Final Main Project

S.V.
INSTITUTE OF MANAGEMENT 1 | P a g e

CHAPTER-1
COMPANY
INTRODUCTION

S.V.INSTITUTE OF MANAGEMENT 2 | P a g e


1.1 Vision & Mission:

Vision
"To Be a Prominent Destination to Enhance the Prosperity of Its Clients, Investors,
Associates and Employees, Always"
"To Provide Best Value For Money To Clients Through Personalized Service,
Innovative Products, Best Trading And Investment Strategies And State-Of-The-Art
Technologies. We at Swastika Believe That 'Our Services Combined With Our Investors'
Trust Will Lead To A Prosperous Swastika Family"

We Are Committed For:
Integrity and transparency in all transactions,
Providing investment solutions based on quality and unbiased research,
Providing personalized services to all investors and business associates,
Achieving success through clients growth.

Mission
Institutional Broking Empanelment with Banks, FIs, & Insurance Companies,
Mutual Fund business,
Merchant Banking Services,
Registrar & Transfer Agents Services,
Equity Placement & Venture Capital Funding,
Dealing in Forex,
Financing & Loans Syndication.


1.2 Company Information:

Name : Swastika Investmart Ltd.
Head Office : 1st Floor Bandukwala Building,
British Hotel Lane Fort,
Mumbai,
Maharashtra-400001
Regional Offices : Delhi, Kota, Jaipur, Bhopal,
Ahmedabad.
Registrars : Ankit Consultancy Pvt Ltd
Plot No. 60
Electronic Complex
Pardeshipura
Indore - 452010
Phone No : 022-66330000
E-Mail : secretarial@swastika.co.in
Web Site : http://www.swastika.co.in
Director : C R Doshi
: Ramanalal Bhutda
: Tarunkumar Baldua
: S N Maheshwari
: Anil C Nyati
: Vinod Gupta
C.E.O : Sunil Nyati
Whole-Time Director : Anita Nyati
Executive Director : Parth Nyati
D P Manager : Sharddha Ojha
H.R Manager : Neha Sharma
Account Manager : Sunita Chourasia


1.3 Company Profile:

Swastika Investmart Ltd. (Formerly known as Swastika Fin-Lease Ltd.), a Public
Limited Company, was incorporated in 1992 with its Registered Office in Mumbai and
Administrative office at Indore (M.P.). It was promoted by Mr. Sunil Nyati belonging to
the Swastika group of Rajasthan, engaged in diversified business since 1959.

In the year 1995 the company came out with a Public issue of 15 Lac equity shares of
Rs.10/- each for cash at par, aggregating Rs.150 Lacks. The shares of company are listed
on BSE and are one of the few listed companies, engaged in Stock broking and Capital
Markets activities.

Since incorporation till 1998, the company was actively involved in the field of Hire
Purchase and Lease Finance. It started the stock broking business as a sub-broker in the
year 1998 and after getting the experience and with the blessings of its satisfied
customers, it took the Corporate Membership of NSE in 2000 and BSE in 2004. Later, it
got registered with CDSL in 2006 as Depository Participant as well.

In the year 2007 the company has acquired membership of two premier Commodity
Exchanges of India, NCDEX and MCX through its wholly owned subsidiary company
Swastika Commodity Pvt. Ltd. It has also got the corporate membership of Currency
Derivatives with NSE and MCX-SX in the year 2008. In 2009 company has started the
services of Portfolio Management Services after being registered with the SEBI for the
same. In year 2010, after having more than 20,000 clients in CDSL, NSDL Depository
added in the Company Portfolio. Company has also taken Member ship of USE & ICEX.
In 2011 company has added Membership of NCDEX Spot Exchange.

Over the years, Swastika has followed a consistent growth path and is established as one
of the leading broking houses of the country with the support and confidence of its
clients, investors, employees and associates. Today the Swastika group is managed by a
team of over 250 professional staff members and has got a nationwide network.


