A STUDY ON FACTOR INFLUENCING CONSUMER BEHAVIOUR WHILE INVESTING IN COMMODITY MARKET WITH REFERENCE TO GOLD IN VENTURA

A PROJECT REPORT
ON
A Study On Factors Influencing Consumer
Behaviour While Investing In Commodity
Market With Reference To Gold In Ventura.
BY
SOUMENDU SUBHANKAR
ROLL NO.-2014MBA003
Submitted to the
DEPARTMENT OF I-MBA
UNDER THE GUIDANCE OF
INTERNAL GUIDE – SHRIMOY PARICHHA
EXTERNAL GUIDE – TAPAN KUMAR SAHU
In partial fulfillment for the award of the degree
of
INTEGRATED MASTER OF BUSINESS ADMINISTRATION
B.J.B AUTONOMOUS COLLEGE
BHUBANESWAR

ACKNOWLEDGEMENT
I take this opportunity to express my profound gratitude and deep
regards to my guide Mr. Shrimoy Parichha for his exemplary
guidance, monitoring and constant encouragement throughout the
course of this thesis. The blessing, help and guidance given by him
time to time shall carry me a long way in the journey of life on which
I am about to embark.
I also take this opportunity to express a deep sense of gratitude to
Mr. Tapan Kumar Sahu, Marketing Manager, VENTURA
SECURITIES LTD. for his/her cordial support, valuable
information and guidance, which helped me in completing this task
through various stages.
I am obliged to staff members of VENTURA SECURITIES LTD.
for the valuable information provided by them in their respective
fields. I am grateful for their cooperation during the period of my
assignment.
Lastly, I thank almighty, my parents, brother, sisters and friends for
their constant encouragement without which this assignment would
not be possible.

DECLARATION
I, Soumendu Subhankar hereby declare that the project report entitled
"A Study On Factors Influencing Consumer Behaviour While
Investing In Commodity Market With Reference To Gold In
Ventura" has been personally done by me under the guidance of Mr.
SHRIMOY PARICHHA in the partial fulfillment for the award of
degree of INTEGRATED MASTER OF BUSINESS
ADMINISTRATION of 6th semester of BJB AUTONOMOUS
COLLEGE, BHUBANESWAR
I further declare that the work reported in this project has not been
submitted and will not be submitted either in part or in full, for the
award of any other degree/diploma in this institute or any other
institute or university.
SOUMENDU SUBHANKAR
Roll No. 2014MBA003
Department of IMBA
BJB Autonomous College

BONAFIDE CERTIFICATE
Certified that the Project report titled
__________________________ isthe bonafide work of Mr. /
Ms. _______________________________ bearing Roll
Number______________who carried out the work under my
supervision. Certified further that to the best of my knowledge
the work reported herein does not form part of any other project
report or dissertation on the basis of which a degree or award
was conferred on an earlier occasion on this or any other
candidate.
Signature of Student Signature of Guide
Name : Name :
Roll No. : Designation :

CERTIFICATE
This is to certify that the summer training project entitled "A
Study On Factors Influencing Consumer Behaviour While
Investing In Commodity Market With Reference To Gold In
Ventura " is a bonafide work done by SOUMENDU
SUBHANKAR from 6th March 2017 to 13th April 2017.
This project report, submitted in partial fulfillment of the
requirement for the completion of summer project of 6th
semester of IMBA at B.J.B Autonomous College under Utkal
University carried out under my guidance and supervision.
Mr. TAPAN KUMAR SAHU
MARKETING MANAGER
VENTURA SECURITIES LTD
DATE: ______________
BHUBANESWAR

EXECUTIVE SUMMARY
In the times of economic recession and global meltdown, when global stock
indices are breaching their previous lows, stock prices are falling headlong
making new lows every day, and business newspapers like The Economic
Times are coming up with headlines like “Saare Zameen Par” on a regular
basis, investors are really worried about their
investment. The market volatility really effects the investors’ investment in a
very large way. So, in this project I will try to find out how the market
volatility effect the Stock Market where people invest and how the investors
are really overcome this market volatility situation. Investors are looking for
some other place to invest their hard-earned money. Commodity market is one
such market which has provided a good opportunity to the investors to earn
good returns.
People are looking to diversify their portfolios to maximize their return on
investment. Commodity market is one such place where some good money can
be made. Commodity prices are on the rise and the further outlook for the
boom in these markets is positive. Analysts expect the commodity market to
provide hefty returns to the investor’s money.
There are three main investment avenues for a person wishing to invest in
equities. These are direct equities, equity mutual funds and portfolio
management schemes. Many investors prefer direct equities, since it gives
them the freedom to make their own decisions and adequate flexibility to
manage their portfolios. However, most investors are lost as to what and when
they should buy or sell, and often rely on market tips, which can be dangerous.
Others prefer mutual funds, especially through the systematic investment plan
route, since it gives them professional fund management expertise and zero
headache, but at a higher cost. So, in this project I will try to analyze that how
the market volatility effect the Indian Stock market and the commodity market
as well as the investors who invest in Stock Market. Thus, I would like to cover
certain aspects of the equity markets as a whole to find out whether it is a safe
place to invest or not.

TABLE OF CONTENT
CONTENTS PAGE
NO
ACKNOWLEDGEMENT
DECLARATION
EXECUTIVE SUMMARY
1. INTRODUCTION 1
1.1. STOCK MARKET 1
1.2. COMMODITY MARKET 2
1.3. NCDEX 3
1.4. MCX 3
1.5. INTRODUCTION TO BROKERAGE INDUSTRY 4
1.6. DEVELOPMEMT IN BROKERAGE INDUSTRY 5
1.7. INDUSTRY INSIGHT 6
1.8. OBJECTIVE OF THE STUDY 9
2. COMPANYOVERVIEW 11
2.1. THE VENTURA CREDO 11
2.2. TEAM VENTURA 12
2.3. VENTURA SPIRIT 13
2.4. BOARD OF DIRECTORS 13
2.5. CORPORATE OFFICE 14
2.6. VENTURA PHILOSOPHY 15
2.7. VALUE ADDED SERVICE 16
2.8. THE RISK MANAGEMENT SYSTEM 16
2.9. RETURN PROCESS 17
2.10. BROKERAGE CALCULARION 18
2.11. POINTER-UPS 19
2.12. FEATURES OF VENTURA ONLINE PLATFORM 20
2.13. STEPS TO OPEN AN ACCOUNT 21

3. LITERATURE REVIEW 23-26
4. COMMODITYMARKET 26
4.1. PHYSICAL AND FUTURES COMMODITY MARKETS 27
4.2. HISTORY OF COMMODITY MARKET IN INDIA 28
4.3. HOW COMMODITY MARKET WORK 32
4.4. COMMODITIES EXCHANGE 34
4.5. LEADING COMMODITIES TRADED 36
4.6. BULLION MARKET 38
 GOLD 38
 SILVER 40
4.7. ENERGY 41
 CRUDE OIL 41
4.8. METALS 43
 ALLUMINIUM 43
 LETS TAKE AN EXAMPLE OF GOLD
44
GOLD COMMODITY FUTURE MARKET 44
GOLD IN INDIAN SCENARIO 44
GOLD AN INDEPENDENT ASSET 46
TURNING ON DEMAND 47
FIFTEEN FUNDAMENTAL REASONS FOR BULLISH
RUN OF GOLD 48
5. RESEARCH MEATHODOLOGY 51
5.1. METHODS OF RESEARCH 52
5.2. DATA COLLECTION APPROACH 52
5.3. SOURCES OF DATA COLLECTION 52
5.4. TOOLS USED FOR ANALYSIS 52
5.5. SAMPLING 53
5.6. LIMITATIONS OF THE STUDY 53
6. DATA ANALYSIS AND INTERPRETATION 55-70

7. FINDINGS 71
8. SUGGESTION 74
9. CONCLUSION 75
10. APPENDIX & BIBLIOGRAPHY 79
 REFERENCES ( PRESENTION) 79
 ARTICLES 80
 BOOKS 80
 WEBLIOGRAPHY 81
LIST OF TABLES
1.1. EXCHANGE DEALING WITH COMMODITIES 32
1.2. MAIN COMMODITY 35
1.3. TRADING MARGIN(MCX) 36
1.4. TRADING MARGIN(NCDEX) 37
1.5. INDIA IN WORLD GOLD INDUSTRY 39
1.6. WORLD SILVER SUPPLY FROM ABOVE GROUNDSTOCKS 40
1.7. PREVAILING DUTIES AND LEVIES ON CRUDE OIL 42
LIST OF FIGURES
1.1. VENTURA COMMODITY POINTER 20
1.2. INDIAN COMMODITY FUTURE EXCHANGE 31
1.3. WORKING OF COMMODITY MARKET 33
1.4. INDIA AS LARGEST CONSUMER OF GOLD,2002 45

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INTRODUCTION
STOCK MARKET:-
A stock market is a public market for the trading of company stock
and derivatives at an agreed price; these are securities listed on a stock exchange as
well as those only traded privately. The stock market is one of the most important
sources for companies to raise money. This allows businesses to be publicly traded,
or raise additional capital for expansion by selling shares of ownership of the
company in a public market.
The size of the world stock market was estimated at about $36.6
trillion US at the beginning of October 2008. The total world derivatives market has
been estimated at about $791 trillion face or nominal value, 11 times the size of the
entire world economy.
Stock exchanges are the perfect type of market for securities whether of
government and semi-govt. bodies or other public bodies as also for shares and
debentures issued by the joint-stock companies. In the stock market, purchases and
sales of shares are affected in conditions of free competition. Government securities
are traded outside the trading ring in the form of over the counter sales or purchase.
The bargains that are struck in the trading ring by the members of the stock
exchanges re at the fairest prices determined by the basic laws of supply and demand.
Under the Securities Contract Regulation Act of 1956, securities’
trading is regulated by the Central Government and such trading can take place only
in stock exchanges recognized by the government under this Act. As referred to
earlier there are at present such recognized stock exchanges in India. Of these, major
stock exchanges, like Bombay Stock Exchange (BSE), National Stock Exchange
(NSE), Calcutta, Delhi, Chennai, Hyderabad and Bangalore etc. are permanently
recognized while a few are temporarily recognized. The above act has also lain down
that trading in approved contract should be done through registered members of the
exchange. As per the rules made under the above act, trading in securities permitted to

