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"A STUDY ON COMMODITY MARKET"

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"A STUDY ON COMMODITY MARKET"

  1. 1. S.V.INSTITUTE OF MANAGEMENT 1 | P a g e CHAPTER-1 COMPANY INTRODUCTION
  2. 2. S.V.INSTITUTE OF MANAGEMENT 2 | P a g e
  3. 3. S.V.INSTITUTE OF MANAGEMENT 3 | P a g e 1.1 Vision & Mission:  Vision "To Be a Prominent Destination to Enhance the Prosperity of Its Clients, Investors, Associates and Employees, Always" "To Provide Best Value For Money To Clients Through Personalized Service, Innovative Products, Best Trading And Investment Strategies And State-Of-The-Art Technologies. We at Swastika Believe That 'Our Services Combined With Our Investors' Trust Will Lead To A Prosperous Swastika Family" We Are Committed For: Integrity and transparency in all transactions, Providing investment solutions based on quality and unbiased research, Providing personalized services to all investors and business associates, Achieving success through client’s growth.  Mission Institutional Broking – Empanelment with Banks, FIs, & Insurance Companies, Mutual Fund business, Merchant Banking Services, Registrar & Transfer Agents Services, Equity Placement & Venture Capital Funding, Dealing in Forex, Financing & Loans Syndication.
  4. 4. S.V.INSTITUTE OF MANAGEMENT 4 | P a g e 1.2 Company Information: Name : Swastika Investmart Ltd. Head Office : 1st Floor Bandukwala Building, British Hotel Lane Fort, Mumbai, Maharashtra-400001 Regional Offices : Delhi, Kota, Jaipur, Bhopal, Ahmedabad. Registrars : Ankit Consultancy Pvt Ltd Plot No. 60 Electronic Complex Pardeshipura Indore - 452010 Phone No : 022-66330000 E-Mail : secretarial@swastika.co.in Web Site : http://www.swastika.co.in Director : C R Doshi : Ramanalal Bhutda : Tarunkumar Baldua : S N Maheshwari : Anil C Nyati : Vinod Gupta C.E.O : Sunil Nyati Whole-Time Director : Anita Nyati Executive Director : Parth Nyati D P Manager : Sharddha Ojha H.R Manager : Neha Sharma Account Manager : Sunita Chourasia
  5. 5. S.V.INSTITUTE OF MANAGEMENT 5 | P a g e 1.3 Company Profile: Swastika Investmart Ltd. (Formerly known as Swastika Fin-Lease Ltd.), a Public Limited Company, was incorporated in 1992 with its Registered Office in Mumbai and Administrative office at Indore (M.P.). It was promoted by Mr. Sunil Nyati belonging to the Swastika group of Rajasthan, engaged in diversified business since 1959. In the year 1995 the company came out with a Public issue of 15 Lac equity shares of Rs.10/- each for cash at par, aggregating Rs.150 Lacks. The shares of company are listed on BSE and are one of the few listed companies, engaged in Stock broking and Capital Markets activities. Since incorporation till 1998, the company was actively involved in the field of Hire Purchase and Lease Finance. It started the stock broking business as a sub-broker in the year 1998 and after getting the experience and with the blessings of its satisfied customers, it took the Corporate Membership of NSE in 2000 and BSE in 2004. Later, it got registered with CDSL in 2006 as Depository Participant as well. In the year 2007 the company has acquired membership of two premier Commodity Exchanges of India, NCDEX and MCX through its wholly owned subsidiary company Swastika Commodity Pvt. Ltd. It has also got the corporate membership of Currency Derivatives with NSE and MCX-SX in the year 2008. In 2009 company has started the services of Portfolio Management Services after being registered with the SEBI for the same. In year 2010, after having more than 20,000 clients in CDSL, NSDL Depository added in the Company Portfolio. Company has also taken Member ship of USE & ICEX. In 2011 company has added Membership of NCDEX Spot Exchange. Over the years, Swastika has followed a consistent growth path and is established as one of the leading broking houses of the country with the support and confidence of its clients, investors, employees and associates. Today the Swastika group is managed by a team of over 250 professional staff members and has got a nationwide network.
  6. 6. S.V.INSTITUTE OF MANAGEMENT 6 | P a g e Swastika Investmart Limited, corporate member of all the premier stock and commodity exchanges, is providing best value for money through personalized services, committed to high standards of corporate governance, highest levels of transparency, accountability and integrity in all its activities.  CURRENT ACTIVITIES OF SWASTIKA : 1. Stock broking – NSE & BSE – Equities & Derivatives. 2. Commodity Trading – NCDEX & MCX, ICEX & NCDEX SPOT Exchange. 3. Currency Broking – NSE & MCX-SX & USE - Currency Derivatives. 4. Depository Services – NSDL & CDSL. 5. Portfolio Management & Investment Advisory Services. 6. Mutual Funds and Fixed Deposits Investments. 7. Initial Public Offering (IPO) And IPO Financing. 8. Technical Analysis and Research based advice. 9. Internet Based Trading.  STRENGTHS OF SWASTIKA : 1. Corporate Membership Of NSE, BSE, NCDEX & MCX-SX, ICEX & USE 2. Internet & Mobile Based Trading Platform. 3. Depository Participants Of NSDL & CDSL 4. 24 * 7 Web Base Back Office Software 5. Own Private VSAT Net Work 6. 30 Own Branches 7. Business Partners And Sub Brokers – More Than 500 8. CTCL Net Work – More Than 1000 Odin Licenses 9. More Than 40000+ Registered Clients (Individual & Corporate). 10. Company Listed At BSE Since 1995. 11. In House Technical Analysis & Research Team. 12. Strong Team for Fundamental Equity Analysis & Research. 13. Team for Derivative Strategies Trading. 14. Annual Turnover in C M & F&O (NSE & BSE): More than Rs. 50,000 Crores.
  7. 7. S.V.INSTITUTE OF MANAGEMENT 7 | P a g e 15. Annual Turnover in Commodity (NCDEX & MCX): More than Rs. 60000 Crores. 16. Annual Turnover in Currency (NSE & MCX-SX): More than Rs. 12000 Crores.  PROPOSED ACTIVITIES OF SWASTIKA : 1. Institutional Broking – Empanelment with Banks, Financial Institutions and Fiis. 2. Merchant Banking Services. 3. Registrar & Transfer Agents Services. 4. Equity Placement & Venture Capital Funding. 5. Dealing In Forex. 6. Financing & Loans Syndication 7. Insurance Broking 1.4 Hrarchy Structure: Board of Director General Manager G e n e r a l M a n a g e r G G e DP Front Trading Account Technology DP BACK Audit (compliance) software
  8. 8. S.V.INSTITUTE OF MANAGEMENT 8 | P a g e 1.5 Companies Milestone:  1992: Incorporation with registered Office at Mumbai.  1993: Actively involved in financing. Hire-purchase and leasing business.  1995: Came out with an initial Public Issue, Listed at Bombay Stock Exchange.  1998 : Registered with RBI as NBFC,  2000: Membership of NSE - Capital Market Division.  2002: Membership of NSE - Future & Option Segment.  2003: Setting up Research Desk and Mutual Fund Desk.  2004 : Membership of BSE - Capital Market Division  2005: Centralized Back Office Software successfully implemented.  2006: Registered with CDSL as Depository Participants.  2007: Membership of NCDEX & MCX.  2008: Membership of Currencies Derivatives of NSE and MCX-SX.  2009: Starting of SEBI Registered Portfolio Management Services.  2010: Starting of NSDL Services, Membership of USE & ICEX.  2011: Starting of NCDEX Spot Exchange.
  9. 9. S.V.INSTITUTE OF MANAGEMENT 9 | P a g e 1.6 Service of Swastika Investmart:  EQUITY: The lure of big money has always directed investors to the stock markets. However, making money is not easy. It not only requires a lot of patience and discipline, but also a great deal of research and a sound understanding of the market. The recent volatility in the market has created a lot of confusion and apprehension in the investor community. There is a dilemma of what to buy sell or hold and when to take the action. Swastika gives the perfect solution to stay profitable in the stock market with its market experience, thorough research and analysis, trading solutions and personalized services.  DERIVATIVES: Derivatives enable the investor to earn greater returns (at greater risk) by leveraging your position i.e. by a lower initial investment. Derivatives have the potential to benefit from both rise and fall in the market and can also be used as a risk management tool by the investors. Swastika aspires to make derivatives trading an easy and profitable venture for its investors. Through our simple to understand and easy to implement research and advisory solutions, traders can now efficiently take advantage of the derivatives market.  COMMODITY: Commodity market offers more than 40 commodities across various segments such as bullion, metals, energy, and a number of agri-commodities on its platform. The MCX Exchange is the world's largest exchange in Silver and Gold, 2nd largest in Natural Gas and the 3rd largest in Crude Oil with respect to the number of futures contracts traded.
  10. 10. S.V.INSTITUTE OF MANAGEMENT 10 | P a g e  CURRENCY: The currency market is the largest and most liquid financial market in the world with a turnover of more than $ 5 Trillion on a daily basis. With the introduction of currency derivatives in 2008, the Indian market is poised for growth by increasing its share in the world forex trade. Swastika extends the opportunity to benefit from this market in India. We offer a simple, convenient and profitable platform to trade and hedge in the Currency derivatives market and diversify your investment portfolio.  DEPOSITORY SERVICES: Demat services provide solutions to problems faced by investors while dealing with securities. A DP account is necessary for each and every participant in the stock market. It is a safe and fast means to trade and invest in the securities market.  MERCHANT BANKING: We are delighted to add another feather in our cap. We have registered ourselves with SEBI as a Category-I Merchant Banker. We are one of the very few listed companies who are involved in Merchant Banking Services. We have a dedicated team of Merchant Banking Professionals striving hard to provide excellent services and complete satisfaction to our clients. Our ongoing projects include IPO for SMEs in sectors of Agtrotech, Education, Exports and NBFC. We are also currently providing Debt Syndication for companies involved in Sugar, Organic and Chemical Industries. With the experience gained, we are ready to serve all the sectors of the industry.
