Commodity presentation (july 10)
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Commodity presentation (july 10) Presentation Transcript

  • 1. Commodity Markets July 2010 Way2Wealth Commodities Pvt. Ltd.making investing simpler, more understandable and profitable
  • 2. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 3. Commodity - Definition A commodity is any good or service produced by human labour and offered as a product for general sale on the market - Karl Max Characteristics • Commodity is anything movable (a good) that has following characteristics • Fungible, i.e. the same no matter who produces it • Derivatives, i.e. involves further processing into number of products • Economic cost, i.e. production of it involves some cost
  • 4. Commodities – in Real Life Wheat in your bread Petrol in your vehicle Coffee on your table Sugar in your sweets Chana in your chhole Gold in your necklace ……… and so on ……. Commodities are everywhere
  • 5. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 6. Commodity – As Asset Class In financial parlance, assets are economic resources that is capable of being owned or controlled to produce value Commodity too has gained importance currently as independent asset class Commodity, being the natural goods are independent of other asset classes Assets Classes Equities : Performer during economic expansion & an out performer over very long term… Fixed Income : Performs at the later stage of recession… Real Estate : Performs during early expansion… Commodities : Performance spread evenly over the economic cycle…
  • 7. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 8. Commodity – Unique points of diversification1. Seasonality A major force in the commodities markets2. Correlation Unlike other asset class, commodities are positively and negatively correlated within & outside the group which is unique to commodities only3. Weather No other asset class are so much influenced by weather patterns4. Hedge Provides natural hedge against war, inflation, other asset portfolios, recessions etc. example -GOLD
  • 9. Commodity – Performance Returns Over Different Asset Classes in 4 Yrs.100 88.46 90 80 73.72 75.95 69.51 70 60 50 40 31.55 30 20 10 0-10 -1.44 SENSEX NIFTY CNX 500 NCDEX INR MCX AGRI INDEX METAL Source:Bloomberg,Way2Wealth Research INDEX
  • 10. Commodity – Performance Various Asset Classes Perform ance2602402202001801601401201008060Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 NCDEX Ag Index Nifty USDINR MCX Metal Index
  • 11. Contribution in global landscape Indian Share in Global Commodity Market Global Vs. India 9%  Global commodity has relatively long history  Size is 9 times larger than India 91% India Global India  Commodity futures, though active since 19th century was banned later in 1970’s  Commodity volumes shoots up significantlyCommodity Trading ( Value in Million USD) after re-launch in 2003 2009 2008  MCX emerged as world’s Sixth largest Global 14831317 11712611 exchange India 1469673 1067984  Volumes on Indian exchanges are increasing Source:FMC,Way2Wealth Research at CAGR of 73.7 percent
  • 12. Global growth in Commodities 2004-09 Global Com m odity F&O -2004 Global Com m odity F&O -2009 12% 20% 23% 12% 68% 65%Source : WEF Am erica Asia Europe+ME Source : WEF Am erica Asia Europe+ME Share of Asia has jumped more than 5 times
  • 13. Global growth in Commodities 2008-09 Exchangew ise Volum e Share Com m odity F&O -2008 Exchangew ise Volum e Share Com m odity F&O -2009 7% 6% 5% 5% 18% 9% 11% 33% 9% 13% 38% 18%Source: WFE 8% 20% Source: WFE DCE CME SHFE ZCE ICE MCX LME DCE CME SHFE ZCE ICE MCX LME Chinese exchanges has seen two fold increase in volume
  • 14. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 15. Classification of Commodities Bullion Gold Silver Palladium etc Agriculture Energy Grains Crude oil Pulses Heating oil CommoditiesEdible oils/seeds Natural gas Spices etc Furnace oil Etc. Base Metals Copper Zinc Aluminum Nickel Tin
  • 16. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 17. Commodity – Indian Structure FMC – The Regulator Commodity Exchanges National Regional Exchanges ExchangesNCDEX NMCE MCX NBOT 20 Other Regional Exchanges Leadership position with >90% share
  • 18. Indian Growth so far Volume Growth in Indian Exchanges Significant rise in volume since 700 launch of 600 > 65% CAGR Growth exchanges in 2003 500 400 300 200 MCXLeader in Metals & Energy 100 0 2004 2005 2006 2007 2008 2009 2010 MCX NCDEX TOTAL Source:FMC,Way2Wealth Research Segment wise % Share of Commodities 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Bullion and other metals 31.5 36.1 57.9 64.6 56.7 40.8 NCDEX Other than bullion metals - 23.2 Leader in Agri Agriculture 68.2 55.3- 35.8- 23.1- 11.9 - 15.7 Energy 0.3 8.4 6.3 12.3 20.3 Others 0.0 0.1 0.0 0.0 31.4 0.0 - Source:FMC,Way2Wealth Research * 2008-09 other segment includes energy& other metals
  • 19. Indian Growth during 2004-09 Exchange wise commodity Volumes in 2004 Exchange wise commodity Volumes in 2009 12% 38%62% 88% MCX NCDEX MCX NCDEX