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be traded would be in the normal trading hours (9.15 A.M to 3.30 P.M) on working
days in the trading ring, as specified for trading purpose.
COMMODITYMARKET
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 Future
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 :

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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.
National Commodities & Derivatives Exchange Limited (NCDEX)
National Commodities & Derivatives Exchange Limited (NCDEX) promoted by
ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC),
National Bank of Agriculture and Rural Development (NABARD) and National
Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Rating
Information Service of India Limited (CRISIL), Indian Farmers Fertilizer
Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to
the equity shares have joined the promoters as a share holder of exchange. NCDEX
is the only Commodity Exchange in the country promoted by national level
institutions.
NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a
national level technology driven on line Commodity Exchange with an independent
Board of Directors and professionals 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 (FMC). NCDEX is also
subjected to the various laws of land like the Companies Act, Stamp Act, Contracts
Act, Forward Contracts Regulation Act and various other legislations.
NCDEX is located in Mumbai and offers facilities to its members in more than 550
centers throughout India. NCDEX currently facilitates trading of 57 commodities.
Multi Commodity Exchange of India Limited (MCX)
Multi Commodity Exchange of India Limited (MCX) is an independent and de-
mutulized exchange with permanent reorganization from Government of India,

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having Head Quarter in Mumbai. Key share holders of MCX are Financial
Technologies (India) Limited, State Bank of India, Union Bank of India, Corporation
Bank of India, Bank of India and Canara Bank. MCX facilitates online trading,
clearing and settlement operations for commodity futures market across the country.
MCX started of trade in Nov 2003 and has built strategic alliance with Bombay
Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of
India, pulses Importers Association and Shetkari Sanghatana.MCX deals with about
100 commodities.
INTRODUCTION TOBROKERAGE INDUSTRY-
Globalization has proved to be a boon for the Indian economy. After globalization
there has been a tremendous growth in the Indian economy. Every sector of the
economy has shown an outstanding performance after globalization. Earlier Trading
was confined in limited boundaries but now the scenario has been totally different
after the entrance of online trading. There is a cut throat competition between the
broking houses. Now the brokers are more concerned about their customers to
improve their performance.
The sector is undergoing fundamental changes that have diluted its traditional role of
protecting small deposits against capital and income risk and facilitating the
conversion of Savings into investment. Also there have been a drastic increase in the
volume of share traded on stock exchange and with that the online trading has shown
Bull Run. The Indian Brokerage Industry consists of companies that primarily act as
agents for the buy inland selling of securities (e.g. stocks, shares, and similar
financial instruments) on a commissioner transaction fee basis. Hence, to understand
this industry we have to study Security Market: Security market has two main
interdependent segments
Early Years
The equity brokerage industry in India is one of the oldest in the Asia region. India
had an active stock market for about 150 years that played a significant role in
developing risk markets as also promoting enterprise and supporting the growth of
industry. The roots of a stock market in India began in the 1860s during the
American Civil War that led to a sudden surge in the demand for cotton from India
resulting in setting up of a number of joint stock companies that issued securities to

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raise finance. This trend was akin to the rapid growth of securities markets in Europe
and the North America in the background of expansion of rail road sand exploration
of natural resources and land development.
At that time, was a major financial centre having housed 31 banks, 20 insurance
companies and 62 joint stock companies. In the aftermath of the crash, banks, on
whose building steps share brokers used to gather to seek stock tips and share news,
disallowed them to gather there, thus forcing them to find a place of their own, which
later turned into the Dalal Street. A group of about 300 brokers formed the stock
exchange in Jul 1875, which led to the formation of a trust in 1887 known as the
“Native Share and Stock Brokers Association”. A unique feature of the stock market
development in India was that that it was entirely driven by local enterprise, unlike
the banks which during the pre-independence period were owned and run by the
British. Following the establishment of the first stock exchange in Mumbai, other
stock exchanges came into being in major cities in India, namely Ahmedabad (1894),
Calcutta (1908),Madras (1937), Uttar Pradesh and Nagpur (1940) and Hyderabad
(1944). The stock markets gained from surge and boom in several industries such as
jute (1870s), tea (1880s and 1890s),coal (1904 and 1908) etc, at different points of
time.
DEVELOPMENT IN BROKERAGE INDUSTRY
In actuality the brokerage industry continues to develop rapidly. Many of the
traditional restrictions against banking activities within the brokerage industry are
being eliminated and the barriers are disappearing. Due to this, some commercial
banks have as subsidiaries, brokerage houses that offer discounts and some of them
have available accounts that offer all of the services that are offered by a checking
account. The basic function of a brokerage firm is to execute buy and sell orders for
clients. Traditionally these firms have offered the investigation of the quality and the
possibilities of investing in a variety of investment products. It is still accustomed for
brokerage firms to offer information about possible investments free of charge. This
activity of bringing free of charge stock investment reports is one of the main tools
that are utilized by brokerage houses to compete against other firms and to investors
it continues to be an important service. Despite the previously, not all investors

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consider that investment reports is an important service. Some investors prefer other
types of services since many investors don’t believe that these
In order to capture this vast diverse clientele, the brokerage industry has segmented
itself. After the restrictions in commissions were eliminated, several brokerages
began to open up their doors as discount brokerage firms. In actuality, brokerage
firms may be classified into full service brokers and discount brokers. Full service
brokerage firms continue to offer informative stock reports and a level of service
much higher than other brokerage houses. Discount brokerage houses only dedicate
themselves to execute orders for clients. Full service brokers are sellers looking for
purchasing and selling for clients and offering more customer service than is
available from discount brokers. It is many times possible that a client will not even
know who is taking care of the buy or sell order that they placed. These differences
in services and philosophies may lead to great differences in commission costs. It is
evident that these differences may be an important factor in the return of an
investment. This is particularly true when we see that these commissions are added
to the purchase as well as to the sale of a stock or other investments. Post major
reforms initiative in early 2000s brokerage industry in India is experiencing rapid
growth and diversity. At present apart of brokerage business industry is also offering
wide range of financial services. These developments have resulted in huge spurt in
business and also growing market share of the large sized brokerage houses has led
to surge in enterprise value. In the year 2007 IPOs of large firms (Motilal Oswal,
Ventura Securities ltd, and Edelweiss) received huge response (Indian catalogue,
2001). At the same time global and private equity firms have taken stake in
brokerage firms.
Industry Insight
 Majority of the broking firms entered the business post 1990. A majority of
members have memberships in more than one stock exchange and across
equities, equity derivatives and commodities futures in domestic and
International stock exchange.
 On the back of growing equity culture broking activity is spreading in Tier II
and Tier III cities in India.

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 Deepening financial system and economic growth has provided growth and
expansion opportunities to broking firms. Access to public equity markets
and growing international investor’s interest has enabled them to raise
resources. Although there are more than 9000 brokers registered with SEBI
80% of the turnover in NSE and BSE is accounted by about 100 brokers
Main players in the brokerage industry are:
 India Infoline
 ICICI Direct
 Angel Broking
 HDFC Securities
 Kotak Securities
 Relaince Money
 Ventura Securities Ltd
 Share Khan
 SBI Demat
 Motilal Oswal
 Citi Bank Demat
 Karvy securities

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OBJECTIVE OF THE
STUDY

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OBJECTIVES OF THE STUDY:-
The objectives of the study are as follows:
 To study the satisfaction levels of investors in
online trading.
 To have an idea on Factors Influencing Consumer
Behaviour While Investing In Commodity Market
With Reference To Ventura.
 To know about the awareness of stockbrokers
towards online trading and share market.
 To study the satisfaction level of people with
Ventura Security Limited.

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COMPANYOVERVIEW
Ventura Securities Ltd. (Ventura) commenced operations in 1994 as a stock broking
house. Over the past two decades, they have grown into a group of companies that
provides a complete array of financial products and services. Through a large
network of sub-brokers, they offer their clients the opportunity to invest and trade in
equity and equity derivatives, commodities, mutual funds, fixed income products and
currency futures.
They also directly facilitate clients who wish to trade in equity online via their in-
house, customized and ready to use software – Pointer – which enables seamless
processes and flawless execution. They adhere to a well-defined risk management
system and settlement mechanism thereby conducting fully compliant operations.
Beyond investment avenues, the Ventura Group is constantly committed to providing
investors with access to timely and relevant research and data to ensure an informed
and fruitful investment experience.
VISION
To build Ventura Securities ltd as a globally trusted brand in the financial services
domain.
MISSION
To build true relationships and strive towards customer delight, through constant
innovation on a strong foundation of dedicated and trained resources.
The Ventura Credo
Building and valuing true partnerships
When it comes to their business partners, they see their success reflected in their
progress. They have facilitated them all the way with technology and marketing
strategies and in turn have been rewarded with their performance and loyalty.
Think and it’s their approach.