  11. 11. S.V.INSTITUTE OF MANAGEMENT 11 | P a g e  PORTFOLIO MANAGEMENT: In today's complex financial environment, investors have unique needs, which are derived from their risk appetite and financial goals. But regardless of this, every investor seeks to maximize his returns on investments without capital erosion. While there are many investment avenues such as fixed deposits, income funds, bonds, equities etc… It is a proven fact that Equities as an asset class typically tend to outperform all other asset classes over the long run. Investing in equities, require knowledge, time and a right mind-set. Equity as an asset class also requires constant monitoring may not be possible for you to give the necessary time, given your other commitments. We at Swastika recognize this, and manage your investments professionally to achieve specific investment objectives, and not to forget, relieving you from the day-to-day hassles which investment require. Swastika Investmart Ltd with more than 1.5 decade of experience & expertise in stock broking and equity research offers professional PMS product to you. When you invest through our PMS, you can be assured of the best research being used for the investment decisions. We have experienced finance professionals – Chartered Accountants, Chartered Financial Analysts, MS-Finance and MBAs all working just to make your money grow steadily in a disciplined manner.  MUTUAL FUND: A Mutual Fund is a body corporate that pools the savings of a number of investors and invests the same in a variety of different financial instruments, or securities. The investment objectives of a Mutual fund specify the class of securities a Mutual Fund can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures, commercial paper and government securities.
  12. 12. S.V.INSTITUTE OF MANAGEMENT 12 | P a g e  IPO: The IPO page of Swastika Investmart Ltd. captures the details on its Issue Open Date, Issue Close Date, Listing Date, Face Value, Price band, Issue Size, Issue Type, and Listing Date's Open Price, High Price, Low Price, Close price and Volume. It also captures the Holding Period Returns and Annual Returns.  INSURANCE: The Company’s Assets Are Adequately insured against the Loss of Fire and Other Risks, As Considered Necessary by the Management From Time To Time .The Company Has Also Taken Insurance Cover for Any Claims /Losses Arising out Of Its Core Business of Security Broking.
  13. 13. S.V.INSTITUTE OF MANAGEMENT 13 | P a g e 1.7 Branches: State City Contact Person Address Contact Details Gujarat Ahmedabad Mr. Rishabh Bagadiya Labdhi Stock, 7/C, 7th Floor, Center Point, C. G. Road, Near Panchwati, Ahmedabad 079 – 26445208 Gujarat Ahmedabad Mr. Nikhil Shah SWASTIKA INVESTMART LTD. 302, Sarita complex, Stt. Xaviers College Road, Navranpura, Ahmedabad. 380009 07930409000 Gujarat Gandhidham Ranjit Patel Shop 16.,AUM Corner 1st Floor Plot no 336- 337,343,12 B Gandhidham opp Axis Bank, Gujarat -370201 02836-229056 Gujarat Maninagar Jaydeep Joshi 304, Rajvi complex, Opp. Maninagar police station, Ram bag, Maninagar, Ahmedabad(Gujarat) 079-40321231 Gujarat Paldi Mr. Rajesh Thakkar 307,Half Business Center, above ICICI Bank & HDFC Bank, Beside Ankur School,Fatehnagar Paldi 079-40372970 Gujarat Rajkot Mr. Tanmay Shah Prarthana House, Off Dhebar Road, Mira Furniture Street,14 Milapara, Rajkot- 360002 0281-2225214 Gujarat Surendranagar Mr. Sanjay V. Sheth 26 New Market,Praful Cycle Street,Surendranagar,Gujarat 02752-222296 Gujarat Vadodra Mr. Jitesh Vasava FF1 Vyavsay Complex, Behind Dinesh Mill, Akota, Vadodra – 390020 9227546333 Gujarat Vadodra Mr. Manish Desai & Dinesh Koli FF 7 Helix Complex, Opp. Surya Hotel, Near PM Regency, Sayajiganj, Vadodra – 390005 0265-23611200 Andhra Pradesh Hyderabad Mr. Pavan Reddy Mallampati 102, Imperial House, Opp. Green Park Hotel, Ameerpet, Hyderabad 040-66021234 Chhattisgarh Raipur Mr. Adarsh Shukla H-23, Maruti Business Park, G.E. Road, Raipur 0771-4043600
  14. 14. S.V.INSTITUTE OF MANAGEMENT 14 | P a g e Delhi Delhi Mr. Sheker Gahlawat 18-19, Neta Ji Subhash Marg, Opp. Golcha Theater, Daryaganj, Delhi 110002 011-30775000 Haryana Gurgaon Mr. Siddhartha Tiwari Shop No 10-11 2nd Floor, Old Delhi Road, Opp. Axis Bank Sector 14, Gurgaon-122001 0124-4233128 Haryana Panipat Deepak Kumar 3rd Floor, Classic Tower, Near Vodafone Store, Gt Road, Panipat - 132103 0180-4000083 Karnataka Bangalore Mr. Pankaj Kumar B-2, !St Floor,Jyouti Complex, 134/1,Near Sony Center, Infantry Road, Bangalore- 560001,Karnataka 080-41223494 Madhya Pradesh Bhopal Mr. Saurabh Nuwal 22-Zone Ii, Maharana Pratap Nagar, Bhopal 0755-3345000 Madhya Pradesh Chhindwara Mr. Kamlesh Soni F-56, 2nd Floor, Mansarovar Complex, Bus Stand, Chhindwara- 480001 07162-244363 Madhya Pradesh Gwalior Mr.Anand Pathak Opposites Punjab National Bank, Sarafa Bazar Lashkar, Gwalior-474001 0751-4004167 Madhya Pradesh Indore Mr. Manoj Sawner 8, Mezzanine Floor, Akashdeep Sapna Sangeeta Road, Indore 0731-4090900 Madhya Pradesh Indore Mr. Vijay Sharma 101, 1st Floor 728, Usha Nagar, Annapurna Main Road, Indore 0731-4263200 Madhya Pradesh Indore Mr. Lokesh Soni 202, Navneet Darshan Appt.16/2, Old Palasia, Indore 0731-2562284 Madhya Pradesh Indore Mr. Surendra Jain F-16, Crossroad Building, Vijay agar, Indore 0731-4042789 Madhya Pradesh Indore Mr. Rajendra Mundra 39, Patel Nagar, Aerodrum Road, Indore 0731-3533300 Madhya Pradesh Indore Mr. Manoj Choube 198 Jawahar Marg, Opp.Nema Dharmshala, Malganj Square, Indore - 452002 0731- 2340470 Madhya Pradesh Indore Mr. Vijay Jain 22/19, Y.N. Road, Opp. Rani Sati Gate, Indore 0731-6688000 Madhya Pradesh Jabalpur Mr. Rajendra Patel 324,1st Floor, Beside Icici Lombard, Russel Chowk, Napier Town, Jabalpur 0761-4083308 Madhya Pradesh Neemuch Mr.Jitesh Singhal 30 C 1st Floor Jaroli Trade Centre, Opp. Jama Masjid Fawwara Chowk , Neemuch 458441 07423- 229555 Madhya Pradesh Ratlam Mr. Pratyush Choudhary 19 Lunawat Plaza, College Road, Ratlam 07412-407212 Madhya Pradesh Ujjain Mr. Ashok Singh Atal 8-9-10, 2nd Floor, L.N. Complex, Tower Chowk, Free Ganj, Ujjain 0734-4012829 Maharashtra Ahmednagar Mr. Kanifnath B. Bhapkar Shop No.2/G,Shri Complex, Near By Shardha Hotel,Zopdi Sawedi, Manmade Road, Ahmednagar-414001 0241-6603713
  15. 15. S.V.INSTITUTE OF MANAGEMENT 15 | P a g e Maharashtra Akola Mr. Ravindra Rokade Patil Market,2nd Floor, Behind Sa College, Civil Lines, Akola 440001 0724-2414010 Maharashtra Amravati Mr. Manish Jadhao Shop No. 18, 1st Floor, Gulshan Plaza, Rajateth, Amravati – 444601 0721-2567178 Maharashtra Aurangabad Mr. Manish Gaikwad C/O B.S Bajaj & Company(Charted Accountant), Kandi Tower, 2nd Floor, Jalna Road, Aurangabad 0240-2354977 Maharashtra Jalgaon Mr. Sandeep Dhage 269, Shivaji Chowk, Near Kishore Regency, C/O Kavadiya Associate, United Bank Jalgaon 425 001 0257-2241971 Maharashtra Mumbai Mr. Ravi Shrivastava 1st Floor, 102 Poonam Pearl, Opp. New India Staff Quarter, Juhu Lane, Andheri (W), Mumbai - 400058 022-26254569 Maharashtra Mumbai Mrs. Archana Matta 1st Floor, Bandukwala Building, British Hotel Lane, Fort, Mumbai - 400001 022-66330000 Maharashtra Nagpur Mr. Vaibhav Palod 1st Floor, Block No. 11, Diwan Plaza, Wardha Road, Nagpur 0712-3044100 Maharashtra Nashik Mr. Tushar Joshi Shop No. 7, Navarachana Complex, Sawarkar Nagar, Opp. Madhur Sweet, Gangapur Road, Nashik- 422005 0253-6611093 Maharashtra Pune Mr. Sudesh Chandra Shop No. 53,B Wing Shopper Orbit, Nandi Road,Vishranewadi, Pune - 411001 020-41260020 Orissa Bhubaneswar Mr. Manoj Bebortha Shop No. 407, 4th Floor, Janpat Tower Ashok Nagar Bhubaneswar 8456845587 Orissa Bhubaneswar Mr. Manoj Bebortha Shop No. 407, 4th Floor, Janpat Tower Ashok Nagar Bhubaneswar (Orissa) 0674-2530160 Punjab Ludhiana Mr. Gagandeep Batra Sco 15, Cabin No. 107, 1st Floor, San Plaza Building, Ludhiana 141 001 0161-5091023 Rajasthan Ajmer Mr. Manoj Jain Swastika Investmart Ltd ,Shop No. 11,2nd Floor, Ajmer Tower, Kutchery Road, Ajmer – 305001 0145-2629005 Rajasthan Barmer Mr. Madan Singh Chouhan Shop No:- 2, Near Central Bank Of India, Kamdar Company, Rai Colony Road, Barmer- 344001 02982-220704 Rajasthan Bhilwara Mr. Rajendra Swarnkar First Floor ,Shop No.34,Heera Panna Market,Pur Road, Bhilwara-311001 01482- 650500 Rajasthan Bikaner Mr. Ramdev Chhimpa Babu Ji Plaza, Shop No. 311,1st Floor ,Near Kote Gate Bikaner-334001 0151-2204135 Rajasthan Jaipur Mr. Giriraj Prasad Agrawal 13 A/B, Yudhistar Marg, Opp. Yojana Bhawan, C-Scheme, Jaipur 0141-3345000 Rajasthan Jodhpur Mr. Narendra Dadhich Swastika Investmart Ltd. 178. Narayanam Chopasani Road, Near Bombay Mother Circle, Jodhpur-342001 (Rajasthan) 0291-3012000
  16. 16. S.V.INSTITUTE OF MANAGEMENT 16 | P a g e Rajasthan Kota Mr. Ritesh Nama 344,Mewara Plaza, Shopping Centre, Rawat Bhata Road, Kota 0744-6633000 Rajasthan Udaipur Mr. Hardik Sanadhya Plot No. 15, 2nd Floor, Shyam Plaza, 15- Hazareshwar Mahadev Colony, Udaipur - 313001 0294-5102054 Uttar Pradesh Jhansi Mr. Anil Bundela 125/1 Civil Line, Patwala House Nr. Sales Tax Office Jhansi 284001 0510-2370020 Uttar Pradesh Kanpur Mr. Kapil Tiwari 709, 7th Floor, Krishna Tower, Opp. Green Park Stadium, Civil Lines Kanpur 208001 0512-3019407 Uttar Pradesh Lucknow Mr. Sukesh Agarwal 1st Floor,Himanshu Sadan, 5, Park Road, Lucknow - 226001 0522-2238346 West Bengal Kolkata Mr. Vikash Sanganeria 7th Floor, No. 10 C Middleton Row Kolkata 700071 (West Bengal) 033- 40069552 1.8 Membership:  Capital Market:  National Stock Exchange of India Ltd.  Bombay Stock Exchange Ltd.  Over-the-Counter Exchange of India Ltd.  Commodities Derivatives:  National Commodity & Derivatives Exchange Ltd.  Multi Commodity Exchange of India Ltd.  Dubai Gold & Commodities Exchange Ltd.  Currency derivatives:  Multi Commodity Exchange-Stock Exchange Limited.  Depository Operations:  National Securities Depositories Ltd. (NSDL)  Central Depository Services (India) Ltd.  Securities and Exchange Board of India.  Forward Markets Commission Ltd.