  • 20. Indian Growth during 2004-09 India Commodity Wise Market Share in 2004 India Commodity Wise Market Share in 2009 0% 9% 17% 12% 31% 15% 13% 1% 0%67% 15% 20% Gold Silver Crdue oil Copper Total agri Others Gold Silver Crdue oil Copper Total agri Others
  • 21. Returns in Indian commodities Returns Across Various Com m odities in 5 Yrs. 600 485.86 500 400 300 200 142.80 92.86 87.12 94.21 100 62.54 51.16 9.25 22.25 23.60 3.83 4.96 9.65 0 -12.36 -45.21 -100 Guar Gum Mentha Oil Guar Seed Aluminium Crude oil Turmeric Soy Oil Soybean Copper Pepper Jeera Gold Lead Silver Zinc Source:Bloomberg,Way2Wealth Research Almost 45 commodities are available for trading in both NCDEX & MCX Though few have been de-listed during high inflation times, re-listing also has happened Bullion, Base metals, energy & Agri are the major contributors in terms of volumes
  • 22. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 23. Why Invest in Commodities Commodity provides true diversification in financial portfolio Commodity act as hedge against risks involved in business Rising income will ensure Inflation which in turn will ensure bull market in commodites Explosion of population and shriking agricultural land would leave commodity scarce Returns chasing funds & investors (traders, investor &HNI) will make it vibrant Consumption / Spending in infrastructure / GDP growth will lead to depletion of metals Secular bull market in commodities is likely to continue
  • 24. Who Can Invest  Hedgers : Risk Management o Consumers – Refineries, food processing companies o Traders, exporters, importers o Producers – farmers, Integrated producers  Speculators: High Volatility Higher Leverage o Retail investors, Commodity spot trader o Institutional, Corporate & proprietary traders  Arbitrageurs : Safe Opportunist o Spot future arbitrage o Spread Strategies o Intra and inter market arbitrage  Investors: Portfolio diversifier o Individuals, Pension & Mutual Funds o Corporate bodies
  • 25. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 26. How to InvestProcedure for Trading in Commodities• Open Demat & Trading A/C (Way2Wealth)  Filling KYC (Know Your Customer)  Documents required : Pan Card, Address Proof, Networth, Cancelled cheque (MICR), Photo etc• To get familiar with this asset class, start reading research reports and monitor advisory and execution• Acquire full knowledge of risk involved in futures  Mark to Market  Daily Pay-in & pay-out  Margin requirements  Contract expiry & rollover  Leverage, profit & loss etc
  • 27. Index Definition Commodity – As Asset Class Commodity – Uniqueness Classification of Commodities Indian Commodity Market Size Commodities Offered for Trading Why Commodities How to Invest Commodities @ Way2Wealth
  • 28. Research @ Way2WealthMethodology - Analysis Fundamental • Supply-n-demand, crop survey, climatic changes, policies, logistics, specifications, delivery stocks, physical market linkages, Cartel move, etc Technical • Chart patterns, indicators etc Derivative • Volume and Open Interest Change, Contract duration, rollover, Relative analysis with other markets etc Statistical • Arima modelling, Correlation & regression study, Deviation, Time series, Seasonality, Ratio study etc.
  • 29. Research Products @ Way2WealthProducts  Strategies • Arbitrage / Spreads • Hedging – All commodities • Trading / Investment advisory  Reports • Daily • Weekly • Special • Events • Commodity Profiles  Special Support  Need based special coverage of non futures commodities like Coal, Chemicals, Naptha, Freight, Carbon credits etc. (on cost basis)
  • 30. Products @ Way2Wealth Trading Products • Based on Fundamental / Technical / Derivatives & Algorithm • Plain vanilla Trading • Customised Trading Investing Products • Algorithm or statistical based • Trend chasing, Money management principle, premium brokerage • Strong execution skills
  • 31. The People @ Way2Wealth Sunil Ramrakhiani - COO More than 15 years in industry. Founder member – NCDEX, Member of product committee, Regular speaker in various forum Vinay Tiwary - Sales Head More than 8 years in industry. Have worked with prominent exchange as product head for bullions. Shantanu Bhardwaj - Head Business Analytics & Product Development More than 8 years in industry. Conceptualise & Launched pulses & Guarseed contracts in NCDEX. Have worked as Regional Manager –west in IL&FS Investsmart. Brajendra Talesara - Head Dealing & Arbitrage desk More than 12 years experience in industry. Strong execution skills. Have worked in Anand Rathi, Investsmart etc.
  • 32. The People @ Way2Wealth K N Rahaman - Research Head More than 10 years in Industry. Former Research Head in Agriwatch & Investsmart. Consultancy Projects done for ADB, JBIC, ICICI, OXFAM, DUPONT etc. Member of All India crop forecasting committee (industry) for pulses & oilseeds. Prasad MSR - Research Analyst More than 6 years in industry as Research analyst for various commodities. Have worked with IL&FS Investsmart, Transgraph etc Krishna Reddy - Research Analyst More than 6 years in industry as Research Analyst for various commodities. Have worked in IL&FS investsmart
  • 33. Thank youTeam Commodities