This document outlines a research proposal submitted by Tejal Navarangani and Parth Shah to Maulik Vasani. The research aims to explore the relationship between commodity futures prices and spot market prices through an exploratory study of 7 commodities. Primary data on commodity and spot prices will be collected from news sources and exchanges, while secondary data on investor preferences will come from questionnaires. The sampling method will be convenience-based. Key dates are outlined for completing proposal, fieldwork, analysis, and final report. The research could benefit investors, brokers, traders and others by increasing awareness of linkages between futures and spot markets.

1. Submitted by
Tejal Navarangani
Parth Shah
Submitted to
Maulik Vasani
The Sunshine Group of Institution, Rajkot

2.  The behaviour of commodity prices, an issue that has received
considerable attention from academics, is also a major concern
for producers and consumers.
 Most commodity markets are distinguished by the fact that
there is a spot or cash market in which the physical product is
sold as well as a forward market in which contracts for future
delivery of the product are sold.
 Our research is based on the problem that weather future
treading effect on spot market or not.

3.  1. Commodity Spot Prices:
An Exploratory Assessment of Market–Structureand Forward–Trading Effects1
By Margaret E. Slade & Henry Thille, September 2004
in this as with most empirical studies of futures prices, we find
a p ositive time–series relationship between trading volume
and the volatility of spot prices. Moreover,since we deal with
multiple related markets, we are able to assess that
relationship in the cross section, and we find that it is also
positive. Our findings are consistent with the predictions of
many destabilizing–speculation and informational models. We
can, however, go further. Indeed, we are able to exploit our
instrumental–variables technique to distinguish between
broad classes of theories that predict a positive relationship.

4. 2. Commodity Derivative Market and its Impact on
Spot Market
By Golaka C Nath and Thulasamma Lingareddy
It is expected that futures trading helps in reducing
seasonal/cyclical fluctuation in price. We wanted to find out
if this has happened in case of the above commodities. the
study finds that the introduction of future trading in the
selected commodities had apparently led to increase in price
of commodity like urad but the same is not true for wheat
and gram. The spot prices of all three commodities under
study have increased in the post futures period though
except for urad, variables are not found statistically
significant. The spot prices of these commodities declined
after the ban on futures trading was introduced.
However, the price volatility increased significantly during
the period when futures were allowed. There has been a
sharp fall in volatility after the ban of futures in these
commodities. Althou gh gram prices too have posted a
moderate rise in the post-futures trading period, the
impact was not found statistically significant.

5.  whether the index futures trading in India has caused
a significant change in spot market volatility of the
selected underlying individual commodity.
 how the index futures trading has affected trading
efficiency of the selected commodity.
 Find out the perception of investors.
 Find out the investing pattern of investor in
commodity market.
 How commodites are treaded in commodity market.

6.  Ho : commodity prices effects on spot prices.
 H1: commodity prices does not effect on spot prices.

7. 1. Research design
THIS RESEARCH FALL INTO CATEGORY OF Exploratory
research
2. Data Collection Design
◦ PRIMARY DATA
The data regarding commodity prices and spot prices will
be procured from respective news papers and exchange
websites etc.
◦ SECONDARY DATA
Through Questionnaire investors’ preference can be known.

8. 3.Sampling Design
◦ Sampling design would be conveniences.
◦ Sample size would be of 7 commodities.
◦ Population will be of all commodities.

9.  Prepare proposal by 15th December 2010
 Complete fieldwork by 28th February 2011
 Data collection by 5th March
 Complete analysis by 15th March 2011
 Complete final report by 25th March 2011

10.  First investors’ awareness towards this concept can be known.
Some of the investors who are not aware about this, they can
be guided on this area. Again traders and broking firms can be
aware about relevance between future market and spot market.
Beneficiaries
Customers
Broking firms
Investors
Traders
Other prospective customers