The document provides an overview of the Indian commodity market, including the two major commodity exchanges - MCX and NCDEX. It discusses the various commodities traded on the exchanges like agricultural products, precious metals, base metals and energy. It also provides details about commodity futures contracts, their purpose and participants. The benefits of hedging and different hedging strategies like long hedge and short hedge are explained with examples. Lastly, it summarizes the advantages of trading commodities with MK Commodity Brokers like their research, online trading platform and round-the-clock operations.

1. MK COMMODITY BROKERS LTD.

2. Snapshot of Indian Commodity Market

3. Two Major Commodities Exchange in India MCX (Multi Commodity Exchange) NCDEX (National Commodities & Derivatives Exchange)

4. Commodities traded on the exchanges Agri Products: Jeera Pepper Chilli Turmeric Guar Seed Guar Gum Soya bean Sugar Maize Precious Metals : Gold Silver Platinum

5. Commodities traded on the exchanges Base Metals: Copper Nickel Lead Zinc Aluminum Tin Energy: Crude oil Natural Gas

6. Other Information Exchange Timings Agri Products: 10:00 AM To 5:00 PM Other Commodities: 10:00 AM To 11:30 PM Instrument Traded: Futures Contract Expiry of Contracts : Different for different commodities

7. What are Commodity futures? A Financial Contract The underlying commodity is bought or sold at a future date A tool used by Investors, Hedgers, Arbitrageurs, Day Traders

8. Why futures trading in Commodities? Portfolio diversification and risk management Additional investment opportunity Low cost business No Transportation, storage, insurance, security charges Low Margins – High leverage Intrinsic value of the commodity Domain knowledge of industry Hedging/ Arbitrage

9. Purpose of Futures Markets Meet the needs of three groups of future market users Those who wish to discover information about future prices of commodities (suppliers) Those who wish to speculate (speculators) Those who wish to transfer risk to some other party (hedgers) Those who want to take advantage of price difference in different markets (Arbitrageurs)

10. Commodity Futures Market – Participants Hedgers Producers – Farmers Consumers – Refineries, Food processing companies Speculators Institutional proprietary traders Brokerage houses Spot Commodity traders Arbitrageurs Brokerage houses Investors

11. Exchange vs. Bilateral Trading Difficulty in price dissemination Market prices available to wider world Counter party credit risk Absence of counter party credit risk High cost and time consuming negotiations Low transaction costs Traded prices unknown to other players Price transparency Restricted access Common platform for all traders Bilateral trading Exchange

12. Risks encountered by industry Price volatility depends on International market movement Results in higher procurement cost reducing operational margins No options or tools were available earlier Directionless market No control measures Counter party Risk Credit risk especially during periods of volatile prices Quantity risk during shortages Quality Risk

13. Benefits… Investor: Portfolio diversification and risk management Additional investment opportunity Physical trader : Low cost business No Transportation, storage, insurance, security Charges Domain knowledge of industry Traders: Low Margins – High leverage No balance-Sheet, P&L, EBITDA Hedging/ Arbitrage

14. Hedging Purpose Avoid risk of adverse market movements Rationale Cash and Futures prices tend to move in tandem Converge at close to expiry Types of Hedges Long Hedge, Short Hedge Advantages Lock in a price and margin in advance Disadvantages Limits opportunities if prices move favorably

15. Types of Hedging Long Hedge Hedges that involve taking a long position in futures contract Appropriate when a company plans to owns certain asset in the future Short Hedge Hedges that involve taking a short position in futures contract Appropriate when the hedger already owns the asset or likely to own the asset and expects to sell it in future

16. Short Hedge - Example Suppose:- COPPER producer wants to sell COPPER in future . There is an equal chances of price going up or down. There is a risk if price goes down. Loss – Rs. 50000/- If price goes down by Re. 1 Gain – Rs. 50000/- If price goes up by Re. 1 Case 50000 Kg (50MT) of Copper Expecting/having stock Stock Copper Producer

17. Short Hedge- Example contd… Profit Rs. 25/Kgs -- Profit Rs. 25/Kgs Case 2 - Rs. 305/Kgs Loss Rs. 10/Kgs -- Loss Rs. 10/Kgs Case 1 - Rs. 270/Kgs Without Hedge Profit Rs. 15/Kgs Loss Rs. 10/Kgs Profit Rs. 25/Kgs Case 2 - Rs. 305/Kgs Profit Rs. 15/Kgs Profit Rs. 25/Kgs Loss Rs. 10/Kgs Case 1 - Rs. 270/Kgs Net Result Future Spot 30 th Dec With Hedge (You rule out a loss) Sell Buy/Hold 30 th Nov Rs. 295/Kgs Rs. 280/Kgs 30 th Nov Future Spot Date

18. Long Hedge- Example Scenario of consumer who wishes to lock input prices There is an equal chances of price going up or down. There is a risk if price goes up. Gain – Rs. 50000/- If price goes down by Re. 1 Loss – Rs. 50000/- If price goes up by Re. 1 Case 50,000 Kg (50 MT) of copper Wants to buy Copper in future Stock Copper Consumer

19. Long Hedge - Example contd… Loss Rs. 25/Kgs -- Loss Rs. 25/Kgs Case 2 - Rs. 305/Kgs Profit Rs. 10/Kgs -- Profit Rs. 10/Kgs Case 1 - Rs. 270/Kgs Without Hedge Loss Rs. 15/Kgs Profit Rs. 10/Kgs Loss Rs. 25/Kgs Case 2 - Rs. 305/Kgs Loss Rs.15/Kgs Loss Rs. 25/Kgs Profit Rs. 10/Kgs Case 1 - Rs. 270/Kgs Net Result Future Spot 30 th Dec With Hedge (You rule out a loss) Buy Wait till Nov 30 th Nov Rs. 295/Kgs Rs. 280/Kgs 30 th Nov Future Spot Date

20. Advantage MK Commodity Brokers Top Quality Research Professionally qualified analysts with rich industry experience Research on Precious Metals, Base Metals and Energy Daily outlook report and trading calls on SMS Online Trading Single Screen customized market watch for MCX / NCDEX with BSE / NSE Streaming quotes & intra-day trading calls Pro-active Relationship Management Relationship management desk Educating clients on commodities futures market.

21. Advantage for Clients Round the clock operations in commodities trading Indian commodities market, unlike stock market is open till 11.30 in the night and MK Commodity Brokers Ltd.is all poised to offer round the clock services through its dedicated team of professionals. Better Trading Facility at one place. State of Infrastructure The strong IT backbone of Mangal Keshav helps us to provide customized direct services through our back office system, nation-wide connectivity and website.

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