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They envisage all their clients' diverse needs - ranging from financial planning to
wealth management - well in advance and provide them with resources, tools and
solutions to fulfil them.
Constant innovation
Change for the better has become a way of life at Ventura. Innovations have always
been customer centric which has been amply reflected in the up gradation of systems
to facilitate our network partners.
Team Ventura
They dedicated and well trained people represent the pillar of strength and success at
Ventura. Each of their members has internalized their mission and is constantly
striving to build on it.
A 100% subsidiary of Ventura Securities Ltd is a leading equity and securities firm
in India. The company currently handles sizeable volume stranded on NSE and in the
realm of online trading and investments; it currently holds a reasonable share of the
market. The major activities and offerings of the company today are Equity Broking,
Depository Participant Services and Research Services. To broaden the gamut of
services offered to its investors, the company offers an online investment portal
armed with a host of revolutionary features.
 Ventura Securities Ltd is a member of the National Stock Exchange of India,
Bombay Stock Exchange of India, Depository Participant with National
Securities Depository Limited and Central Depository Services (I) Limited.
 This company has been constantly innovating in terms of product and
services and to offer such incisive services to specific user segments it has
also started the NRI, FII, HNI and Corporate Servicing groups. These groups
take all the portfolio investment decisions depending upon a clients risk /
return parameter.
 It has a very credible Research and Analysis division, which not only caters
to the need of our Institutional clientele, but also gives their valuable inputs to
investment dealers
To realize its vision the Ventura Securities Ltd group provides various financial
services which include broking (stocks & commodities), depository participant

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services, portfolio management services, advisory on mutual fund investments
and many more.
The growing list of financial institutions with which Ventura Securities Ltd is
empanelled as an approved broker is a reflection of the high levels of service
standard maintained by the company. This broking firm is a truly professional
financial service provider managed by a team of highly skilled professionals who
have proven track record in their respective domains.
Now days Ventura Securities ltd is driven by ethical and dynamic process for wealth
creation. Based on this, the company started its Endeavour in the financial market.
Ventura Securities Ltd is proud of being a truly professional financial service
provider managed by a highly skilled team, who have proven track record in their
respective domains. Ventura Securities Ltd operations are managed by more than
1500 highly skilled professionals who subscribe to Ventura Securities Ltd
philosophy and are spread across its country wide branches.
Ventura spirit
It is this spirit of "rising above oneself ", which we at Ventura have internalized
since our inception in order to deliver excellence to our clients.
 When we conceive customer-centric solutions.
 In the rationale behind our choice of technology and platforms.
 When we plan our networking strategies in our risk management system.
 When we share our ideals with fellow workers in the organisation.
 In our approach to problem solving.
 Ventura lives this spirit.
BOARD OF DIRECTORS
Sajid Malik
Co-promoter of Ventura and Director A chartered accountant by qualification, Sajid
Malik is also the Promoter and Managing Director of Genesis. International, a
company with focus on GIS mapping and engineering designing services, listed on
the NSE and BSE.

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Hemant Majethia
Co-promoter of Ventura, CEO and Director With over 2 decades of experience in
capital market intermediation and equity research HemantMajethia is well connected
and respected in market circles for his technocratic approach to stock broking. He is
a chartered accountant by qualification and has been instrumental in the development
of the online platform "POINTER".
Juzer Gabajiwala
Director A member of the Institute of Chartered Accountants of India and The
Institute of Company Secretaries of India heads the HR and operations functions at
Ventura. He initiated the launch of the alternate products platforms for mutual fund
distribution and insurance. He also spearheaded the wealth management and NRI
cell. Prior to joining Ventura, has been associated with the IIT group and the TATA
group.
Corporate Office
Ventura Securities Limited
I-Think Techno Campus,
“B” Wing, 8th Floor,
Pokhran Road No. 2,
Off. Eastern Express Highway,
Thane (West) – 400 607. Maharashtra.
Tel : +91-22-67547000, +91-22-25498500
Fax : +91-22-25498580, +91-22-67547010
REGIONAL OFFICES
Bangalore Hyderabad Chennai
No.202,2nd Floor .HVS Court,21
,Cunningham Road Bangalore-
560052
Showroom No 207, 2nd Floor,
Babukhan mall, Somajiguda ,
Hyderabad-500016
Ground Floor , New
No 197/Old No 88,
TTK road , Chennai-
600018
Tel:+91-80-4118948 Tel: +91-40-30221122 Tel:91-44-24991799
Email:bangalalore@ventura1.com Email:hyderbad@ventura1.com Email:Chennai@1.com

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Baroda New Delhi
Room No 11 ,3rd Floor Saran Chambers-2,5 ,Park Road
,Lucknow-226001
A-23 , Green park (Main),
Main AurobindoMarg
,BesideFree Church ,
NewDelhi-26511371
Tel-+91-265-2362229 Tel-+91-11-2651137
Email:baroda@ventra1.com Email:newdelhi@ventura1.com
Ventura Philosophy
 Building and valuing true partnerships:-When it comes to our business partners,
we see our success reflected in their progress. We have facilitated them all the way
with technology and marketing strategies and in turn have been rewarded with their
performance and loyalty.
 Think and it's there' approach :- We envisage all our clients' diverse needs -
ranging from financial planning to wealth management - well in advance and
provide them with resources, tools and solutions to fulfill them.
 Constant innovation:-Change for the better has become a way of life at Ventura.
Innovations have always been customer centric which has been amply reflected in
the up gradation of systems to facilitate our network partners.
 Team Ventura:-Our dedicated and well trained people represent the pillar of
strength and success at Ventura. Each of our members has internalized our mission
and is constantly striving to build on it.
BRANCHES
Lucknow Nagpur Raipur
Room No.11,3rd Floor,
Saran Chamber-2,5, Park
Road , Locknow-226001
302,3rd Floor, Gomti
Apartment, Law College
Square, Nagpur-440110
Office No.23, Pushpak
Apartment.Opp.Govt.Schoo
l, Raipur-492001
Tel-+9-522-22850-72 Tel-+91-712-2549548 Tel-+91-771-229257
Email:lucknow@ventura1.com Email:Nagpur@ventura1.com Email:Raipur@ventura1.com

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Value Added Services
Online platforms: - Is online equity trading engine. Trade at lightning speed, enjoy a
unique investing experience.
Mutual Funds - Invest across various investment plans and also get a detailed online
analysis.
Commodities - Browser and exe-based online trading software for clients as well as
network partners to facilitate seamless execution on MCX and NCDEX.
www.ventura1.com: A comprehensive website providing a plethora of information for a
cross section of investors; providing product / market information and tools to access data
in a user friendly manner.
Customer web access : Through a common login, clients have access to a host of services
such as portfolio details; digital contracts; transaction statement; tax report etc.
Newsletters: Daily / weekly / monthly newsletters covering equities / mutual funds /
commodities. These are also available on the web.
SMS updates : Regular updates on market happenings and trading / investments calls,
trade confirmations.
Research reports : Detailed fundamental analysis on companies / industries at periodic
intervals.
Baatein bazaar ke Ventura se: An interactive chat room available to our network
partners during trading hours for instant access to news on a real time basis.
In-house training / seminars : Product training / investor conferences covering diverse
topics like technical analysis / industry overview / overall financial markets.
THE RISK MANAGEMENT SYSTEM (RMS) :
Ventura Securities has segregated the scripts available on pointer for trading into 4
categories:-

P a g e | 17
Category A – 4 times exposure
Category B – 3 times exposure
Category C – 2 times exposure
Category D – 1 times exposure
If customer wants to buy shares of a company which falls under category A , he can
purchase shares worth 4 times the money that is available as his ledger balance (Money
lying with Ventura)
Let us understand with the help of an example-
I am a customer with Ventura. I have Rs 10000 as margin in my account.
Today I want to buy shares of TISCO (which falls under category A). I'll get a maximum
of 4 times exposure on the margin available in my Ventura account.
So let’s say on May 7th I buy shares worth Rs 40000 as a delivery, I now owe Rs 30000 to
Ventura Securities as my margin available was Rs 10000 in my account.
Ventura gives me T+2 i.e. the day I traded + the complete subsequent day and the third
day till 9.30 am to pay up the amount.
I can also pay this amount buy selling shares worth Rs 30000 on the subsequent day or by
transferring funds from my bank account to Ventura.
If I fail to pay the amount by 9.30 am in this case Ventura Securities has complete rights to
square up my position and recover Rs 30000.
REFUND PROCESS :
To open an account (demat and trading) a customer needs to opt for a plan out of various
plans offered by Ventura.According to the plan opted by him, he will have to pay the
required access charge at the time of account opening. This access charge would be valid
for a year or six months depending on the plan selected by the customer. Once the
customer begins trading, he would be charged brokerage as per the plan.However, the
good news for the customer is that the access charge paid at the time of account opening is
refundable.

P a g e | 18
Let us understand how the refund procedure works:
Scenario A:-
If a customer has opted for a plan with Ventura and generates brokerage equal to the
access charged paid, the entire amount which was paid by the customer gets refunded to
him in the first week of the subsequent month.
E.g.:- I am a customer with Ventura Securities and enroll in a plan of Rs 5000 on 1st May
2010. I trade for one month and generate brokerage of Rs 5000. This money will be
refunded to me in the first week of June 2010.
Scenario B:-
If a customer generates brokerage less than the access charge paid, whatever amount is
generated as brokerage during the term of the plan, will be refunded to the customer on the
expiry.
E.g.:- I am a customer with Ventura Securities and get enroll in a plan of Rs 5000 on 1st
May 2010. I trade for one year and generate brokerage of Rs 3762 only. So this amount
will get refunded to me in the first week of June 2010 (post 6 months or 1 year, depending
on the plan duration).
BROKERAGE CALCULATION :
As earlier discussed that, if a customer wants to opens an account with Ventura Securities,
he is required to select a plan type from the ones offered by the company.
Only when a plan type is selected and account (Trading and Demat) is created the
customer can trade online.
As soon as the customer starts trading using the Ventura account, we would charge him
brokerage depending on the nature of the transaction done.
The brokerage is charged to a customer according to the plan type selected by him.
There are two types of brokerage charged -
Delivery Brokerage:- When customer purchases (gets delivery) or sells (gives
delivery), this type of transaction attracts delivery brokerage.

P a g e | 19
Intraday/Trading brokerage:-When a customer buy shares and square up his stock
during the course of day or sell the shares and buy more shares the same day, this
attracts intraday brokerage. Intraday brokerage is charged only once irrespective of
number of transactions done during the course of the day.
Let us now take some examples to understand how brokerage is calculated on any trading
done by the customer:-
E.g. - I am a customer who is enrolled under a plan of Rs 3500.
Today I bought 100 shares of TISCO @ 600/-
This transaction is called delivery.
In this case I'll be charged Delivery brokerage, which is 0.20% in the plan of Rs 3500.
The calculation is: - 600 (price per share)*0.20 (delivery brokerage %) =Rs 1.2
Hence delivery brokerage per share is Rs 1.2
So, as I have purchased 100 shares, my total brokerage would be 100(number of shares
purchased) * 1.2 (brokerage per share) =Rs 120.
VALUE ADDED SERVICE OF VENTURA SECURITIES :
Introduction:
 Ventura has launched a new Online Trading Platform - POINTER exclusively for
Non Resident Indians (NRIs) to invest in the secondary market in India.
 NRI clients can now use the online trading facility and trade through the
 “POINTER”. Any investor can access the Indian stock markets from anywhere -
 Home, office or while traveling on a laptop.
 Ventura has tied up with Axis Bank for banking transactions and has a
 Dedicated NRI Services Cell to take care of the operations in these accounts.
 Presence in Dubai & have clients in U.S./UK/Australia/East Africa etc.
Pointer - USP
 Unique software designed as a “Do–it–Yourself” product
 LIVE markets – Instant prices

P a g e | 20
 Bulk trades, Action watch, Market Summary (advance/ decline, best/ worst 20,
 top traded companies)
 Online chat & news facility
 Fundamentals/Latest News/Research inputs on various companies
 Daily equity newsletter
 Daily charts available for technical studies and many more.
Fig 1.1-Ventura Commodity Pointer
Features of Ventura Online Platform
Comprehensive
 Trading on both NSE and BSE.
 Invest through Repatriable as well as Non-Repatriable funds.
Hassle Free
 Simplified account opening process.
 No need to send transaction details to RBI.
Seamless
 No need to write Cheques.
 Funds / Shares directly credited to clients Bank / DP.
Secure
 Secured Socket Layer (SSL) with 128 bit encryption.