  17. 17. S.V.INSTITUTE OF MANAGEMENT 17 | P a g e 1.9 Competitors:  For Broking From:  Share Khan  Karvy  Motilal & Sons  Anagram  Kotak  Angel Broking  Kuwarji  For Demat:  SKSE  Nagrik Bank  Stock Holding
  18. 18. S.V.INSTITUTE OF MANAGEMENT 18 | P a g e CHAPTER-2 COMMODITY INTRODUCTION
  19. 19. S.V.INSTITUTE OF MANAGEMENT 19 | P a g e
  20. 20. S.V.INSTITUTE OF MANAGEMENT 20 | P a g e 2.1 INTRODUCTIONS TO COMMODITY MARKET:  What is “Commodity”? Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines “goods” as “every kind of movable property other than actionable claims, money and securities”. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices. Etc.  What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority.  What is Commodity Futures? A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility. The loss due to price volatility can be attributed to the following reasons:
  21. 21. S.V.INSTITUTE OF MANAGEMENT 21 | P a g e  Consumer Preferences: - In the short-term, their influence on price volatility is small since it is a slow process permitting manufacturers, dealers and wholesalers to adjust their inventory in advance.  Changes in supply: - They are abrupt and unpredictable bringing about wild fluctuations in prices. This can especially noticed in agricultural commodities where the weather plays a major role in affecting the fortunes of people involved in this industry. The futures market has evolved to neutralize such risks through a mechanism; namely hedging.  The objectives of Commodity futures:  Hedging with the objective of transferring risk related to the possession of physical assets through any adverse moments in price. Liquidity and Price discovery to ensure base minimum volume in trading of a commodity through market information and demand supply factors that facilitates a regular and authentic price discovery mechanism.  Maintaining buffer stock and better allocation of resources as it augments reduction in inventory requirement and thus the exposure to risks related with price fluctuation declines. Resources can thus be diversified for investments.  Price stabilization along with balancing demand and supply position. Futures trading leads to predictability in assessing the domestic prices, which maintains stability, thus safeguarding against any short term adverse price movements. Liquidity in Contracts of the commodities traded also ensures in maintaining the equilibrium between demand and supply.  Flexibility, certainty and transparency in purchasing commodities facilitate bank financing. Predictability in prices of commodity would lead to stability, which in turn would eliminate the risks associated with running the business of trading commodities. This would make funding easier and less stringent for banks to commodity market players.
  22. 22. S.V.INSTITUTE OF MANAGEMENT 22 | P a g e  Benefits of Commodity Futures Markets: The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly. 1. Price Discovery:-Based on inputs regarding specific market information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal. 2. Price Risk Management: - Hedging is the most common method of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc. 3. Import- Export competitiveness: - The exporters can hedge their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions.
  23. 23. S.V.INSTITUTE OF MANAGEMENT 23 | P a g e 4. Predictable Pricing: - The demand for certain commodities is highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments. 5. Benefits for farmers/Agriculturalists: - Price instability has a direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions. 6. Credit accessibility: - The absence of proper risk management tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to pay back the loan. There is a high degree of reluctance among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending.
  24. 24. S.V.INSTITUTE OF MANAGEMENT 24 | P a g e 7. Improved product quality: - The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. 2.2 OVERVIEW OF THE INDIAN COMMODITY MARKET: Despite intermittent curbs, India‘s six-year-old commodity futures market has seen a steady stream of new entrants, drawn by the promise of richer rewards. The intense growth, even in the absence of basic reforms, has attracted financial institutions, trading companies and banks to set up large commodity bourse. Since, Indian Commodity Exchange (ICEX), promoted by India bulls Financial Services Ltd in partnership with MMTC is going to start its operation from November 2009; it is expected to create an extensive competition among national level commodity exchanges. Commodity derivatives market of India is drawing attention from all over the world, albeit FMC had banned nine commodities since early 2007, out of which 4 are still out of trade and even financial institutions and foreign entities are barred from trading in the market. Even, industry players are of the view that commodity market regulator (FMC) should permit banks and financial institutions to trade in commodity futures, allow options, exchange- traded indices and some more powers to the market regulator from Ministry of Consumer Affairs to develop the market.
  25. 25. S.V.INSTITUTE OF MANAGEMENT 25 | P a g e 2.3 EVOLUTION AND HISTORY OF COMMODITY MARKETS: The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875, about a decade after they started in Chicago. Over the time datives market developed in several commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920). However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities, resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The act prohibited options trading in Goods along with cash settlement of forward trades, rendering a crushing blow to the commodity derivatives market. Under the act only those associations/exchanges, which are granted reorganization from the Government, are allowed to organize forward trading in regulated commodities. The act envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Government. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution- is the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening Forward
  26. 26. S.V.INSTITUTE OF MANAGEMENT 26 | P a g e Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures’ trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end-users, and even the retail investors, at a grassroots level. It brings a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone else’s lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commodity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National
  27. 27. S.V.INSTITUTE OF MANAGEMENT 27 | P a g e Commodity & Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad. There are other regional commodity exchanges situated in different parts of India. 2.4 THE SIZE OF THE MARKET: The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market. The global volume of commodities contracts traded on exchanges increased by a fifth in 2010, and a half since 2008, to around 2.5 billion million contracts. During the three years up to the end of 2010, global physical exports of commodities fell by 2%, while the outstanding value of OTC commodities derivatives declined by two-thirds as investors reduced risk following a five-fold increase in value outstanding in the previous three years. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers. China accounted for more than 60% of exchange-traded commodities in 2009, up on its 40% share in the previous year. Commodity assets under management more than doubled between 2008 and 2010 to nearly $380bn. Inflows into the sector totaled over $60bn in 2010, the second highest year on record, down from the record $72bn allocated to commodities funds in the previous year. The bulk of funds went into precious metals and energy products. The growth in prices of many commodities in 2010 contributed to the increase in the value of commodities funds under management.
  28. 28. S.V.INSTITUTE OF MANAGEMENT 28 | P a g e 2.5 HOW TO COMMODITY MARKET WORK: There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash and carries away the goods. The second is futures trade. The underpinning for futures is the warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a warehouse receipt. Which allows him to ask for physical delivery of the good from the warehouse? But someone trading in commodity futures need not necessarily posses such a receipt to strike a deal. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. Futures have something called an expiry date, by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. The broker maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market.
  29. 29. S.V.INSTITUTE OF MANAGEMENT 29 | P a g e Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots. The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: - At this stage the following is the system implemented- - Order receiving - Execution - Matching - Reporting - Surveillance - Price limits - Position limits II. Clearing: - This stage has following system in place- - Matching - Registration - Clearing - Clearing limits - Notation - Margining - Price limits - Position limits - Clearing house. III. Settlement: - This stage has following system followed as follows- - Marking to market - Receipts and payments - Reporting - Delivery upon expiration or maturity.
