Your SlideShare is downloading. ×
Commodity futures in india
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×

Introducing the official SlideShare app

Stunning, full-screen experience for iPhone and Android

Text the download link to your phone

Standard text messaging rates apply

Commodity futures in india

440
views

Published on

Published in: Business, Economy & Finance

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
440
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
29
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. COMMODITY FUTURES IN INDIA
  • 2. Why Commodity? Diversification Less Manipulations / Intrinsic Value High Leverage
  • 3. History of Commodity Derivative Market Chicago businessman formed CBOT in1848In 1898 Chicago Mercantile Exchange start trading on Future ContractFor Spot Market Forward Market Commission (FMC) setup in 1953 In 1875 establishment of Cotton Trade Association 4 National level exchanges MCX, NCDEX, NMCE, ICEX
  • 4. Benefits1. • Driven on demand & supply2. • Easy to understand & invest3. • Less investment i.e. 5 - 7 %4. • Market timing 10 am – 11.55 pm • Price manipulation not possible because5. of global market • Volatility gives chance for easy entry6. and exit
  • 5. OpportunitiesHedgingArbitrage • Intra DayTrading • Positional
  • 6. Indian Commodity Exchange NBOT Regional OthersFMC NCDEX MCX National NMCE ICEX
  • 7. Multi Commodity Exchange of India Ltd. An independent and demutualised exchange Promoted by Financial Technologies (India) Limited Introduced a state –of –the –art, online digital exchange for commodities trading On the first week of November, 2004 signed MOU with the Tokyo commodity Exchange
  • 8. National Commodity & Derivatives Exchange Limited (NCDEX) A public limited company incorporated on April 23, 2003 under the Companies Act,1956 Professionally Managed online Multi Commodity ExchangeA only commodity exchange promoted by National Level Institution Regulated by Forward Market Commission
  • 9. Difference & Similarities between MCX & NCDEX MCX NCDEXMonth Different for each commodity Normally monthlyExpiry day Different for commodities 20th of each contract monthTiming Summer (May to October) : All Summer (May to October): All Commodities : 10 am to 5 pm Commodities : 10 am to 5 pm International Commodities : International Commodities : 5 pm to 11.30 pm 5 pm to 11.30pm Winter (Nov to April) : Winter (Nov to April) : 10 am to 5 pm 10 am to 5 pm International Commodities: International Commodities : 5 pm to 11.55 pm 5 pm to 11.55Active Commodity Gold, Silver, Crude, Oil, Copper, Pulses, Sugar, Wheat, Spices, Gold, Natural Gas, Nickel, Ref. Oil, Menthe Silver, Steel, Soy Complex Oil
  • 10. Exchange Volume of MCX & NCDEX MCX Jul-09 NCDEX Mar-09 Nov-08 Jul-08 Mar-08 Nov-07 Jul-07 Mar-07 Nov-06 Jul-06 Mar-06 Nov-05 Jul-05 Mar-05 Nov-04 Jul-04 Month 0 600000 500000 400000 300000 200000 100000
  • 11. Classification of CommoditiesBu l l i on Gol d an d S i l ve rMe tal s Zi n c,Le ad, C oppe r, Ni ck e l , S te e l i n gotsEn e rgy C ru de O i l , Natu ral Gas, He ati n g oi l , Gasol i n ePu l se s C h an a Ru bbe r, Gu ar S e e d , Gu argu m , C ash e w,O th e rs Al mon d,Gu r, C offe eO il & C astor S e e ds, S oy S e e ds, C astor O i l , Re fi n e d S oyO i l se e ds O i l , S oyme al , Mu stard S e e dS pi ce s Pe ppe r, Re d C h i l l i , Je e ra,Tu rme ri c
  • 12. Contact Specification (MCX) Lot Size (Qty) / 1 Approx MarginCommodity LTP Price Quotation Rs (+ & -) Margin % Lot Value(Rs) (Rs) Contract Months Feb, April, June, GOLD 17700 10GRMS 100 4.00% 1,770,000 70,800 Aug, Oct, Dec. Mar, May, July, SILVER 28300 1KGS 30 5.00% 849,000 42,450 Sep, Dec. COPPER 322 1KGS 1000 5.00% 322,000 16,100 Nov, Feb, April. Jan, Feb, Mar. CRUDEOIL 3550 1BBL 100 5.00% 355,000 17,750 (Monthly) Nov, Dec,NATURALGAS 240 1mmBtu 1250 8.00% 300,000 24,000 Jan.(Monthly) Nov, Dec, NICKEL 750 1KGS 250 7.00% 187,500 13,125 Jan.(Monthly)
  • 13. Contact Specification (NCDEX) Price Variant (1 Approx ContractCommodity LTP Quotation Lot Size Margin % Rs + & - ) Lot Value(Rs) Margin (Rs) Months Nov, Dec, Turmeric 10700 Rs/Quintal 10 MT 34.00% 100 1,070,000 363,800 Apr. Nov, Dec, Jan, Feb, Mar,Guar Seed 2800 RS/QUINTAL 10 MT 7.00% 100 280,000 19,600 Apr.(Monthly) Nov, Dec, Soy Oil 495 Rs/10Kgs 10 MT 5.00% 1000 495,000 24,750 Jan.(Monthly) Nov, Dec, Jan, Feb, Mar, Pepper 15650 RS/QUINTAL 1 MT 5.00% 10 156,500 7,825 Apr.(Monthly) Nov, Dec, Jan, Feb, Chana 2620 RS/QUINTAL 10 MT 6.00% 100 262,000 15,720 Mar.(Monthly) Nov, Dec, Jan, Feb,Soy Bean 2420 RS/QUINTAL 10 MT 6.00% 100 242,000 14,520 Mar.(Monthly)