P a g e | 21
 Detailed audit trail of transaction with time stamp of all orders.
 Funds / Securities with Axis Bank and flows only in clients accounts.
Customer-Centric Operations
 24*7 access to portfolio; transaction statements and accounts for all investment
(equity, mutual funds etc.).
 Tax reports for investments bought and sold.
 Co-ordinate with Axis Bank and Client for opening Bank account.
 Report the transactions to Axis Bank by submitting the broker contract notes within
the required time.
 Handle the pay in and pay out of funds from and to the PIS account with Axis Bank.
 Dedicated NRI Cell to answer queries of NRIs and to place orders for trades in case
of exigencies.
Steps to Open an Account
 Log on to our website www.ventura1.com. Click on “NRI Services Cell”.
 Click on “Open an Account”. Fill the form and submit.
 NRE (Repatriable) or NRO (Non Repatriable) savings account with Axis Bank, Fort
Branch and Mumbai.
 Portfolio Investment Scheme (PIS) account with Axis Bank
 NRE/ NRO Demat account with Ventura
 Online Trading account with Ventura
 PAN CARD is Mandatory to open PIS and Trading account
 Log on to our website
http://www.ventura1.com/NRI / iFrame _NRI _ i n d ex. a s p x.
 Click on “Apply for PAN Card” for the instructions as well as to download
The application from.
 Ventura can assist the client to obtain the PAN CARD.
Account Opening Process
 Client will fill up the basic details on the Ventura website
http://ventura1.com/NRI/NRIOnlineForm.aspx.

P a g e | 22
 Ventura will send duly filled Bank; Demat& Trading account opening forms to
 The Client for signature and return.
 Client will sign the documents, affix the photographs and attach the attested.
 Documents and send back the set to Ventura.
 Ventura will facilitate the account opening with Axis Bank.
 After opening bank accounts, Ventura demats and trading accounts will also be
opened.
Transactioncharges
 On purchase (per contract) : Rs.100/- + Service tax
 On sale (per contract) :Rs.100/- + Service tax
Tax computation: Nil
An initial cheque/remittance of Rs.10, 000/- is required for opening the
Account.Cheque is to be drawn in favor of “Your Name” and crossed
“Account Payee”
Charges - Ventura
 Brokerage : 0.40% plus statutory levies
 DP Maintenance Charges : Rs. 400/- per annum
Transactioncharges
 Buy : Nil
 Sell per scrip through Ventura : Rs.10/-
 Sell per scrip outside Ventura : Rs.50/- or 0.05% of value whichever is higher
 An initial cheque/remittance of Rs. 5,000/- is required for opening the Account
in favor of “Ventura Securities Limited”.

P a g e | 23
LITERATURE
REVIEW

P a g e | 24
 (Ke Tang and Wei Xiong, March 2011) The primary objective of this
paper was to find out the effect growing investment in commodity futures
markets has had on commodity price co-movements. In order to find out the
relationship between the two the authors conducted a regression test between the
oil and selected commodities from various sectors and the major finding was that
with the increase in investment by investors observed since the early 2000s
futures prices of non-energy commodities have become increasingly correlated
with oil.
 (UNCTAD,5 June 2011) The major findings in this article was laid on the
functioning of commodity markets and the flow of information that affect the
trading decisions. The paper also summarizes the recent developments and trends
in fundaments on both the demand and supply side. They have urged that due to
increase in the number of investors in commodity market who do not base their
trading purely on the basis of demand and supply has lead to misleading price
signals in the market . Another finding in this paper was that investors want to
diversify their portfolio which is playing an important role for them to invest in
commodity market rather than understanding the fundamentals for investment.
 (John Baffes and Tassos Haniotis ,July 2010) The main objectiveofthis
paper was to analyze three potentially key factors behind recent commodity
price increases: excess liquidity and speculation, increasing food demand by
emerging economies and the use of some food commodities for biofuel
production. The major findings in this paper was speculation played a key role
during the 2008 price rise whereas the use of some food commodities for biofuel
production played a small role and the increase in food demand by emerging
economies played no noticeable role.
 (Lutz Kilian and Dan Murphy, 16 March 2010) The main objectiveof
this study was to develop a structural vector autoregressive (VAR) model of the
global oil market. The major findings of this study was that the increase in oil
prices observed from 2003 to 2008 was caused by fluctuations in the flow
demand for oil driven by the global business cycle. The model also suggests that
1speculative trading played an important role during oil price shocks observed in
1979, 1986 and 1990.

P a g e | 25
 (Christopher Gilbert, March 2010) Main purpose of this study was to
quantify the effect of “bubble behavior”, possibly resulting from extrapolative
expectations and index-based investment on commodity futures prices between
2006 and 2000.The findings of this study was that both bubble behavior and
index investments have had a substantial impact on commodity futures prices.
 (Jeffrey Currie, Allison Nathan, David Greely and Damien
Courvalin, 30 March 2010) The major findings of this study was that
commodity price movements can be explained by increasing marginal costs in
the long term and fluctuations in inventories in the short term. The authors also
find speculative investors contributed to increased price levels and price
volatility in recent years noting as speculators buy, prices generally tend to rise,
and vice versa. Also the author points out that there is close relationship between
price volatility, inventories and storage capacity, as inventories help in closing
the gap between physical supply and demand.
 (Scott Irwin and Dwight Sanders, 2010) The paper aims to test whether
the major growth in index funds has increased price volatility in both agricultural
and energy markets and, in particular, whether they helped cause a commodity
price bubble in 2006-08.The findings of this study was that there were no strong
evidence that index funds caused a price bubble in commodity futures markets.
The authors also find increasing index fund positions are consistently associated
with declining price volatility and this paper gives a reasonable explanation for
this negative correlation arguing speculation helps to provide sufficient liquidity
for hedging needs.
 (International Monetary Fund, October 2008) The basic output ofthis
study was that strong demand from emerging economies, low capacity, low
inventories resulting in slow supply responses and the interaction between these
factors have been the primary causes of the surge in commodity prices observed
in the first half of 2008. In addition, demand for biofuel, supply disruptions and
trade restrictions have caused food prices to surge even higher. The authors also
note that this price momentum may have been reinforced by increased cross-
commodity price linkages.

P a g e | 26
 (Dwight Sanders, Scott Irwin and Robert Merrin, 1 January 2010)
Under this study the author brings out two important findings in agriculture
futures market since 1995, firstly a rapid increase in open interest since late 2004
and a stabilization of index funds’ percentage of open interest since 2006.
 (Gary Gorton and K. Geert Rouwenhorst ,March/April 2006) This
paper concludes that commodity futures returns have provided effective
diversification for stock and bond portfolios. Commodity futures have offered the
same return and risk premium as equities over the study period and are negatively
correlated with equity and bond returns due to different behavior over the
business cycle and positively correlated with inflation, unexpected inflation and
changes in expected inflation.
COMMODITY MARKET
India has a long history of commodity futures trading, extending over 125 years.
Still, such trading was interrupted suddenly since the midseventies in the fond
hope of ushering in an elusive socialistic pattern of society. As the country
embarked on economic liberalization policies and signed the GATT agreement in
The early nineties, the government realized the need for futures trading to
Strengthen the competitiveness of Indian agriculture and the commodity trade
And industry. Futures trading began to be permitted in several commodities, and
The ushering in of the 21 century saw the emergence of new National Commodity
Exchanges with countrywide reach for trading in almost all primary commodities
And their products.
A commodity futures contract is essentially a financial instrument. Following the
Absence of futures trading in commodities for nearly four decades, the new
Generation of commodity producers, processors, market functionaries, financial
Organizations, broking agencies and investors at large are, unfortunately,
Unaware at present of the economic utility, the operational techniques and the
Financial advantages of such trading. The Multi Commodity Exchange of India
(MCX) the premier New Order Exchange in the country is, therefore, launching
This Commodity Futures Education Series to provide valuable insights into the
Rationale for such trading, and the trading practices and regulatory procedures

P a g e | 27
Prevailing at the Exchange. For easy understanding and simplification of various
Issues and nuances involved in commodity futures trading, a convenient
Question-answer approach is adopted.
PHYSICAL AND FUTURES COMMODITYMARKETS
Q. What kind of statutory framework for regulating commodity futures
exists in India?
A. Commodity futures contracts and the commodity exchanges organizing
Trading in such contracts are regulated by the Government of India under the
Forward Contracts (Regulation) Act, 1952 (FCRA or the Act), and the Rules
framed there under. The nodal agency for such regulation is the Forward Markets
Commission (FMC), situated at Mumbai, which functions under the aegis of the
Ministry of Consumer Affairs, Food & Public Distribution of the Central
Government.
Q. What is "Commodity"?
A. Commodity includes all kinds of goods. FCRA defines "goods" as "every kind
of movable property other than actionable claims, money and securities".
Futures' trading is organized in such goods or commodities as are permitted by
the Central Government. At present, all goods and products of agricultural
(Including plantation), mineral and fossil origin are allowed for futures trading
under the auspices of the commodity exchanges recognized under the FCRA.
The national commodity exchanges have been recognized by the Central
Government for organizing trading in all permissible commodities which include
precious (gold & silver) and nonferrous metals; cereals and pulses; ginned and
Unginned cotton; oilseeds, oils and oilcakes; raw jute and jute goods; sugar and
gur; potatoes and onions; coffee and tea; rubber and spices, etc.
Indian scenario
The commodity derivatives markets in India are as old as those of the US. The origin
of commodity derivatives markets in India can be traced back to 1875, when
Bombay Cotton Trade Association Ltd., was set up to start trading in cotton Futures.
Subsequent to this, many other associations have started Future trading in
commodities at different places. For example, the Futures trading in oilseeds started