  30. 30. S.V.INSTITUTE OF MANAGEMENT 30 | P a g e 2.6 CURRENT SCENARIO IN INDIAN COMMODITY MARKET: India is among top 5 producers of most of the Commodities, in addition to being a major consumer of bullion and energy products. Agriculture contributes about 22% GDP of Indian economy. It employees around 57% of the labor force on total of 163 million hectors of land Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives. Trends in volume contribution on the three National Exchanges:- Pattern on Multi Commodity Exchange (MCX) MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has even become the third largest in bullion and second largest in silver future trading in the world. Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4 commodities contribute for more than 80 percent of total trade volume. As per recent data the largely traded commodities are Gold, Silver, Energy and base Metals. Incidentally the futures’ trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence, the price signals largely reflect international scenario. Among Agricultural commodities major volume contributors include Gur, Urad, and Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to manipulations. Pattern on National Commodity & Derivatives Exchange (NCDEX) NCDEX is the second largest commodity exchange in the country after MCX. However the major volume contributors on NCDEX are agricultural commodities. But, most of them have common inherent problem of small market size, which is making them
  31. 31. S.V.INSTITUTE OF MANAGEMENT 31 | P a g e vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by FMC). Pattern on National Multi Commodity Exchange (NMCE) NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities. Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. But, in subsequent period, the pattern has changed and slowly moved towards commodities with small market size or narrow commodities. Analysis of volume contributions on three major national commodity exchanges reveled the following pattern, Major volume contributors: - Majority of trade has been concentrated in few commodities that are • Non Agricultural Commodities (bullion, metals and energy) • Agricultural commodities with small market size (or narrow commodities) like guar, Urad, Mentha etc. Advertisements
  32. 32. S.V.INSTITUTE OF MANAGEMENT 32 | P a g e 2.7COMMODITY EXCHANGE IN INDIA:  National Level Multi Commodity Exchanges: Sr. No Name and Address Commodities 1. Multi Commodity Exchange of India Ltd., Mumbai Gold, Silver, Aluminum, Copper ,Nickel, Sponge Iron, Steel Flat, Steel Long (Bhavnagar), Tin, Castor Oil, Castor Seeds Castor Seeds (Disa), Cottonseed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli (Cottonseed Oilcake), Mustard Seed (Hapur), Mustard seed (Jaipur), Mustard / Rapeseed Oil, Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Sesame seed, Soymeal, Soy Seeds, Ghana, Masur, Tur, Urad, Yellow peas, Rice, Basmati Rice, Wheat, Maize, Sarbati Rice, Black pepper, Red Chilli, Jeera, Turmeric, Cashew Kernel, Rubben Kapas, Cotton long staple, medium staple, short staple). Guar seed, Guargum, Gur, Mentha Oil, Sugar, High Density Polyethylene (HOPE), Polypropylene (PP), Brent Crude Oil, Crude Oil, Furnace Oil., Natural Gas, etc. 2. National Commodity & Derivatives Exchange Ltd., Mumbai Cashew, Castor Seed, Ghana, Chili, Coffee - Arabica, Coffee -Robusta, Common Raw Rice, Common Parboiled Rice ,Crude Palm Oil, Cotton Seed Oilcake, Expeller Mustard Oil, Grade A Parboiled Rice, Grade A Raw Rice, Groundnut (in shell). Groundnut Expeller Oil, Guar gum, Guar Seeds, Gur, Jeera, Jute sacking bags Lemon Tur, Indian Parboiled Rice, Indian Raw Rice, Indian 28 mm Cotton, Indian 31 mm Cotton, Maharashtra Lai Tur, Masoor Grain Bold, Medium Staple Cotton , Mentha Oil, Mulberry Green Cocoons, Mulberry Raw Silk, Mustard Seed, Pepper, Raw Jute, Rapeseed-Mustard Seed Oilcake, RBD Palmolein, Refined Soy Oil, Rubber, Sesame Seeds, Soyabean, Sugar, Yellow Soybean Meal, Turmeric, Urad, V-797 Kapas, Wheat, Yellow Peas, Yellow Red Maize Electrolytic Copper Cathode, Mild Steel Ingots, Sponge Iron, Gold, Silver, Brent Crude Oil, Furnace Oil, etc.
  33. 33. S.V.INSTITUTE OF MANAGEMENT 33 | P a g e 3. National Multi Commodity Exchange of India Limited. Ahmedabad Gur, RBD Pamolein, Groundnut Oil, Sunflower Oil, Rapeseed/ Mustard seed, Rapeseed/Mustard seed Oil, Rapeseed/ Mustard seed oilcake. Soy bean. Soy Oil, Copra, Cottonseed, Safflower, Groundnut, Sugar, Sacking, Coconut oil, Castor seed. Castor-oil, Groundnut oil cake, Cottonseed oil, Sesamum, Sesamum oil, Sesamum Oilcake, Safflower Oilcake, Rice Bran Oil, Safflower Oil, Sunflower Oilcake, Sunflower Seed, Pepper, Crude Palm Oil, Guar seed. Castor Oilcake, Cottonseed ce Oilcake, Aluminum Ingots, Nickel, Vanaspati, Soybean Oilcake, Rubber, Copper, Zinc, Lead, Tin, Linseed, Linseed Oil, Linseed Oilcake, Coconut Oilcake, Gram, Gold, Silver, Rice, Wheat, Cardamom, Kilo oe Gold, Masoor, Urad, Tur, etc.  Regional Exchanges Sr.No Name and Address Commodities 1 Bhatinda om & oil exchange ltd., Bhatinda. Gur 2 The bombay commodity exchange ltd., mumbai Groundnut oil, sunflower oil, cottonseed safflower, groundnut, castor seed, castor see cottonseed oil, sesamum oil, sesamum oilcake safflower oilcake, rice bran, rice bran oil, rice bran oilcake, safflower oil, crude palm oil 3 The Rajkot Seeds oil & Bullion Merchants" As- sociation Ltd.,Rajkot Groundnut Oil, Castor seed 4 The meerut agro commodities exchange co. Ltd., meerut Gur 5 The Spices and Oilseeds Exchange Ltd. Turmeric 6 Ahmedabad commodity exchange ltd., Ahmedabad Cottonseed, castor seed
  34. 34. S.V.INSTITUTE OF MANAGEMENT 34 | P a g e 7 Vijay beopar chamber ltd., muzaffarnagar Gur, mustard seed 8 India pepper & spice trade association. Kochi Pepper domestic-mg 1, pepper domestic- 500g/ 1, black pepper int'l-mls asta, black pepper int'l-vb asta, black pepper int'l faq, rubber rss 4 9 Rajdhani Oils and Oilseeds Exchange Ltd., Delhi Gur, Rapeseed/Mustard seed 10 National Board of Trade (NBOT), Indore Rapeseed / Mustard seed, rapeseed / Mustard seed oil Rapeseed / Mustard seed oilcake, soy bean, soy meal soy oil, crude palm oil. 11 The Chamber of Commerce, Hapur Gur, Rapeseed / Mustard seed 12 The east india cotton association, mumbai (eica) Indian cotton 13 The central india commercial exchange ltd., Gwalior Gur, rapeseed / mustard seed 14 The east india jute & hessian exchange ltd., Kolkata Hessian sacking 15 First Commodity Exchange of India Ltd., Kochi Copra, Coconut oil, copra cake 16 Bikaner commodity exchange ltd, Bikaner Rapeseed / mustard seed, rapeseed/mustard seed oil Rapeseed / mustard seed oilcake, Guarseed, gram, gaur gum ^ 17 The coffee futures exchange india ltd. (cofc), Bangalore Coffee - plantation a, coffee - Robusta cherry abs, raft coffee Arabica parchment, raw coffee robusta clieny '^ 18 E-Sugar-india Ltd. Sugar Grade - M, Sugar Grade - S 19 Surendranagar Cotton Oil and Oilseeds Assoc. Ltd., Surendranagar Kapas 20 Haryana commodities ltd., hisser Rapeseed, mustard seed, rapeseed / mustard seed oil A 21 E-Commodities Ltd. And Bombay Bullion Association
  35. 35. S.V.INSTITUTE OF MANAGEMENT 35 | P a g e  Structure of Indian Exchange Based Commodity Market: Ministry of consumer affairs FMC Commodity exchanges National NCDEX MCX NMCE Regional NBOT 21 other regional exchanges
  36. 36. S.V.INSTITUTE OF MANAGEMENT 36 | P a g e 2.8 MAIN EXCHANGE OF INDIA COMMODITY MARKET:  Multi Commodity Exchange of India Limited (MCX): The Multi Commodity Exchange of India Limited (MCX), India’s first listed exchange, is a state-of-the-art, commodity futures exchange that facilitates online trading, and clearing and settlement of commodity futures transactions, thereby providing a platform for risk management. The Exchange, which started operations in November 2003, operates within the regulatory framework of the Forward Contracts (Regulation) Act, 1952. MCX offers trading in varied commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy, agri-based and agricultural commodities. The Exchange focuses on providing commodity value chain participants with neutral, secure and transparent trade mechanisms, and formulating quality parameters and trade regulations, in conformity with the regulatory framework. The Exchange has an extensive national reach, with over 2100 members, operations through more than 400,000 trading terminals (including CTCL), spanning over 1900 cities and towns across India. MCX is India’s leading commodity futures exchange with a market share of about 86 per cent in terms of the value of commodity futures contracts traded in 9M FY2013-14.