  • 14. International commodityInternational Commodity Exchange exchange
  • 15. New York Mercantile Exchange (NYMEX)Biggest exchange for trading in Physical Commodity Future NYMEX COMEX NaturalCrude oil Gold Silver Gas
  • 16. London Metal Exchange (LME)1877 as a direct consequence of the industrial revolution witnessed in Britain in 19th 1877 Primary focus on base metals LME trades 24 hours a dayLME also offer option contract (Trade Average Price Option Contract – TAPOC) based on Monthly Average Settlement Price (MASP) Trading turnover value is more than US $ 2,000 billion per annual Commodity traded –Aluminum, Coppers, Nickel, Lead, Tin, Zinc
  • 17. Chicago Mercantile Exchange (CME) Commodities trade – Trade heavily interest1898 primarily to trade Butter, Milk, Frozen rate future, stock indices in agricultural Pork & foreign exchange commodities bellies, live, cattle, Non futures –fat Dry Milk
  • 18. Tokyo Commodity Exchange (TOCOM) • Second largest commodity future exchange1. • TOCOM initiative towards establishing Asia as the benchmark2. for price discovery & risk management in commodities • Platform for future price discovery in Asian for Asian players in3. Crude Oil • Commodity Traded- Crude Oil, Gasoline4.
  • 19. Market Players Exporters /Producers HNI / F & O Importers Traders / Consumers Brokers
  • 20. Concept of Commodity Derivative Gold Jeweler Example:-For making jewellery XYZ buy 1 kg gold at 21000 for &it sell jewellery in 3 month cycle after 3 month goldprices are 19000.
  • 21. Strategy XYZ Buy Spot Price 21000 / 10gmXYZ Sell 1 kg hold short Future Price 21050 Net Payoff – 21,000*100 + Initial Margin = 21,00,000 + 5% of 21,00,000 Expiry 3 months = 1,05,000 + 21,00,000 = 22,05,000
  • 22. Pay Off ScheduleOn Expiry Physical Gold Future Net PayoffCloses At Position (21,050) 17000 -4,00,000 +4,05,000 +5000 18000 -3,00,000 +3,05,000 +5000 19000 -2,00,000 +2,05,000 +5000 20000 -1,00,000 +1,05,000 +5000 21000 0 0 0 22000 1,00,000 -95000 +5000 23000 2,00,000 -85000 +5000 24000 3,00,000 -75000 +5000
  • 23. Mechanism of Hedging (Agent) •Agree to sell flour to breadAPRIL manufacturer •Buy wheat futures contract WHEAT MILLER •Sell wheat futures contact •Buy wheat in the physicalJULY market for delivery of flour to Bread Manufacturer
  • 24. Mechanism of Hedging (Producer) •Sell Guar seed NovemberSEPTEMBER Futures FARMER •Buy Guar seed November Future to square offNOVEMBER transaction •Sell Guar seed Harvest
  • 25. Mechanism of Hedging(Exporter) •Export contract to sell JUNE (export) automobiles in October •Buy steel futures contract AUTOMOBILE MANUFACTURER •Sell steel futures contract to square off transaction •Buy steel from Physical SEPTEMBER market to meet export requirement
  • 26. Commodity V/S Financial Derivatives Commodity Financial Derivative Derivative Settlement Physical / Cash CashDelivery Notice Yes No Period Warehousing Yes NoQuality Of Assets Issue No Issue
  • 27. Parity CalculationCrudeNYMEX Crude 76.30Present Exchange Rates 46.50 3547.95Parity Price Of MCX Crude 3547.95Natural GasNYMEX Natural Gas ($/mmbtu) 5.14Present Exchange Rates 46.50 239.01Parity Price Of MCX Natural Gas 239.01
  • 28. Brokerage CalculationBrokerage for ClientsGold Per 1 KgGold price per 10 gm 17600/- 1760000Brokerage 0.03% 528Service Tax (10.2%) 54Turnover Charges (0.004%) 70Service Tax on Turnover Charges (10.2%) 7Stamp Duty on Turnover (0.001%) 18Total Cost 677
  • 29. Learning the Commodities Global Demand & Seasonity Commodity Supply Prices Global PoliticalFx Currency / economic INR V/S - $movement - $ events Indian economic data / Weather policies
  • 30. Factor Effecting Gold /Silver / Crude / Coppers PricesEmployment Data First Friday of monthGDP Last Friday of monthISM Mfg. Index First working day of monthTrade Deficit Third week of monthConsumer Price Index Third weekProduction Price Index Third weekIndustrial Production Third weekRetail Sale Third week of monthDurable Goods Order Last week of monthFederal Bank Meeting Eight times in year
  • 31. Important Website www.bulliondesk.com www.forexfactory.com www.bloombear.comwww.futureresource.com www.nymex.com www.tocom.com.jp www.gold.org www.kitco.com