Purchasing Power Parity - Introduction, Meaning, Merits and Demerits
Commodity & trading market
1. Commodity market
PRESENTED BY
GAYATRI, MEENAKSHI
&
VANDANA
GUIDED BY
PROF. AMREEN SHAIKH
2. WHAT IS COMMODITY
MARKET?
Commodity markets are markets where raw or
primary products are exchanged.
Itcovers physical product (food, metals,
electricity) markets.
3. Modern Commodity Market have their roots in the
trading of agricultural products.
Thetrading of commodities includes physical trading of
food items, Energy and Metals, etc.
4. CLASSIFICATION OF COMMODITIES
Bullion
Gold
Silver
etc
Agriculture Energy
Grains Crude oil
Pulses Heating oil
Commodities
Edible oils/seeds Natural gas
Spices etc Furnace oil
Etc.
Base Metals
Copper
Zinc
Aluminum
Nickel
Tin
5. ENERGIES
Crude Oil
Petroleum
By Products Of Petroleum
Heating Oil
Natural Gas
Coal.
8. PERFORMANCE OF THE MARKET
Returns Across Various Com m odities in 5 Yrs.
600
485.86
500
400
300
200
142.80
92.86 87.12 94.21
100 62.54 51.16
9.25 22.25 23.60
3.83 4.96 9.65
0
-12.36
-45.21
-100
Guar Gum
Mentha Oil
Turmeric
Soy Oil
Crude oil
Gold
Aluminium
Jeera
Guar Seed
Copper
Pepper
Lead
Soybean
Silver
Zinc
Source:Bloomberg,Way2Wealth Research
9. Types of Market For Commodity
Trading
Spot Future Forward Option Swap
Trading Trading Trading Trading Trading
10. SPOT TRADING
Instant cash is used to physically exchange the
commodities, which pass from sellers hands to
users.
11. FORWARD MARKETS AND
FUTURE MARKETS
Forward markets and Future markets are derived for
trading of commodities in markets, with a view of
ascertaining a future value of the same commodity.
After keeping view of the demand
Climatic conditions
Fluctuation in currency
Inflation
12. OPTIONS TRADING
These are contracts that give the owner the right, but
not an obligation, to buy (call option) or sell (put
option) an asset.
13. SWAPS TRADING
These are contracts exchange cash (flows) on /
before a specified future date based on the
underlying value of bonds/interest
rates, currencies/exchange
rates, stocks, commodities, or other assets.
14. REGULATING BODIES
The trading of commodity derivatives is regulated by
Forward Markets Commission (FMC).
Interms of Section 15 of the Forward Contracts
(Regulation) Act, 1952 (the Act)
Forward contracts in commodities notified under section 15
of the Act can be entered into only
a member of a recognized association.
15. The recognized associations/commodity exchanges are
granted recognition under the Act by the Central
Government
All the Exchanges, which permit forward contracts for
trading, are required to obtain certificate of registration
from the Central Government.
16. The other legislations which have relevance to commodity
trading are the
Companies Act,
Stamp Act,
Contracts Act,
EssentialCommodities Act 1955,
Prevention of Food Adulteration Act,1954
And various other legislations, which impact on their
working
17. BENEFITS OF INVESTING IN
COMMODITY MARKET
Leverage
Liquidity
Diversification
InflationHedge
Assurance Of Purity
Transparency Of Rates
Preferential Tax Treatment
Than Stocks
18. RISK ASSOCIATED WITH
INVESTMENTS IN COMMODITY
MARKET
Price risk
Quantity risk
Cost risk (Input price risk)
Political risk
19. PROCESS OF BUYING AND
SELLING PRODUCTS
1.Market Order
The customer chooses a specific commodity or
commodities that he / she wants to buy or to sell.
The customer chooses the number of contracts that
will deliver monthly.
The contracts will not have a price on them.
Time is the priority, not price.
20. 2.Buy Limit Order-
This order is only filled at the specified price “or better.” This
order specifies a price limit for the order be filled.
Thegoal is to buy at the lowest price possible for the
commodity or commodities.
3.Sell Limit Orders:
This order is only executed at the current market price or
higher.
The goal is to sell the commodity or commodities at the
highest price.
21. 4.Stop order:
Itbecomes a market order when the stop level is
reached in the specified commodity or
commodities
22. INDIAN COMMODITY
EXCHANGE
1) Precious Metals 4)Oils & Oilseed Complex
Gold Mustard Seed
Silver Soya Bean
Soya Oil
2) Metals
Copper 5) Fibers
Lead Raw Jute
3) Energy 6) Other Agro product
Crude Oil Mentha Oil
Natural Gas
7) Minerals
Iron Orez
23. TAX IMPLICATIONS
1. Futures contracts are in the nature of agreement to buy or
sell at a future date and hence are not liable for payment of
VAT/sales tax.
2. If the futures contract is closed out and settled between the
Constituents prior to the settlement date without actually
buying or selling the commodities, there is no liability for
payment of VAT/sales tax.
24. 3.When the futures contract fructifies into a
sale and culminates into delivery, there
would be liability for payment of sales
tax. This liability will arise in the State in
which the warehouse (into which the
4. Goods are lodged by the Constituent) is
situated when the commodities are
delivered to the buyer.
25. There are favourable tax rates for commodities
as they are taxed at 60% long-term capital gains
and 40% short-term capital gains.
Long-term gains are capped at 15% and short-
term gains are taxed at your ordinary tax
rate, which depends on your adjusted income.
27. INDIAN COMMODITY
EXCHANGES
The East India Cotton Association
Surendra nagar Cotton oil & Oilseeds Association
Ltd
The East India Jute & Hessian Exchange Ltd,
The Spices and Oilseeds Exchange Ltd.
Vijay Beopar Chamber Ltd., Muzaffarnagar
Ahmadabad Commodity Exchange
First Commodity Exchange of India Ltd, Kochi
The Bikaner Commodities Exchange Limited
Haryana Commodities Ltd., Hissar
The Bombay Commodity Exchange Ltd
The Indian Pepper and Spice Trade Association
28. Bhatinda Om & Oil Exchange Ltd., Bhatinda
The Meerut Agro Commodities Exchange Co. Ltd.,
Meerut
The Central India Commercial Exchange Ltd,
Gwalior
National Board of Trade Limited
The Chamber of Commerce
Rajdhani Oils and Oilseeds Exchange Ltd. , Delhi
E-Commodities Ltd
The Rajkot Seeds oil & Bullion Merchants`
Association Ltd