  37. 37. S.V.INSTITUTE OF MANAGEMENT 37 | P a g e To ease participation, the Exchange offers facilities such as calendar-spread facility, as also EFP (Exchange of Futures for Physical) transactions which enables participants to swap their positions in the futures/ physical markets. The Exchange’s flagship index, the MCXCOMDEX, is a real-time composite commodity futures price index which gives information on market movements in key commodities. Other commodity indices developed by the exchange include MCXAgri, MCXEnergy, and MCXMetal. MCX has been certified to three ISO standards including ISO 9001:2008 quality management standard, ISO 27001:2005 information security management standard and ISO 14001:2004 environment management standard. With an aim to seamlessly integrate with the global commodities ecosystem, MCX has forged strategic alliances with leading international exchanges such as CME Group, London Metal Exchange (LME), The Baltic Exchange, Dalian Commodity Exchange (DCE) and Taiwan Futures Exchange (TAIFEX). The Exchange has also tied-up with various trade bodies, corporate, educational institutions and R&D centres across the country. These alliances enable the Exchange in improving trade practices, increasing awareness, and facilitating overall improvement of commodity futures market. MCX’s ability to use and apply technology efficiently is a key factor in the development of its business. The exchange’s technology framework is designed to provide high availability for all critical components, which guarantees continuous availability of trading facilities. The robust technology infrastructure of the exchange, along with its with rapid customization and deployment capabilities enables it to operate efficiently with fast order routing, immediate trade execution, trade reporting, real-time risk management, market surveillance and market data dissemination. The Exchange is committed to nurturing communities that are vital for the development of its business. To achieve our goal of inclusive growth, we collaborate with diversified
  38. 38. S.V.INSTITUTE OF MANAGEMENT 38 | P a g e partners. Garmin Suvidha Kendra, our social inclusion programmer in partnership with India Post, seeks to enhance farmers’ value realization from agricultural activities. MCX has been continuously raising the bar through effective research and product development, intelligent use of information and technology, innovation, thought leadership and ethical business conduct.  National Commodity & Derivatives Exchange Limited (NCDEX): National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally managed on-line multi commodity exchange. The shareholders of NCDEX comprises of large national level institutions, large public sector bank and companies. Promoter shareholders: ICICI Bank Limited (ICICI)*, Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). Other shareholders: Canara Bank, Punjab National Bank (PNB), CRISIL Limited, Indian Farmers Fertilizer Cooperative Limited (IFFCO), Goldman Sachs, Intercontinental Exchange (ICE), Shree Renuka Sugars Limited, Jaypee Capital Services Limited and Build India Capital Advisors LLP, Oman India Joint Investment Fund, IDFC Private Equity Fund III. NCDEX is the only commodity exchange in the country promoted by national level institutions. This unique parentage enables it to offer a bouquet of benefits, which are currently in short supply in the commodity markets. The institutional promoters and shareholders of NCDEX are prominent players in their respective fields and bring with them institutional building experience, trust, nationwide reach, technology and risk
  39. 39. S.V.INSTITUTE OF MANAGEMENT 39 | P a g e management skills. NCDEX is a public limited company incorporated on April 23, 2003 under the Companies Act, 1956. It obtained its Certificate for Commencement of Business on May 9, 2003. It commenced its operations on December 15, 2003. Corporate Identity No. is U51909MH2003PLC140116. NCDEX is a nation-level, technology driven de-mutualised on-line commodity exchange with an independent Board of Directors and professional management - both not having any vested interest in commodity markets. It is committed to provide a world-class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission. NCDEX is subjected to various laws of the land like the Forward Contracts (Regulation) Act, Companies Act, Stamp Act, Contract Act and various other legislations. NCDEX headquarters are located in Mumbai and offers facilities to its members from the centres located throughout India. As on March 30, 2013, the Exchange offered 31 contracts for trading of which: 23 agricultural commodities, 3 precious metals, 2 energy, 1 polymer and 2 other metals. The top 5 commodities, in terms of volume traded at the Exchange, were Soya oil, Soyabean, RM seed, Chana and Castor Seed.
  40. 40. S.V.INSTITUTE OF MANAGEMENT 40 | P a g e  National Multi Commodity Exchange of india ltd. (NMCE): In response to the Press Note issued by the Government of India during May'1999, first state-of-the-art demutualised multi-commodity Exchange, National Multi Commodity Exchange of India Ltd. (NMCE) was promoted by commodity-relevant public institutions, viz., Central Warehousing Corporation (CWC), National Agricultural Cooperative Marketing Federation of India (NAFED), Gujarat Agro-Industries Corporation Limited (GAICL), Gujarat State Agricultural Marketing Board (GSAMB), National Institute of Agricultural Marketing (NIAM), and Neptune Overseas Limited (NOL). While various integral aspects of commodity economy, viz., warehousing, cooperatives, private and public sector marketing of agricultural commodities, research and training were adequately addressed in structuring the Exchange, finance was still a vital missing link. Punjab National Bank (PNB) took equity of the Exchange to establish that linkage. Even today, NMCE is the only Exchange in India to have such investment and technical support from the commodity relevant institutions. These institutions are represented on the Board of Directors of the Exchange and also on various committees set up by the Exchange to ensure good corporate governance. Some of them have also lent their personnel to provide technical support to the Exchange management. The day-to-day operations of the Exchange are managed by the experienced and qualified professionals with impeccable integrity and expertise. None of them have any trading interest. The structure of NMCE is impossible to replicate in India. NMCE is unique in many other respects. It is a zero-debt company; following widely accepted prudent accounting and auditing practices. It has robust delivery mechanism making it the most suitable for the participants in the physical commodity markets. The exchange does not compromise on its delivery provisions to attract speculative volume. Public interest rather than commercial interest guide the functioning of the Exchange. It has
  41. 41. S.V.INSTITUTE OF MANAGEMENT 41 | P a g e also established fair and transparent rule-based procedures and demonstrated total commitment towards eliminating any conflicts of interest. NMCE commenced futures trading in 24 commodities on 26th November, 2002 on a national scale and the basket of commodities has grown substantially since then to include cash crops, food grains, plantations, spices, oil seeds, metals & bullion among others. Research Desk of NMCE is constantly in the process of identifying the hedging needs of the commodity economy and the basket of products is likely to grow even further. NMCE has also made immense contribution in raising awareness about and catalyzing implementation of policy reforms in the commodity sector. NMCE was the first Exchange to take up the issue of differential treatment of speculative loss. It was also the first Exchange to enroll participation of high net-worth corporate securities brokers in commodity derivatives market. It was the Exchange, which showed a way to introduce warehouse receipt system within existing legal and regulatory framework. It was the first Exchange to complete the contractual groundwork for dematerialization of the warehouse receipts. Innovation is the way of life at NMCE.
  42. 42. S.V.INSTITUTE OF MANAGEMENT 42 | P a g e  Indian Commodity Exchange Limited. (ICEX): Indian Commodity Exchange Limited is a nation-wide screen based on-line derivatives exchange for commodities and has established a reliable, efficient and transparent trading platform. It has put in place assaying and warehousing facilities in order to facilitate deliveries. This exchange is ideally positioned to leverage the huge potential of commodities’ market and encourage participation of farmers, traders and actual users to benefit from the opportunities of hedging, risk management and supply chain management in the commodities markets. The Exchange is a public-private partnership with Reliance Exchange next Ltd. as anchor investor and has MMTC Ltd., India bulls Financial Services Ltd., Indian Potash Ltd., KRIBHCO and IDFC among others, as its stakeholders.
  43. 43. S.V.INSTITUTE OF MANAGEMENT 43 | P a g e  National Spot Exchange Limited. (NSEX): National Spot Exchange Limited (NSEL) is the national –level, institutionalized, electronic, transparent spot trading platform for commodities. It is a structured market place, set-up to transform the commodity market by way of reducing the cost of intermediation and thereby improving marketing efficiency. Its state-of-the-art technology facilitates risk free and hassle free purchase and sale of various commodities. NSEL provides customized solution to farmers, traders, processors, exporters, importers, arbitrageurs, investors and other stakeholders pertaining to commodity procurement, storage, marketing, warehouse receipt financing, etc. NSEL commenced “Live” trading on October 15, 2008. At present, NSEL is operational in 16 States in India, providing delivery-based spot trading in 52 commodities. National Spot Exchange's stated mission is to develop a common Indian market by setting up a nation-wide electronic spot market and providing state of art trading, delivery, and settlement facilities in various commodities. This exchange is now in the middle of a controversy and all the trades have been stopped.
  44. 44. S.V.INSTITUTE OF MANAGEMENT 44 | P a g e 2.9 TRENDS IN VOLUME CONTRIBUTION ON THE THREE NATIONAL EXCHANGES:  Pattern on Multi Commodity Exchange (MCX):- MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has even become the third largest in bullion and second largest in silver future trading in the world. Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4 commodities contribute for more than 80 percent of total trade volume. As per recent data the largely traded commodities are Gold, Silver, Energy and base Metals. Incidentally the futures’ trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence, the price signals largely reflect international scenario. Among Agricultural commodities major volume contributors include Gur, Urad, and Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to manipulations?  Pattern on National Commodity & Derivatives Exchange (NCDEX):- NCDEX is the second largest commodity exchange in the country after MCX. However the major volume contributors on NCDEX are agricultural commodities. But, most of them have common inherent problem of small market size, which is making them vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by FMC).
  45. 45. S.V.INSTITUTE OF MANAGEMENT 45 | P a g e  Pattern on National Multi Commodity Exchange (NMCE):- NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities. Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. But, in subsequent period, the pattern has changed and slowly moved towards commodities with small market size or narrow commodities. Analysis of volume contributions on three major national commodity exchanges reveled the following pattern, Major volume contributors: - Majority of trade has been concentrated in few commodities that are  Non Agricultural Commodities (bullion, metals and energy)  Agricultural commodities with small market size (or narrow commodities) like guar, Urad, Mentha etc. Trade strategy:- It appears that speculators or operators choose commodities or contracts where the market could be influenced and extreme speculations possible. In view of extreme volatilities, the FMC directs the exchanges to impose restrictions on positions and raise margins on those commodities. Consequently, the operators/speculators chose another commodity and start operating in a similar pattern. When FMC brings restrictions on those commodities, the operators once again move to the other commodities. Likewise, the speculators are moving from one commodity to other (from methane to Urad to guar etc) where the market could be influenced either individually or with a group.