P a g e | 28
in 1900 at Bombay, raw jute and jute products in 1912 in Calcutta, wheat in Hapur in
1913, bullion in Bombay in 1920. However, in 1939, the Option trading in cotton
was banned by the government of Bombay to restrict the speculative activity in the
cotton market. in subsequent years, forward trading in various commodities like
oilseeds, food grains, vegetable oil, sugar cloth were also prohibited.
India’s commodity exchanges have come a long way since their opening up in the
early twenty first century. In India, three national level exchanges namely Multi
Commodity Exchange of India (MCEX), National Commodity and Derivatives
Exchange (NCDEX) and National Multi Commodity Exchanges are operating to
cater to the needs of Indian investors. Apart from these national level exchanges,
nearly 20 regional exchanges are in operation, to deal with specified commodities in
that region.
Present Scenario
Over the last 20 years, the prices of commodities have generally been bearish. Even
as recently as 2002-03, the outlook on the recovery in the global economy and world
trade was generally subdued due to depressed equity markets, weakening US dollar
and geopolitical concerns. Commodity market across the world was impacted by
these developments. However, of late, the scenario has completely changed as the
global economy recovered from its slump aided by the boom in the US markets and
increased demand from developing economies like India and China. In the global
investment market, the newly hailed, attractive, asset class is commodities. So,
investors are being attracted to this new booming market for investment.
History of Commodity Market in India
The Commodity Futures market in India dates back to more than a century. The first
organized futures market was established in 1875, under the name of ’Bombay
Cotton Trade Association’ to trade in cotton derivative contracts. This was followed
by institutions for futures trading in oilseeds, food grains, etc. The futures market in
India underwent rapid growth between the period of First and Second World War. As
a result, before the outbreak of the Second World War, a large number of commodity
exchanges trading futures contracts in several commodities like cotton, groundnut,

P a g e | 29
groundnut oil, raw jute, jute goods, castor seed, wheat, rice, sugar, precious metals
like gold and silver were flourishing throughout the country. In view of the delicate
supply situation of major commodities in the backdrop of war efforts mobilization,
futures trading came to be prohibited during the Second World War under the
Defence of India Act. After Independence, especially in the second half of the 1950s
and first half of 1960s, the commodity futures trading again picked up and there were
thriving commodity markets. However, in mid-1960s, commodity futures trading in
most of the commodities was banned and futures trading continued in two minor
commodities, viz, pepper and turmeric.
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

P a g e | 30
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 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 Commodity & Derivatives Exchange Limited

P a g e | 31
(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.
The Five exchanges operating at the national level (as on) are:
i) National Commodity and Derivatives Exchange of India Ltd. (NCDEX)
ii) National Multi Commodity Exchange of India Ltd. (NMCE)
iii) Multi Commodity Exchange of India Ltd. (MCX)
iv) Indian Commodity Exchange Ltd. (ICEX) which started trading operations on
November 27, 2009
v) ACE Derivatives and Commodity Exchange.
The leading regional exchange is the National Board of Trade (NBOT) located at
Indore. There are more than 15 regional commodity exchanges in India.
Figure1.2

P a g e | 32
Table-1.1
No. Exchanges Main Commodities
Multi Commodity
Gold, Silver, Copper, Crude Oil, Zinc, Lead,
Nickel, Natural gas,
Exchange of India Ltd., Aluminum, Menthe Oil, Crude_Palm_Oil, Refined
1.. Mumbai* Soya Oil, Cardamom, Guar Seeds, Kapas, Potato,
ChanaGram, Melted Menthol Flakes, Almond,
Wheat,
Barley, Long Steel, Maize, Soybean Seeds,
National Commodity &
Guar Seed, Soy Bean, Soy Oil, Chana,RM Seed,
Jeera,
2.
Derivatives Exchange
Ltd,
Turmeric, Guar Gum, Pepper, Cotton Cake, Long
Steel,
Mumbai*
Gur, Kapas, Wheat, Red Chilli, Crude Oil, Maize,
Gold,
Copper, Castor Seeds, Potato, Barley, Kachhi
Ghani
National Multi
Commodity
Rape/Mustard Seed, Guar Seeds, Nickel, Jute,
Refined
3. Exchange of India
Soya Oil, Zinc, Rubber, ChanaGram, Isabgul,
Lead, Gold,
Limited, Ahmedabad*
Aluminium, Copper, Turmeric, Copra, Silver, Raw
Jute,
How Commodity market works?
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.

P a g e | 33
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.
Figure1.3-Following diagram gives a fair idea about working of the Commodity market.
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

P a g e | 34
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.
COMMODITIES EXCHANGE
Commodities trading should not be construed as a means to dispose of surplus
products. Consumers value choice and prefer quality. Initially, there may be certain
distortion in agricultural prices but there will be productive growth for most of the
commodities.As India liberalises its farm economy, the issue of robust price
discovery and price risk hedging becomes important. This step is a crucial element in
ensuring that decontrol of commodities takes place without adverse effects on the
participants.
Exchange-traded derivatives are characterised by standardisation of the following
parameters:
 Grade/quality
 Contract maturity dates
 Tradeable lot sizes
 Price change intervals (ticks)
 Delivery locations

P a g e | 35
Derivative Exchanges provide the following benefits to the users:,
Hedging: Commodities, almost by definition, experience wide, continuous and
unpredictable price volatility. Sellers and buyers of commodities are exposed to the
price risk that this volatility creates and seek ways of insulating themselves from it.
A traditional solution to this problem has been “forward” contracts.
A forward contract obliges a buyer and a seller to receive and give delivery of a
specific quantity of a specific commodity at a specific future date. The problem is
that either party is exposed to a last minute non-performance by the counter-party. In
a futures exchange, however, the exchange itself stands guarantee for all futures
transactions and participants can lock in or “hedge” at a level that they find
acceptable.
Table-1.2
Price discovery: Successful exchanges create a near-perfect market situation
where a large number of buyers and sellers continuously transact in a commodity for
a variety of preset future dates. Every time an agreement is reached to transact, a
price is “discovered”. The price so discovered discounts the information available to
all participants thereby making it a robust and reliable price.
Risktransference : The moment a participant completes a transaction and
locks in a price, he is no longer affected by adverse price movements (e.g. if a seller
sells a particular contract at Rs 100 and subsequently the market trades down to Rs
90, there has been an adverse price movement but the seller continues to sit pretty on
a profit of Rs 10). At this stage therefore the risk stands “transferred” to whoever has
bought the contract. Individuals and Institutions with an appetite for risk, generally
Bullion Energy Base Metals Agricultural Commodities
Gold Crude Oil Copper
Chana
Soyabean
Ref. Soya Oil
Silver Natural Gas Nickel
Jeera
Turmeric
Sugar

P a g e | 36
termed Speculators participate in Derivatives trading to take on such risk and attempt
to profit from it.
Information: Exchanges continuously generate a large volume of data on traded
volumes, prices, depth and width of trading participation. These numbers are keenly
watched and tracked by a variety of audiences as they contain valuable clues about
the state of the economy.
LEADING COMMODITIES TRADED
Table-1.3
Trading Margin(MCX)
Commodities
Price
Quotation
Lot
Size
1 Rs. Change
(Profit/Loss)
Margin
(%)
(Approx)
Absolute
Margin
Trade
Value
GOLD Rs./10gms 1 Kg Rs. 100 5.00 129405 2588100
SILVER Rs./Kg 30 Kg Rs. 30 5.00 64240.5 1284810
CRUDE OIL Rs./Barrels
100
Barrels
Rs. 100 5.00 29105 582100
NATURAL
GAS
Rs./mmbtu
1250
mmbtu
Rs. 1250 5.79 17927.2875 309625
COPPER Rs./Kg
1000
MT
Rs. 1000 5.00 21370 427400
NICKEL Rs./Kg
250
Kg
Rs. 250 6.00 17016 283600
CHANA Rs./Quintal 10 MT Rs. 100 5.00 14695 293900
SOYABEAN Rs./Quintal 10 MT Rs. 100 6.91 22595.7 327000
JEERA Rs./Quintal 30 Kg Rs. 30 5.63 18832.35 334500
TURMERIC Rs./Quintal 50 Kg Rs. 50 8.28 27456.48 331600
SUGAR Rs./Quintal 10 MT Rs. 100 5.00 15225 304500

