding markets. Also, investing in water as a commodity has never been easier due to the presence of multiple online brokerage platforms like Libertex and Admiral Markets which support multiple asset classes for professional as well as novice investors.

However, it is also crucial to note that trading water futures can be subject to increased volatility due to the ever-changing climatic conditions which affect the limited water resources on the planet. There is not enough regulatory involvement in the water market as well and therefore, investors need to look out for themselves.

Nevertheless, investing in water as a commodity might prove beneficial for many investors in the long-term due to the scarcity of the liquid and the limited resources present. Further, the development of the agro industry and the increase in the number of hydroelectric projects will only increase the demand for investment in water as a commodity.