  46. 46. S.V.INSTITUTE OF MANAGEMENT 46 | P a g e 2.10 INTERNATIONAL COMMODITY EXCHANGES: Futures’ trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are homes to leading commodity futures exchanges in the world.  The New York Mercantile Exchange (NYMEX):- The New York Mercantile Exchange is the world’s biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals. Commodities traded: - Light sweet crude oil, Natural Gas, Heating Oil, Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc.  London Metal Exchange (LMEX):- The London Metal Exchange (LME) is the world’s premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from non-ferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open- outcry trading between ring dealing members that takes place on the market floor. Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy, North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low Density Polyethylene, etc.
  47. 47. S.V.INSTITUTE OF MANAGEMENT 47 | P a g e  The Chicago Board of Trade:- The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver. Commodities Traded: - Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough Rice, Gold, and Silver etc.  Tokyo Commodity Exchange (TOCEX):- The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOM’s recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the first option contract in Japanese market, in May 2004. Commodities traded: - Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum, Rubber, etc
  48. 48. S.V.INSTITUTE OF MANAGEMENT 48 | P a g e  Chicago Mercantile Exchange:- The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the largest futures clearing house in the world for futures and options trading. Formed in 1898 primarily to trade in Agricultural commodities, the CME introduced the world’s first financial futures more than 30 years ago. Today it trades heavily in interest rates futures, stock indices and foreign exchange futures. Its products often serves as a financial benchmark and witnesses the largest open interest in futures profile of CME consists of livestock, dairy and forest products and enables small family farms to large Agri-business to manage their price risks. Trading in CME can be done either through pit trading or electronically. Commodities Traded: - Butter milk, Diammonium phosphate, Feeder cattle, frozen pork bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc. 2.11 BASIC TERMINOLOGIES:  Spot trading Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.  Forward contracts A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.
  49. 49. S.V.INSTITUTE OF MANAGEMENT 49 | P a g e  Futures contracts A futures contract has the same general features as a forward contract but is transacted through a futures exchange. Commodity and futures contracts are based on what’s termed forward contracts. Early on these forward contracts — agreements to buy now, pay and deliver later — were used as a way of getting products from producer to the consumer. These typically were only for food and agricultural products. Forward contracts have evolved and have been standardized into what we know today as futures contracts. Although more complex today, early forward contracts for example, were used for rice in seventeenth century Japan. Modern forward, or futures agreements began in Chicago in the 1840s, with the appearance of the railroads. Chicago, being centrally located, emerged as the hub between Midwestern farmers and producers and the east coast consumer population centers. In essence, a futures contract is a standardized forward contract in which the buyer and the seller accept the terms in regards to product, grade, quantity and location and are only free to negotiate the price.  Hedging Hedging, a common practice of farming cooperatives insures against a poor harvest by purchasing futures contracts in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions.  Delivery and condition guarantees In addition, delivery day, method of settlement and delivery point must all be specified. Typically, trading must end two (or more) business days prior to the delivery day, so that the
  50. 50. S.V.INSTITUTE OF MANAGEMENT 50 | P a g e routing of the shipment can be finalized via ship or rail, and payment can be settled when the contract arrives at any delivery point. 2.12 GROWTH OF THE COMMODITY MARKET: Investment in commodity markets has undoubtedly grown, but commentators Found it difficult to quantify. Even the larger market participants that we spoke to were unable to accurately gauge the total size of the market, and estimates varied widely. There was a similarly wide range of estimates regarding the breakdown of Investment by market sector. On-exchange volumes have certainly increased greatly in the past five to ten years. There has been rapid growth in the number of contracts traded on both LIFFE (soft Commodities) and ICE Futures (energy). ICE Futures has seen volumes almost double in the last year alone and volumes on LME have increased tenfold since 1990.14 However in some markets OTC business is equal to several multiples of these volumes. The December 2006 Bank for International Settlements (BIS) Quarterly Review Includes data on the amount of outstanding OTC commodity derivatives contracts among those who report. Figure 6 shows that this market too has increased greatly in recent years.  How will commodity investment grow in the future? All market participants we spoke to expected investment growth to continue and there are strong arguments to support their case. The last commodity boom was caused by supply restrictions whereas this boom has mainly been caused by Dramatic growth in demand (particularly from the rapidly developing economies of China and India); i.e. it is underpinned by what seem to be long-lasting fundamentals. Date June 2004 December 2004 June 2005 December 2005 June 2006 Amount (US$ billions) 1,270 1,443 2,940 5,434 6,394
  51. 51. S.V.INSTITUTE OF MANAGEMENT 51 | P a g e It is widely stated that institutional investors will stay for the long Term. Private investors will continue to invest where they gain the benefits from portfolio diversification, whereas the hedge funds are likely to trade the short side as well as the long and will happily benefit from either. In addition we have already talked of the impact of electronic trading. In many cases remote traders are indifferent to the nature of the instrument they are trading and simply seek a contract with a degree of volatility that they can easily trade in and out of. Studies indicating that commodities are an effective portfolio diversifier have been around for some time but perhaps it has taken the recent economic climate (dot-com bubble, low equity and bond returns, commodity bull run) for commodities to become regarded as a genuine asset class. Many investors now undoubtedly regard it as such. We think therefore it is a reasonable conclusion that investment in commodities markets will continue to grow, and is moving away from a cyclical opportunistic market to a genuine asset class. Currently, global pension funds stand at $18.6 trillion Assets under Management (AUM) 15 of which estimates suggest about $80 billion estimated to be invested in commodities. As many now regard commodities as an asset class, most of our correspondents think all institutional investors should build an exposure of at least 5% (equivalent to $930 billion). So what is preventing institutional investors? Reaching this level? Only a handful of large UK pension funds invest in commodities and usually at around 3% of AUM. Pension funds are traditionally cautious in adopting new investment strategies which is likely to explain this anomaly. We look more closely at pension funds in Section 6. It seems from our research that rather than ask how much investment there will be, we should perhaps consider how long it will take to grow. The limiting factors seem to be the time required to educate new investors and the availability of suitably experienced staff. We should also ask ourselves what effect the increasing allocation of pension fund assets may have on the commodity markets. Should the trend continue of investing mainly in passive indices – where the index rolling periods already have a noticeable effect – will the markets be able to sustain these massive influxes?
  52. 52. S.V.INSTITUTE OF MANAGEMENT 52 | P a g e CHAPTER-3 LITERATURE REVIEW
  53. 53. S.V.INSTITUTE OF MANAGEMENT 53 | P a g e INTRODUCTION Following repeated changes in the rules and regulations by the authorities, the Indian commodity futures market has achieved a surge in values and volumes of traded commodities over the last decade. The history of commodity futures in India can be traced back to the end of the 19th century when the Bombay Cotton Trade Association established cotton contracts. In the interwar period, the futures market underwent rapid growth, although futures trading came to be prohibited during the Second World War under the Defence of India Act (FMC, 2011a, 1). After its transient resumption and prosperity in the mid-1950s, futures trading was again banned in 1966 except for a few minor commodities, and after that, it was practically deactivated. During the 1980s, commodity futures trading were partially permitted in a few commodities, but it was in the liberalization process beginning in 1991 that the Indian government reassessed the role of commodity futures trading in the economy. In 2003, the government lifted the prohibition against futures trading in all the commodities, granting recognition to three electronic exchanges, namely National Multi Commodity Exchange of India (NMCE), Multi Commodity Exchange of India (MCX), and National Commodity and Derivatives Exchange (NCDEX), as national level multi- commodity exchanges (FMC, 2011a, 6). Moreover, Indian Commodity Exchange (ICEX) and ACE Commodity and Derivative Exchanges were also granted recognition as the fourth and the fifth national multi-commodity exchanges in 2009 and 2010, respectively. With the establishment of these exchanges, the commodity futures market has witnessed massive growth in India. For example, the total value of commodities traded has steadily increased, and after reaching Rs.52.49 trillion in 2008-09, it has outperformed the domestic stock market (see Figure 1). Certainly, the commodity market has grown to be among the major financial markets in India. Generally, it is said that the futures market has the two important economic functions, i.e., price risk management and price discovery. By taking equal but opposite positions in the futures market, both the producer and the consumer can manage the price risk in the spot market, which is usually called the hedging of price risk in commodities. Apart from
  54. 54. S.V.INSTITUTE OF MANAGEMENT 54 | P a g e these participants who aim to hedge, there must also be someone in the futures market who aims to take risk and profit by doing so (Easwaran and Ramasundaram, 2008, 339). Having market participants with various objectives and information, the futures market enables the current futures price to act as an accurate indicator of the spot price expected at the maturity of the futures contract. This is referred to as the price discovery function of the futures market. Only an efficient futures market can perform these functions. As proposed by Fame (1970), we consider the market as weak-form efficient if the futures price reflects all available information for predicting the future spot price and any participants cannot make profits consistently. Empirical analyses on market efficiency of commodity futures have been conducted mainly for developed countries so far. The examples include Choudhary (1991) and Kellard (2002) for the UK, and Beck (1994) and McKenzie et al. (2002) for the US. Meanwhile, the relevant studies for emerging countries are significantly growing but still limited. In this paper, we especially focus on India, one of the emerging countries with phenomenal growth in its commodity market, and we empirically examine whether the market efficient hypothesis holds in the Indian commodity market. More specifically, we first estimate the long-run equilibrium relationship between multi- commodity futures and spot prices and then test for market efficiency in a weak form sense by applying the dynamic OLS (DOLS) and the fully modified OLS (FMOLS) methods, respectively. This paper is organized as follows. The next section briefly reviews the relevant literature and discusses the contributions of this study. Section 2 explains the definitions, sources, and properties of the data, while the third section presents the model and shows the empirical results. In the final section, we summarize the main findings of this study and suggest policy implications. LITERATURE REVIEW Since the introduction of co integration theory, a growing body of literature has empirically tested market efficiency of commodity futures around the world. If the non- stationary spot and futures prices are co integrated, it ensures that there exists a long-run equilibrium relationship between them. However, if these two price series are not co
  55. 55. S.V.INSTITUTE OF MANAGEMENT 55 | P a g e integrated, they diverge without bound, such that the futures price would provide little information about the movement of the spot price (Lai and Lai, 1991, 569). Therefore, co integration between the spot price and the futures price is a necessary condition for market efficiency (ibid. 568). Market efficiency also requires that the futures price is an unbiased predictor on average, indicating that these two price indices have a co integrating vector. So far, market efficiency has mainly been studies for developed countries such as the US and the UK, and studies on emerging and developing counties are few. Among the latter, examples other than India include Wang and Ke (2005) for wheat and soybeans and Xin et al. (2006) for copper and aluminum, both of which examine the commodity market efficiency in China using co integration methods. The prior research on India consists of Bose (2008), Jabir and Gupta (2011), and Goyari and Jena (2011).2 Bose (2008) examines some characteristics of Indian commodity futures in order to judge whether the prices fulfill the efficient functions of the markets or not. She analyzes this issue by applying different methods such as correlation, co integration and causality and using the price indices from the MCX and the NCDEX from June 2005 to September 2007. The results show that the multi-commodity futures indices help to reduce volatility in the spot prices of corresponding commodities and provide for effective hedging of price risk, while the agricultural indices do not exhibit these features clearly. Also, Jabir and Gupta (2011) analyze the efficiency of 12 agricultural commodity markets by examining the relationships between the futures and spot prices from 2004 to 2007. As the results from their co integration and causality tests, they indicate that co integration exists in these indices for all commodities except wheat and rice and that the direction of causality is mixed, depending on the commodities. Finally, Goyari and Jena (2011) examine the commodity futures market from June 2005 to January 2008 using the daily spot and futures prices of gold, crude oil and guar seed. The results of their co integration test state that the spot price and the futures price are co integrated for three commodities, suggesting that they have a long-run relationship. As mentioned above, all these studies use the period before 2008 as their sample period and so do not cover the period during which Indian commodity futures gained momentum significantly. Besides, they conduct the Johansen co integration test but do not test the co integrating parameter restriction for the unbiasedness hypothesis. This paper differs from the surveyed studies on these two points.