P a g e | 37
Table-1.4
Trading Margin(NCDEX)
As on 17-Apr-17
Symbol
Expiry
Date
Closing
Price
(Rs.)
Buy Margin
(%) (Rs.)
Sell Margin
(%) (Rs.)
Per Re
Change
Contract
Value
(Rs.)
BARLEYJPR 19-May-17 1577.00 5.11 8058.47 5.11 8058.47 100.00 157700.00
CASTOR 19-May-17 4781.00
29.6
5
141756.6
5
9.65 46136.65 100.00 478100.00
CHILLI 20-Jun-17 7388.00 10.38 38343.72 10.38 38343.72 50.00 369400.00
COCUDAKL 19-May-17 2058.00 5.71 11751.18 5.71 11751.18 100.00 205800.00
COPPER 28-Apr-17 362.85 7.25 26306.63 7.25 26306.63 1000.00 362850.00
COTTON 19-May-17 20940.00 5.00 104700.00 5.00 104700.00 100.00
2094000.0
0
CPO 28-Apr-17 529.60 5.00 26480.00 5.00 26480.00 1000.00 529600.00
DHANIYA 19-May-17 7192.00
19.5
6
140675.5
2
19.5
6
140675.5
2
100.00 719200.00
GOLDHEDGE 29-May-17 26582.00 5.00 132910.00 5.00 132910.00 100.00
2658200.0
0
GUAR2MT 11-May-17 4092.00 9.13 7471.99 9.13 7471.99 20.00 81840.00
`GUARGUM5 19-May-17 8828.00 11.32 49966.48 11.32 49966.48 50.00 441400.00
GUARSEED10 19-May-17 4091.00 9.11 37269.01 9.11 37269.01 100.00 409100.00
JEERAUNJHA 19-May-17 19005.00 16.28 92820.42 16.28 92820.42 30.00 570150.00
KAPASSRNR 28-Apr-17 1005.00 8.96 18009.60 8.96 18009.60 200.00 201000.00
MAIZEKHRF 19-May-17 1479.00 5.52 8164.08 5.52 8164.08 100.00 147900.00
MAIZERABI 19-May-17 1321.00 6.24 8243.04 6.24 8243.04 100.00 132100.00
RMSEED 19-May-17 3890.00 5.75 22367.50 5.75 22367.50 100.00 389000.00
SBMEALIDR 19-May-17 24930.00 5.45 13586.85 5.45 13586.85 10.00 249300.00
SHANKRKPA
S
28-Apr-17 1129.50 5.00 11295.00 5.00 11295.00 200.00 225900.00
STEELLONG 19-May-17 32110.00 5.44 17467.84 5.44 17467.84 10.00 321100.00

P a g e | 38
BULLION MARKET
1. Gold
Gold is the oldest precious metal known to man. Therefore, it is a timely subject
for several reasons. It is the opinion of the more objective market experts that the
traditional investment vehicles of stocks and bonds are in the areas of their alltime
highs and may be due for a severe correction.
To fully appreciate why 8,000 years of experience say “gold is forever”, we
should review why the world reveres what England's most famous economist,
John Maynard Keynes, cynically called the "barbarous relic."
Why gold is "good as gold" is an intriguing question. However, we think that the
more pragmatic ancient Egyptians were perhaps more accurate in observing that
gold's value was a function of its pleasing physical characteristics and its
scarcity.
• Gold is primarily a monetary asset and partly a commodity.
• More than two thirds of gold's total accumulated holdings account as
value for investment' with central bank reserves, private players and high carat
Jewellery.
• Less than one third of gold's total accumulated holdings is as a
'commodity' for Jewellery in Western markets and usage in industry.
• The Gold market is highly liquid and gold held by central banks, other
major institutions and retail Jewellery keep coming back to the market.
• Due to large stocks of Gold as against its demand, it is argued that the
core driver of the real price of gold is stock equilibrium rather than flow
equilibrium.
• Economic forces that determine the price of gold are different from, and in
many cases opposed to the forces that influence most financial assets.
• South Africa is the world's largest gold producer with 394 tons in 2001,
followed by US and Australia.
India is the world's largest gold consumer with an annual demand of 800 tons.

P a g e | 39
Table-1.5
India in World Gold Industry.
(Rounded Figures) India (In Tons) World (In Tons) % Share
Total Stock 13000 145000 9
Central Bank Holding 400 28000 1.4
Annual Production 2 2600 0.08
Annual Recycling 100-300 1100-1200 13
Annual Demand 800 3700 22
Annual Import 600 --- ---
Annual Export 60 --- ---
IndianGold Market
• Gold is valued in India as a savings and investment vehicle and is the
second preferred investment after bank deposits.
• India is the world's largest consumer of gold in jewellery as investment.
• In July 1997 the RBI authorized the commercial banks to import gold for
sale or loan to jewellers and exporters. At present, 13 banks are active in the
import of gold.
• This reduced the disparity between international and domestic prices of
gold from 57 percent during 1986 to 1991 to 8.5 percent in 2001.
• The gold hoarding tendency is well ingrained in Indian society.
• Domestic consumption is dictated by monsoon, harvest and marriage
season. Indian jewellery offtake is sensitive to price increases and even more
so to volatility.
• In the cities gold is facing competition from the stock market and a wide
range of consumer goods.
• Facilities for refining, assaying, making them into standard bars in India,
as compared to the rest of the world, are insignificant, both qualitatively and
quantitatively.

P a g e | 40
2. SILVER
General Characteristics
• Silver's unique properties make it a very useful 'Industrial Commodity',
despite it being classed as a precious metal.
• Demand for silver is built on three main pillars; industrial uses,
photography and Jewellery & silverware accounting for 342, 205 and 259
million ounces respectively in 2002.
• Just over half of mined silver comes from Mexico, Peru and United States,
respectively, the first, second and fourth largest producing countries. The
third largest is Australia.
• Primary mines produce about 27 percent of world silver, while around 73
percent comes as a by-product of gold, copper, lead, and zinc mining.
• The price of silver is not only a function of its primary output but more a
function of the price of other metals also, as world mine production is more a
function of the prices of other metals.
• The tie between silver and economic activity is strong, given that around
two-thirds of total silver fabrication is in the industrial and photographic
sectors.
• Often a faster growth in demand against supply leads to drop in stocks
with government and investors.
Table-1.6
World Silver Supply from Above-ground Stocks.
Million Ounces
2001 2002
Implied Net Disinvestment -9.5 20.9
Producer Hedging 18.9 -24.8
Net Government Sales 87.2 71.3
Sub-total Bullion 96.6 67.4
Scrap 182.7 184.9
Total 297.3 252.

P a g e | 41
Indian Scenario
• Silver imports into India for domestic consumption in 2002 was 3,400 tons
down 25 % from record 4,540 tons in 2001.
• Open General License (OGL) imports are the only significant source of
supply to the Indian market.
• Non-duty paid silver for the export sector rose sharply in 2002, up by close
to 200% year-on-year to 150 tons.
• Around 50% of India's silver requirements last year were met through
imports of Chinese silver and other important sources of supply being UK,
CIS, Australia and Dubai.
• Indian industrial demand in 2002 is estimated at 1375 tons down by 13 %
from 1,579 tons in 2001. In spite of this fall, India is still one of the largest
users of silver in the world, ranking alongside Industrial giants like Japan and
the United States.
• By contrast with United States and Japan, Indian industrial offtake for
fabrication in hardcore industrial applications like electronics and brazing
alloys accounts for only 15 % and the rest being for foils for use in the
decorative covering of food, plating of Jewellery and silverware and jari.
• In India silver price volatility is also an important determinant of silver
demand as it is for gold.
ENERGY
1. Crude Oil
General Characteristics
• Crude oil is a mixture of hydrocarbons that exists in a liquid phase in
natural underground reservoirs. Oil and gas account for about 60 per cent of
the total world's primary energy consumption.
• Almost all industries including agriculture are dependent on oil in one way
or other. Oil & lubricants, transportation, petrochemicals, pesticides and
insecticides, paints, perfumes, etc. are largely and directly affected by the oil
prices.
• Aviation gasoline, motor gasoline, naphtha, kerosene, jet fuel, distillate

P a g e | 42
fuel oil, residual fuel oil, liquefied petroleum gas, lubricants, paraffin wax,
petroleum coke, asphalt and other products are obtained from the processing
of crude and other hydrocarbon compounds.
• The prices of crude are highly volatile. High oil prices lead to inflation that
in turn increases input costs; reduces non-oil demand and lower investment
in net oil importing countries.
Indian Scenario
• India ranks among the top 10 largest oil-consuming countries.
• Oil accounts for about 30 per cent of India's total energy consumption. The
country's total oil consumption is about 2.2 million barrels per day. India
imports about 70 per cent of its total oil consumption and it makes no
exports.
• India faces a large supply deficit, as domestic oil production is unlikely to
keep pace with demand. India's rough production was only 0.8 million barrels
per day.
• The oil reserves of the country (about 5.4 billion barrels) are located
primarily in Mumbai High, Upper Assam, Cambay, Krishna-Godavari and
Cauvery basins.
• Balance recoverable reserve was about 733 million tones (in 2003) of
which offshore was 394 million tones and on shore was 339 million tones.
• India had a total of 2.1 million barrels per day in refining capacity.
• Government has permitted foreign participation in oil exploration, an
activity restricted earlier to state owned entities.
Table-1.7
Prevailing Duties & Levies on Crude Oil
Particulars Rates
Basic Customs Duty 10%
Cess Rs.1800 per metric tonne
NCCD* Rs.50 per metric tonne
Education cess 2%
Octroi 3%
War fedge Rs.57 per metric tonne

P a g e | 43
METALS
1. Aluminium
CharacteristicsOf Aluminium
• Aluminium is the third most abundant element in the Earth's crust. In
nature however it only exists in very stable combinations with other materials
(Particularly as silicates and oxides) and it was not until 1808 that its
Existence was first established.
• Aluminum is light. Its density is only one third that of steel. Aluminum is
resistant to weather, common atmospheric gases and a wide range of liquids.
Aluminum has a high reflectivity, and therefore finds more decorative uses.
Aluminum has high elasticity, which is an advantage in structures under
shock loads.
• Aluminium keeps its toughness down to very low temperatures, without
becoming brittle like carbon steels. It is easily worked and formed. Aluminium
conducts electricity and heat nearly as well as copper.
Indian Scenario
• India is considered the fifth largest producer of aluminium in the world.
• It is estimated at about 3037 million tonnes for all categories of bauxite
(proved, probable and possible). With the present level of consumption of
aluminum, the identified reserves would have an estimated life of over 350
years. India's reserves are estimated to be 7.5 per cent of the total deposits
and installed capacity is about 3 per cent of the world.
• In terms of demand and supply, the situation is not only self-sufficient, but
it also has export potential on a competitive basis. India's annual export of
aluminium is about 82,000 tonnes.
• India’s annual consumption of Aluminum is around 6.18 lakh tons and is
projected to increase to 7.8 lakh tones by 2007.
• About a decade back, the primary Indian aluminium producers were
BALCO, NALCO, INDAL, HINDALCO and MALCO. Of the five, two (BALCO
and NALCO) were in the public sector while the other three were in the
private sector

P a g e | 44
LETS TAKE AN EXAMPLE OF GOLD
Gold commodity Future Market
Introduction
Gold is a unique asset based on few basic characteristics. First, it is primarily
a monetary asset, and partly a commodity. As much as two thirds of gold’s total
accumulated holdings relate to “store of value” considerations. Holdings in this
category include the central bank reserves, private investments, and high-cartage
jewelry bought primarily in developing countries as a vehicle for savings. Thus, gold
is primarily a monetary asset. Less than one third of gold’s total accumulated
holdings can be considered a commodity, the jewelry bought in Western markets for
adornment, and gold used in industry.
The distinction between gold and commodities is important. Gold has
maintained its value in after-inflation terms over the long run, while commodities
have declined.
Some analysts like to think of gold as a “currency without a country’. It is an
internationally recognized asset that is not dependent upon any government’s
promise to pay. This is an important feature when comparing gold to conventional
diversifiers like T-bills or bonds, which unlike gold, do have counter-party risk.
Gold in Indian Scenario
Gold is valued in India as a savings and investment vehicle and is the second
preferred investment behind bank deposits. India is the world’s largest consumer of
gold in jewelry (much of which is purchased as investment). The hoarding tendency
is well ingrained in Indian society, not least because inheritance laws in the middle of
the twentieth century lent a great desirability to anonymity. Indian people are
renowned for saving for the future and the financial savings ratio is strong, with a
ratio of financial assets-to-GDP of 93%.
Gold’s circulates within the system and roughly 30% of gold jewelry
fabrication is from recycled pieces. India is typically also the largest purchaser of
coins and bars for investment (>80tpa), although last year it had to concede first
place to Japan in the wake of the heavy buying in the first quarter due to fears for the

P a g e | 45
stability of the Japanese banking system. In 1998-2001 inclusive, annual Indian
demand for gold in jewelry exceeded 600 tons; in 2002, however, due to rising and
volatile prices and a poor monsoon season, this dropped back to 490 tons, and coin
and bar demand dropped to 67 tons. Indian jewelry off take is sensitive to price
increases and even more so to volatility, although this decline in tonnage since 1998
is also due in part to increasing competition from white and brown goods and
alternative investment vehicles, but is also a reflection of the increase in price. The
Indian bride’s “Streedhan”, the wealth she takes with her when she marries and
which remains hers, is still gold, however (thus giving gold an important role in the
“empowerment” of women in India).
The distinction between gold and commodities is important. Gold has
maintained its value in after-inflation terms over the long run, while
commoditieshave declined.
Some analysts like to think of gold as a “currency without a
country’. It is an internationally recognized asset that is not dependent
upon any government’s promise to pay. This is an important feature when
comparing gold to conventional diversifiers like T-bills or bonds, which
unlike gold, do have counter-party risk.
Figure-1.4

P a g e | 46
Gold an Independent Asset
It’s not difficult to understand why the gold price moves independently from
the economic cycle when one considers the diversity of its demand and supply base,
the ultimate determinants of price movements.
There are three sources of gold supply: mine production, official sector sales
and scrap or recycled gold. Mine production is by far the largest element, accounting
for 70% of total supply last year. Changes in annual mine supply bear no relation to
changes in US or even global GDP growth. The upward trend in mine production
that was underway in the late 1980s was not arrested by 1990 recession (the US
economy suffered an outright contraction, while world GDP growth slowed to 1.6%
from 2.9% the previous year). Nor was the downtrend in mining output that began in
2001 reversed by the sharp acceleration in world growth.
Mine production is influenced by very specific factors, such as the level of
exploration spending, the success or otherwise in discovering new gold deposits and
the cost of extraction (some new discoveries may not be economically viable). Lead
times in gold mining are often very long. It can take years to re-open a closed mine,
let alone find and mine new reserves.
The decision to build a mine shaft (and often an entire infrastructure) is a
long term one that will often see business cycles comes and goes. Central bank
decisions to buy or sell gold (they remain net sellers) are also usually strategic in
nature, rather than reactive to the economic cycle. The decision to buy or sell gold is
often made years in advance and then carried out over a period of years. In
Switzerland, for e xample, the proposition to sell gold (the first gold sales
programmed) was first recommended by a group of experts in 1997. However, the
actual sales programmed did not commence until May 2000, with the sales then
taking place over a period of five years.
Similarly, in Indonesia the 1998 recession saw scrap supply increase by 72
tonnes in the first quarter of the year, in this instance purely for independent reasons
rather than at the behest of the government.

P a g e | 47
Turning to demand
Conventional wisdom argues that recessions are bad for commodity prices. The
reasoning goes that as consumer and business confidence falls, demand for goods
and services is cut back and hence the materials used in the production of those
goods or in the provision of services (many of which are commodities) declines,
thereby depressing their price.
India is in fact the single largest consumer of gold jewellery in the world in
tonnage terms. Last year, Indian households bought 558 tonnes of gold jewelry, more
than double their US counterparts (Chart 7). Chinese consumers rank second, having
bought 331 tonnes. US consumers are third in tonnage terms, although US demand
remains highest in retail value terms due to its higher trade margins. The extent to
which worldwide gold jewelry demand suffers from a US recession will depend
partly on the spill-over effects to other countries. If proponents of “decoupling”
prove to be correct (they argue that emerging market economies are now strong
enough domestically to withstand a US slowdown) then worldwide jewelry demand
need not fare badly.
In summary, statistical analysis suggests there is no relationship between
changes in US GDP growth and changes in the gold price. This reflects gold’s unique
and diverse demand and supply base, which as for any freely-traded good ultimately
determine the price. Consequently, a US recession does not have negative
implications for the gold price. The only element of demand likely to be affected by
a recession is investment demand, but that in turn will depend on the “type” of
recession. So far, the brewing recession has been positive for gold, as it has been
accompanied by a rise in inflation and a falling dollar, which has boosted demand for
gold as a dollar and inflation hedge.
What makes Gold Special?
 Timeless and Very Timely Investment: For thousands of years, gold has
been prized for its rarity, its beauty, and above all, for its unique
characteristics as a store of value. Nations may rise and fall, currencies come
and go, but gold endures. In today’s uncertain climate, many investors turn to
gold because it is an important and secure asset that can be tapped at any

P a g e | 48
time, under virtually any circumstances. But there is another side to gold that
is equally important, and that is its day-to-day performance as a stabilizing
influence for investment portfolios. These advantages are currently attracting
considerable attention from financial professionals and sophisticated
investors worldwide.
 Gold is an effective diversifier: Diversification helps protect your portfolio
against fluctuations in the value of any one-asset class. Gold is an ideal
diversifier, because the economic forces that determine the price of gold are
different from, and in many cases opposed to, the forces that influence most
financial assets.
 Gold is the ideal gift: In many cultures, gold serves as a family treasure or a
wealth transfer vehicle that is passed on from generation to generation. Gold
bullion coins make excellent gifts for birthdays, graduations, weddings,
holidays and other occasions. They are appreciated as much for their intrinsic
value as for their mystical appeal and beauty. And because gold is available
in a wide range of sizes and denominations, you don’t need to be wealthy to
give the gift of gold.
 Gold is highly liquid: Gold can be readily bought or sold 24 hours a day, in
large denominations and at narrow spreads. This cannot be said of most other
investments, including stocks of the world’s largest corporations. Gold is also
more liquid than many alternative assets such as venture capital, real estate,
and timberland. Gold proved to be the most effective means of raising cash
during the 1987 stock market crash, and again during the 1997/98 Asian debt
crisis. So holding a portion of your portfolio in gold can be invaluable in
moments when cash is essential, whether for margin calls or other needs.
Fifteen Fundamental Reasons for bullish run of Gold
1. Global Currency Debasement:
The US dollar is fundamentally & technically very weak and should fall
dramatically. However, other countries are very reluctant to see their currencies
appreciate and are resisting the fall of the US dollar. Thus, we are in the early stages

P a g e | 49
of a massive global currency debasement, which will see tangibles, and most
particularly gold, rise significantly in price.
2. Investment Demand for Gold is Accelerating:
When the crowd recognizes what is unfolding, they will seek an alternative to paper
currencies and financial assets and this will create an enormous investment demand
for gold. To facilitate this demand, a number of new vehicles like Central Gold Trust
and gold Exchange Traded Funds (Etf's) are being created.
3. Alarming Financial Deterioration in the US:
In the space of two years, the federal government budget surplus has been
transformed into a yawning deficit, which will persist as far as the eye can see. At the
same time, the current account deficit has reached levels which have portended
currency collapse in virtually every other instance in history.
4. Negative Real Interest Rates in Reserve Currency (US dollar):
To combat the deteriorating financial conditions in the US, interest rates have been
dropped to rock bottom levels, real interest rates are now negative and, according to
statements from the Fed spokesmen, are expected to remain so for some time. There
has been a very strong historical relationship between negative real interest rates and
stronger gold prices.
5. Dramatic Increases in Money Supply in the US and Other Nations:
US authorities are terrified about the prospects for deflation given the unprecedented
debt burden at all levels of society in the US. Fed Governor Ben Bernanke is on
record as saying the Fed has a printing press and will use it to combat deflation if
necessary. Other nations are following in the US's footsteps and global money supply
is accelerating. This is very gold friendly.
6. Existence of a Huge and Growing Gap between Mine Supply and Traditional
Demand:
Gold mine supply is roughly 2500 tonnes per annum and traditional demand
(jewellery, industrial users, etc.) has exceeded this by a considerable margin for a

P a g e | 50
number of years. Some of this gap has been filled by recycled scrap but central bank
gold has been the primary source of above-ground supply.
7. Mine Supply is anticipated to Decline in the next Three to Four Years:
Even if traditional demand continues to erode due to ongoing worldwide economic
weakness, the supply demand imbalance is expected to persist due to a decline in
mine supply. Mine supply will contract in the next several years, irrespective of gold
prices, due to a dearth of exploration in the post Bre-X era, a shift away from high
grading which was necessary for survival in the sub-economic gold price
environment of the past five years and the natural exhaustion of existing mines.
8. Large Short Positions:
To fill the gap between mine supply and demand, central bank gold has been
mobilized primarily through the leasing mechanism, which facilitated producer
hedging and financial speculation. Strong evidence suggests that between 10,000 and
16,000 tonnes (30- 50% of all central bank gold) is currently in the market. This is
owed to the central banks by the bullion banks, which are the counter party in the
transactions.
9. Low Interest Rates Discourage Hedging:
Rates are low and falling. With low rates, there isn't sufficient contango to create
higher prices in the out years. Thus there is little incentive to hedge, and gold
producers are not only hedging, they are reducing their existing hedge positions, thus
removing gold from the market.
10. Rising Gold Prices and Low Interest Rates Discourage Financial Speculation
on the Short Side:
When gold prices were continuously falling and financial speculators could access
central bank gold at a minimal leasing rate (0.5 - 1% per annum), sell it and reinvest
the proceeds in a high yielding bond or Treasury bill, the trade was viewed as a lay
up. Everyone did it and now there are numerous stale short positions. However, these
trades now make no sense with a rising gold price and declining interest rates.