  56. 56. S.V.INSTITUTE OF MANAGEMENT 56 | P a g e CHAPTER-4 RESEARCH METHODOLOGY
  57. 57. S.V.INSTITUTE OF MANAGEMENT 57 | P a g e  OBJECTIVES OF THE STUDY:  To study the concepts of commodities Trading in India.  To study of The Various Trends In Commodity Trading  To Study The Role of Commodities In Indian Financial Markets  To study In detail The Role of Futures And Forwards.  To analyze the present situation of the commodities in Indian market and suggest for any improvements there after  RESEARCH METHODOLOGY: To achieve the object of studying the commodities market in stock market data have Been collected. Research Methodology carried for this study is purely from Secondary data from various web sites mentioned below.  WEBSITES: http://www.indiainfoline.com/ http://www.swastika.co.in/ http://www.investopedia.com/ http://business.mapsofindia.com/
  58. 58. S.V.INSTITUTE OF MANAGEMENT 58 | P a g e  LIMITATIONS OF THE STUDY: The study is limited to “Commodity Trading – Investment and Speculation” in the Indian context. 1. The study cannot say as totally perfect as it is subjected to any alteration. 2. The study is not based on the international perspective of Commodity markets. It is limited to national level only. 3. The finding of the study is based on information which was given by the respondent. It may be possible that the respondents ware not provided the right information. 4. There can be business from researcher or responds side.
  59. 59. S.V.INSTITUTE OF MANAGEMENT 59 | P a g e CHAPTER-5 DATA ANALYSIS & INTERPRETATION
  60. 60. S.V.INSTITUTE OF MANAGEMENT 60 | P a g e Q.1 Do you have any investment plan? TABLE 1.1 CHART 1.1 INTERPRETATION  In our study, we have put down this question to check the analytical aspect of the investors.  We have found in our study that 68% of the investors would prefer to investment plan in it and only 32% of the investors would not prefer to investment plan. Investment plan Frequency Percent YES 32 32.0 NO 68 68.0 Total 100 100.0
  61. 61. S.V.INSTITUTE OF MANAGEMENT 61 | P a g e Q.2 If Yes, Where you would like to invest your money? TABLE 2.1 CHART 2.1 INTERPRETATION  The above graph shows preferred mode of investment by investors.  As we have taken sample of investors who invest in commodity market, it is obvious that commodity market is most preferable mode of investment for them.  The graph represents that Bank FD is second preferable mode of investment by investors, i.e., 32% of the investors invest in Bank FD. 0 2 4 6 8 10 12 14 Bank F.D Commodity Market Share Market Other Mode Of Investments Frequency Percent Bank F.D 10 10.0 Commodity Market 13 13.0 Share Market 6 6.0 Other 3 3.0 Total 32 32.0
  62. 62. S.V.INSTITUTE OF MANAGEMENT 62 | P a g e Q.3 If No, what reasons? TABLE 3.1 Reasons Frequency Percent Not Aware About Invest Avenues 28 28.0 Insufficient Income 37 37.0 Other 3 3.0 Total 68 68.0 CHART 3.1 INTERPRETATION  In Our study, we have found that 55% of the investors have not aware about the invest avenues.  We also found that 41% of the inventors have insufficient income.  We also found that 4% of the investors have other reason to not invest in money. 41% 55% 4% Reasons NOT AWARE ABOUT INVEST AVENUES INSUFFICIENT INCOME OTHER
  63. 63. S.V.INSTITUTE OF MANAGEMENT 63 | P a g e Q.4 Do you aware about Commodity Market? TABLE 4.1 CHART 4.1 INTERPRETATION  In our study, we have put down this question to check the analytical aspect of the investors.  We have found in our study that 71% of the investors would prefer to not aware about the commodity market and 29% of the investors would prefer to yes aware about the commodity market.  Whereas 29% of the investors analyze the market with the help of brokers / financial advisors or themselves. Aware About Commodity Market Frequency Percent YES 29 29.0 NO 71 71.0 Total 100 100.0 29% 71% Aware About Commodity Market YES NO
  64. 64. S.V.INSTITUTE OF MANAGEMENT 64 | P a g e Q.5 If yes, which Commodity Exchange you will prefer for investment? TABLE 5.1 CHART 5.1 INTERPRETATION  From the above graphical presentation, we can say that investors are mostly preferred NCDEX (NATIONAL COMMODITY &DERIVATIVES EXCHANGE LTD.) & NMCE (NATIONAL MULTI COMMODITY EXCHANGE) for trading in commodities.  MCX holds a market share of over 80% of the Indian commodity futures market, and more than 2000 registered members operating through over 100,000 trader work station, across India. 24% 28% 28% 17% 3% MCX NCDEX NMCE Can't Say Other Frequency Percent MCX 7 7.0 NCDEX 8 8.0 NMCE 8 8.0 Can't Say 5 5.0 Other 1 1.0 Total 29 29.0
  65. 65. S.V.INSTITUTE OF MANAGEMENT 65 | P a g e  We also found that 24% of the investors preferred MCX for trading in commodity market.  From the above chart we can say that 17% of the investors preferred can’t say and 3% of the investors use preferred local trading exchange for trading for trading in commodity market. Q.6 what is your perception about Commodity Market? TABLE 6.1 Frequency Percent Less Risk 30 30.0 Risk 52 52.0 Very Risk 18 18.0 Total 100 100.0 CHART 6.1 INTERPRETATION  I can know that commodity is risky because the inventor says that there is no one can predict to the commodity price in a market so that commodity is risky for the investing. 30% 52% 18% Perception About Commodity Less Risk Risk Very Risk
  66. 66. S.V.INSTITUTE OF MANAGEMENT 66 | P a g e  We also that found that the 30% peoples are commodity is less risky and 18% peoples are commodity is very risky. Q.7 For each statement given below, please tick mark in the box to in the indicate your opinion. Objective: To check the effectiveness of factors in determining commodities price from investor’s perspective. TABLE 7.1 TABLE 7.2 Mean and Standard Deviation Factors which affects to determine commodities price Statement Strongly Agree Agree Neutral Disagree Strongly Disagree Export-import data of commodities issued by government to the commodities price. 47 26 15 10 2 Flood, earthquake, droughts and tsunami create fluctuation incommodities price. 26 39 17 14 4 If buyers are standing less than suppliers, reduces the price of commodities. 33 19 25 21 2 Government policies like monetary and fiscal policy affects commodities price. 19 27 30 21 3 Crude oil inventory level data affects commodities prices. 18 29 16 28 9 Seasons like monsoon, winter and summer affects to the price of commodities. 20 27 19 21 13 Statement Mean Standard Deviation Export-import data of commodities issued by government to the commodities price. 1.94 1.099 Flood, earthquake, droughts and tsunami create fluctuation incommodities price. 2.31 1.125 If buyers are standing less than suppliers, reduces the price of commodities. 2.40 1.206
  67. 67. S.V.INSTITUTE OF MANAGEMENT 67 | P a g e CHART 7.1 INTERPRETATION  From the above graphical presentation and tables, we can say that investors are almost agree with the all the statements related to the factors which affect to determine commodity prices.  We have calculate the mean and standard deviation for each of the statements and their mean ranges from 1.94 to 2.81 which represent that investors are agree about that all the factors are more or less important in determining commodity prices.  The most important factors that affects the price of commodities are Export-Import data of commodities issued by government, Flood, Earthquake, Droughts and Tsunami, If buyers are standing less than suppliers, Government policies like monetary and fiscal policy, interest rate issues by RBI and Foreign Exchange rate affects to commodities price, having mean of 1.94, 2.31, 2.4, 2.62, 2.81 and 2.8 respectively 1.94 2.31 2.4 2.62 2.81 2.8 1.099 1.125 1.206 1.108 1.277 1.333 1 2 3 4 5 6 Mean Standard Deviation Government policies like monetary and fiscal policy affects commodities price. 2.62 1.108 Crude oil inventory level data affects commodities prices. 2.81 1.277 Seasons like monsoon, winter and summer affects to the price of commodities. 2.80 1.333
  68. 68. S.V.INSTITUTE OF MANAGEMENT 68 | P a g e Q.8 Give your opinions about the followings……. Objective: To check investors’ perception as compared to equity market and currency market and to check views over reliability and transiency of on line trading in commodity market. TABLE 8.1 Statement Strongly Agree Agree Neutral Disagree Strongly Disagree Commodity market gives more return than equity market and currency market. 43 24 9 19 5 Commodity market consists more risk than equity market and currency market. 19 33 24 23 1 Commodity market is less volatile then equity market and currency market. 17 24 32 20 7 Commodity market fluctuation makes impact on equity market and currency market. 17 32 28 19 4 Online trading in commodity market is transparent. 16 30 22 26 6 Online trading in commodity market is reliable. 17 18 17 26 22 TABLE 8.2 Statement Mean Standard Deviation Commodity market gives more return than equity market and currency market. 2.19 1.308 Commodity market consists more risk than equity market and currency market. 2.54 1.077 Commodity market is less volatile then equity market and currency market. 2.76 1.164 Commodity market fluctuation makes impact on equity market and currency market. 2.61 1.100 Online trading in commodity market is transparent. 2.76 1.182 Online trading in commodity market is reliable. 3.18 1.410
  69. 69. S.V.INSTITUTE OF MANAGEMENT 69 | P a g e CHART 8.1 INTERPRETATION From the above graphical presentation and graph we can come to know that investor’s opinion is approximately neutral for the two statements. The statements are commodity market and give more return than Equity market and currency market and commodity market consists more risk than Equity market which has mean of 2.19 and 3.18 respectively and on the basis of that we can say that investors are neutral about both the statements. In our study, we also found that investors are agreeing about the following statements. Commodity market is less volatile than Equity market and currency market, commodity market fluctuation makes impact on Equity market and currency market , online trading in commodity market is transparent, online trading in commodity market is reliable because their means are 2.54, 2.76, 2.61 and 2.76 respectively. 2.19 2.54 2.76 2.61 2.76 3.18 1.308 1.077 1.164 1.100 1.182 1.410 .00 .50 1.00 1.50 2.00 2.50 3.00 3.50 1 2 3 4 5 6 Mean Standard Deviation
  70. 70. S.V.INSTITUTE OF MANAGEMENT 70 | P a g e PERSONAL DETAILS 1. GENDER: TABLE 9.1 Gender Frequency Percent Male 79 79.0 Female 21 21.0 Total 100 100.0 CHART 9.1 INTERPRETATION  In our study, we have taken a sample of 100 investors who invest in commodity market.  Out of 100, there are approximately 79% respondent are male while rest of the respondents are female. 79% 21% Gender Male Female
  71. 71. S.V.INSTITUTE OF MANAGEMENT 71 | P a g e 2. AGE GROUP: TABLE 9.2 CHART 9.2 INTERPRETATION  The above chart shows the graphical presentation of age group of investors who in commodity market. 30% 42% 15% 10% 2% 1% AGE GROUP Below 20 20-30 31-40 41-50 51-60 Above 60 Frequency Percent Below 20 30 30.0 20-30 42 42.0 31-40 15 15.0 41-50 10 10.0 51-60 2 2.0 Above 60 1 1.0 Total 100 100.0
  72. 72. S.V.INSTITUTE OF MANAGEMENT 72 | P a g e  From the graph, we can say that majority of the respondents are of age group between 20- 30 year i.e. 42% of the respondent having their age between 20-30 year. 3. OCCUPATION: TABLE 9.3 CHART 9.3 INTERPRETATION  The above graphical presentation shows the occupation of respondents. 18% 26% 17% 5% 11% 23% Occupation Government Employee Self Employee Professional Farmer Employee In Private Sector Other Frequency Percent Government Employee 18 18 Self Employee 26 26 Professional 17 17 Farmer 5 5 Employee In Private Sector 11 11 Other 23 23 Total 100 100
  73. 73. S.V.INSTITUTE OF MANAGEMENT 73 | P a g e  Out of total of respondents, 26% are self Employed, 18% government employees, 11% are private sector employees, 17% are professional employees, and 26% are other respondents. 4. Monthly Income of Family (in Rs.): TABLE 9.4 CHART 9.4 43% 24% 18% 9% 3% 3% Monthly Income Below 10000 10000-20000 20000-30000 30000-40000 40000-50000 Above 50000 Frequency Percent Below 10000 43 43.0 10000-20000 24 24.0 20000-30000 18 18.0 30000-40000 9 9.0 40000-50000 3 3.0 Above 50000 3 3.0 Total 100 100.0
  74. 74. S.V.INSTITUTE OF MANAGEMENT 74 | P a g e INTERPRETATION  The above chart shows the graphical presentation of monthly income of family of respondents.  In this data there is mostly 43% investors has more than Below 10000 incomes per month that reason is family business in market and it is well settled because if you have no sufficient income so you cannot payout of deal that when you get big loss that time you have to pay and you have no more income. 5. Educational Qualification: TABLE 9.5 Frequency Percent Below HSC 18 18.0 Undergraduate 13 13.0 Graduate 42 42.0 Post Graduate 26 26.0 Other 1 1.0 Total 100 100.0 CHART 9.5 18% 13% 42% 26% 1% Educational Qualification Below HSC Undergraduate Graduate Post Graduate Other
  75. 75. S.V.INSTITUTE OF MANAGEMENT 75 | P a g e INTERPRETATION  The above chart shows the graphical presentation of Education Qualification of investors who invest in commodity market.  From the graph, we can say that majority of the respondents are Graduate.
  76. 76. S.V.INSTITUTE OF MANAGEMENT 76 | P a g e CHAPTER-6 FINDINGS
  77. 77. S.V.INSTITUTE OF MANAGEMENT 77 | P a g e FINDINGS  In India MCX is trading in bullion market.  Goldsmiths get their raw material from wholesale dealers.  They fix the prices on daily trading bases.  Hence there is positive correlation between both market traders can easily predict the future prices of the commodities and hedge their positions.  The investors expect that the brokers should provide them the genuine information regarding the market.  Also they want moderate brokerage and good services from the brokers.  Mostly investor of commodity is trading in NCDEX or MCX Exchange.  For the commodity deal the brokerage house provides a research advisory, delivery facility for their clients.  Most of investors say that commodity market is risky market for the investment.  We have also found that maximum number of investors of investors’ are agree or strongly agree with the statement that international commodity market affects national trading activity.  The most important factors that affects the price of commodities are Export-Import data of commodities issued by government, if buyers are standing less than suppliers, red, Government policies like Monetary and Fiscal policy, interest rate issue by RBI and Foreign rate affects to commodities price.  In our study we have also found that commodity market is lee volatile than Equity market and currency market, commodity market fluctuation makes impact on Equity market and currency market, Online trading in commodity market is transparent and online trading in commodity market is reliable.
  78. 78. S.V.INSTITUTE OF MANAGEMENT 78 | P a g e CHAPTER-7 CONLUSION
  79. 79. S.V.INSTITUTE OF MANAGEMENT 79 | P a g e CONCLUSION  The trading in commodity derivatives started on Dec. – 2003.  Within a short span of 3 years the trading volume in commodity derivatives increased in a rapid manner, now it going to equalize with the financial derivatives trading volumes.  First derivatives emerged as hedging products in commodities.  These commodities are the risk management instruments which transfers the pricing risks to other parties.  Internationally, commodity derivatives are exchange - traded.  In the bullish market, the investors can earn profits by buying the commodity futures.  In the bearish market, the investors can earn profits by selling the commodity futures.  The hedgers can transfer their risks to other parties by ways of long hedge and short hedge.  The speculators can build large positions with little margins by way of leverage and their profit/loss potential is unlimited.  The arbitragers can also earn risk less profits by ways of cash –and-carry arbitrage and reverse cash-in-carry arbitrage.  These commodity products are very much new to India.  The SEBI is taking necessary actions to create awareness into the investors.
  80. 80. S.V.INSTITUTE OF MANAGEMENT 80 | P a g e CHAPTER-8 BIBLIOGRAPHY
  81. 81. S.V.INSTITUTE OF MANAGEMENT 81 | P a g e BIBLIOGRAPHY http://www.indiainfoline.com/ http://www.swastika.co.in/ http://www.investopedia.com/ http://business.mapsofindia.com/ http://www.managementparadise.com/ http://www.scribd.com/ http://www.gujaratmba.com/ http://www.citesales.com/ http://www.mcxindia.com/ http://www.commodityonline.com/ http://business.mapsofindia.com/ http://www.moneycontrol.com/ http://www.icexindia.com/ http://www.ncdex.com/ http://businesstoday.intoday.in/ http://economictimes.indiatimes.com/ http://www.slideshare.net/ https://www.linkedin.com/ http://www.nationalspotexchange.com/ http://www.nmce.com/
  82. 82. S.V.INSTITUTE OF MANAGEMENT 82 | P a g e CHAPTER-9 ANNEXURE
  83. 83. S.V.INSTITUTE OF MANAGEMENT 83 | P a g e Questionnaire Dear Sir / Madam, We Are Student Of MBA Programmer From S.V.Institute Of Management, Kadi. As A Part Of Our Study, We Are Required To Prepare A Comprehensive Project For Which We Have Selected The Topic “A Study On Commodity Market”. We Ensure That The Information Provided By You Will Be Kept Confidential & Exclusively Used For Academic Purpose Only. 1. Do you have any investment plan? YES NO (If NO move to question no. 4) 2. If, yes, where you would like to invest your money? Bank F.D Commodity Market Share Market Other (specify) ---------------------------------------------------------------- 3. If no, why? Not aware about invest avenues Insufficient income Other (specify) ---------------------------------------------------------------- 4. Do you aware about Commodity Market? YES NO (If NO move to question no. 7)

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