P a g e | 51
RESEARCH
METHODOLOGY

P a g e | 52
Methods of Research
Research Design
Exploratory design has been selected as data has been collected from the secondary
sources inorder to understand the functioning of commodity market and data has
been collected from primary source inorder to satisfy the research objectives.
DATA COLLECTION APPROACH
Primary data is important data for successful research. It has collected through
questionnaire and personal discussion with brokers and investors. And also
secondary data which act like key for successful research is collected from MCX,
Gold World website,ventura official website and articles in newspapers such as
Business Line, Economic Standards. Spot prices were collected from business line
news paper and future prices were collected from MCX.
SOURCES OFDATA COLLECTION:
Primary and secondary data are collected from following sources.
Primary Data-
 Questionnaire
 Observation and personal discussion with investors.
Secondary data-
 Information collected from different websites likes ventura official website,
MCX etc.
 From various text books, journals, magazines, news papers and booklets from
company.
TOOL USED FOR ANALYSES
1. Graphical Representation of Analysis:
a. Pie charts
b. Bar Graphs
2. Ventura Pointer Software

P a g e | 53
Sampling
The study mainly deals with the financial behavior of Individual Investors towards
Commodity market in India. The required data was collected through a pretested
questionnaire administered on a combination of convenience and judgment sample of
50 individual investors. Judgment sample selection is due to the time. Respondents
were screened and inclusion was purely on the basis of their knowledge about
Financial Markets, Commodity market in particular. This was necessary, because the
questionnaire presumed awareness of some basic terminology about Commodity
market. The purpose of the survey was to understand the behavioral aspects of
individual investors, mainly their fund selection behavior, various factors influencing
this behavior and also the conceptual awareness level among individual investors.
Sample of the questionnaire is given in Annex. A.
LIMITATIONS OF THE STUDY:-
The study on investor’s perception is not an easy task to
come out, as it is believed. The main limitations of study
are:-
 There may be biasness in information by market
participants.
 The complete data was not available due to company
privacy and secrecy.
 The size of the research may not be substantial.
 Lake of time as one month and seven days is not
sufficient to make a study on a topic the investor
satisfaction towards the service provider by the
broking house.

P a g e | 54
Data Analysis
And
Interpretation

P a g e | 55
DATA ANALYSIS
1. The option on investment portion of the customer’s income.
TABLE-1.1
OPTIONS NO. OF RESPONDENT PERCENTAGE(%)
BELOW 10% 8 16
10-15% 20 40
15-20% 12 24
ABOVE 20% 10 20
TOTAL 50 100
FIGURE-1.1
INFERENCE DRAWN-From the above analysis we found that 16% people’s
income is below 10%, 40% of the people’s income is 10-15%, 24% of the people’s
income is up to 15-20%,where as 20% of the customers income are above 20%.
16%
40%
24%
20%
INVESTMENT PORTION
BELOW 10 10-15 15-20 ABOVE 20

P a g e | 56
2.The option on investment of money in financial market.
TABLE 1.2
OPTIONS NO.OF RESPONDANTS PERCENTAGE(%)
YES 40 80
NO 10 20
TOTAL 50 100
FIGURE 1.2
INFERENCE DRAWN – From the above analysis we found that 80% of the people
are interested in investing in stock market and 20% of the people are found not
interested in stock market.
80%
20%
STOCK MARKET INVESTMENT
YES NO

P a g e | 57
3.The options on saving of money for investment.
TABLE-1.3
OPTIONS NO. OF RESPONDANT PERCENTAGE(%)
YES 33 82
NO 7 18
TOTAL 40 100
FIGURE 1.3
INFERENCE DRAWN –From the above analysis we found that 82% of the
respondents are able to save money for investment where as 18% of the respondent
are not able to save money for investment in stock market.
82%
18%
SAVING OF MONEY FOR INVESTMENT
YES NO

P a g e | 58
4.The options on preference on investment in financial market.
TABLE 1.4
OPTIONS N0.OF RESPONDANTS PERCENTAGE(%)
EQUITY MARKET 12 30
COMMODITY MARKET 10 25
MUTUAL FUNDS 9 22
CURRENCY MARKET 3 8
REAL ESTATE 4 10
OTHERS 2 5
TOTAL 40 100
FIGURE 1.4
INFERENCE DRAWN – From the above analysis we found that 30% of the
respondents are interested in investing in equity market, 25% of the respondents are
interested in investing in commodity market, 22% of the respondents are interested in
mutual funds, 8% of the respondent are interested in investing in currency market,
another 10% are interested in investing in real estate and 5% of the respondents are
interested in investing in other financial market.
30%
25%
22%
8%
10%
5%
INVESTMENT IN FINANCIAL MARKET
EQUITY MARKET
COMMODITY MARKET
MUTUAL FUNDS
CURRENCY MARKET
REAL ESTATE
OTHERS

P a g e | 59
5.The options on preference of investment horizon.
TABLE 1.5
OPTIONS N0.OF RESPONDANTS PERCENTAGE(%)
SHORT TERM 8 20
MEDIUM TERM 20 50
LONG TERM 12 30
TOTAL 40 100
FIGURE-1.5
respondents have a short term investment preference, 50% of the respondents have a
medium term investment preference and 30% of the respondent have a long term
investment preference.
20%
50%
30%
PREFERENCEOF INVESTMENT HORIZON
SHOTR TERM
MEDIUM TERM
LONG TERM

P a g e | 60
6.The options on market attitude towards financial market.
TABLE 1.6
OPTIONS NO. OF RESPONDANTS PERCENTAGE(%)
EQUITY MARKET 30
COMMODITY MARKET 22
MUTUAL FUNDS 18
CURRENCY MARKET 14
REAL ESTATE 16
TOTAL 40 100
FIGURE 1.6
respondents have a highly favourable attitude towards financial market, 22% of the
respondents have a favourable attitude towards financial market, 18% of the
respondents have a somewhat favourable attitude towards financial market, another
14% of the respondent have not very favourable attitude towards financial market
and 16% of the respondents are not at all favourable towards financial market.
EQUITY
COMMODI
TY
CURRENCY
REAL
ESTATE
MUTUAL
FUNDS
HIGHLY FAVOURABLE 15 11 9 7 8
FAVOURABLE 12 12 10 9 6
SOMEWHAT FAVOURABLE 8 9 12 12 14
NOT VERY FAVOURABLE 2 5 8 10 9
NOT AT ALL FAVOURABLE 3 3 1 2 3
0
2
4
6
8
10
12
14
16
NO.OFPEOPLE
ATTITUDE TOWARDS FINANCIAL MARKET

P a g e | 61
7.The options on risk taking capacity.
TABLE 1.7
HIGH 10 25
MEDIUM 12 30
LOW 18 45
TOTAL 40 100
FIGURE 1.7
respondent have a high risk taking capacity, 30% of the respondent have a medium
risk taking capacity where as 45% of the respondent have a low risk taking capacity.
25%
30%
45%
RISK TAKING CAPACITY
HIGH MEDIUM LOW

P a g e | 62
8.The options on investment objective.
TABLE 1.8
OPTIONS NO. OF RESPONDENTS PERCENTAGE(%)
HIGH INCOME 10 26
STABLE INCOME 6 16
REASONABLE INCOME AND
SAFETY
11 29
FOR FUTURE WELFARE 4 11
RETIREMENT PROTECTION 5 13
TAX BENEFITS 2 5
TOTAL 40 100
FIGURE 1.8
respondent have an investment objective of high income, 16% of the respondent have
an objective of stable income, 29% of the respondent have the investment objective
of reasonable income and safety, 11% of the respondent have an investment
objective of future welfare whereas 13% of the respondent have an investment
objective of retirement protection and 5% of the respondents have an objective of tax
benefits.
26%
16%
29%
11%
13%
5%
INVESTMENT OBJECTIVE
HIGH INCOME
STABLE INCOME
REASONABLE INCOME &
SAFETY
FUTURE WELFARE
RETIREMENT PROTECTION
TAX BENEFITS

P a g e | 63
9.The options on awarenessofcommodity market.
TABLE 1.9
YES 35 87
NO 5 13
TOTAL 40 100
FIGURE 1.9
respondents are aware of the commodity market whereas 13% of the respondent do
not have any idea on the commodity market.
87%
13%
AWARENESSON COMMODITY MARKET
YES NO

P a g e | 64
10. The options on how they knew about the commodity market.
TABLE 2.0
PRINT MEDIA 6 17
ELECTRONIC MEDIA 8 23
FINANCIAL MAGAZINE 5 14
FRIENDS/RELATIVES 9 26
BROKER/AGENTS 5 14
OTHERS 2 6
TOTAL 35 100
FIGURE 2.0
respondent knew about the commodity market through print media, 23% of the
respondent knew through electronic media, 14% knew through financial magazines,
26% came to knew from friends/relatives, 14% came to knew through broker/agent
and 6% of the respondent knew through other sources.
17%
23%
14%
26%
14%
6%
HOW THEY KNEW THE COMMODITY MARKET
PRINT MEDIA
ELECTRONIC MEDIA
FINANCIAL MAGAZINES
FRIENDS/RELATIVES
BROKER/AGENT
OTHERS

P a g e | 65
11.The options on investment in commodity market.
TABLE 2.1
YES 32 80
NO 8 20
TOTAL 40 100
FIGURE 2.1
respondents are investing in commodity markets whereas 20% of the respondent do
not invest in the commodity market.
80%
20%
INVESTMENT IN COMMODITY MARKET
YES
NO

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