Swastika Investmart Limited, corporate member of all the premier stock and commodity
exchanges, is providing best value for money through personalized services, committed
to high standards of corporate governance, highest levels of transparency, accountability
and integrity in all its activities.

CURRENT ACTIVITIES OF SWASTIKA :

1. Stock broking NSE & BSE Equities & Derivatives.
2. Commodity Trading NCDEX & MCX, ICEX & NCDEX SPOT Exchange.
3. Currency Broking NSE & MCX-SX & USE - Currency Derivatives.
4. Depository Services NSDL & CDSL.
5. Portfolio Management & Investment Advisory Services.
6. Mutual Funds and Fixed Deposits Investments.
7. Initial Public Offering (IPO) And IPO Financing.
8. Technical Analysis and Research based advice.
9. Internet Based Trading.

STRENGTHS OF SWASTIKA :

1. Corporate Membership Of NSE, BSE, NCDEX & MCX-SX, ICEX & USE
2. Internet & Mobile Based Trading Platform.
3. Depository Participants Of NSDL & CDSL
4. 24 * 7 Web Base Back Office Software
5. Own Private VSAT Net Work
6. 30 Own Branches
7. Business Partners And Sub Brokers More Than 500
8. CTCL Net Work More Than 1000 Odin Licenses
9. More Than 40000+ Registered Clients (Individual & Corporate).
10. Company Listed At BSE Since 1995.
11. In House Technical Analysis & Research Team.
12. Strong Team for Fundamental Equity Analysis & Research.
13. Team for Derivative Strategies Trading.
14. Annual Turnover in C M & F&O (NSE & BSE): More than Rs. 50,000 Crores.


15. Annual Turnover in Commodity (NCDEX & MCX): More than Rs. 60000 Crores.
16. Annual Turnover in Currency (NSE & MCX-SX): More than Rs. 12000 Crores.

PROPOSED ACTIVITIES OF SWASTIKA :

1. Institutional Broking Empanelment with Banks, Financial Institutions and Fiis.
2. Merchant Banking Services.
3. Registrar & Transfer Agents Services.
4. Equity Placement & Venture Capital Funding.
5. Dealing In Forex.
6. Financing & Loans Syndication
7. Insurance Broking

1.4 Hrarchy Structure:

Board of Director

General Manager

G
e
n
e
r
a
l

M
a
n
a
g
e
r
G

G
e
n
DP Front Trading Account Technology

DP BACK Audit
(compliance)
software


1.5 Companies Milestone:
1992: Incorporation with registered Office at Mumbai.
1993: Actively involved in financing. Hire-purchase and leasing business.
1995: Came out with an initial Public Issue, Listed at Bombay Stock Exchange.
1998 : Registered with RBI as NBFC,
2000: Membership of NSE - Capital Market Division.
2002: Membership of NSE - Future & Option Segment.
2003: Setting up Research Desk and Mutual Fund Desk.
2004 : Membership of BSE - Capital Market Division
2005: Centralized Back Office Software successfully implemented.
2006: Registered with CDSL as Depository Participants.
2007: Membership of NCDEX & MCX.
2008: Membership of Currencies Derivatives of NSE and MCX-SX.
2009: Starting of SEBI Registered Portfolio Management Services.
2010: Starting of NSDL Services, Membership of USE & ICEX.
2011: Starting of NCDEX Spot Exchange.


1.6 Service of Swastika Investmart:

EQUITY:
The lure of big money has always directed investors to the stock markets. However,
making money is not easy. It not only requires a lot of patience and discipline, but also a
great deal of research and a sound understanding of the market. The recent volatility in
the market has created a lot of confusion and apprehension in the investor community.
There is a dilemma of what to buy sell or hold and when to take the action.
Swastika gives the perfect solution to stay profitable in the stock market with its market
experience, thorough research and analysis, trading solutions and personalized services.

DERIVATIVES:
Derivatives enable the investor to earn greater returns (at greater risk) by leveraging your
position i.e. by a lower initial investment. Derivatives have the potential to benefit from
both rise and fall in the market and can also be used as a risk management tool by the
investors.
Swastika aspires to make derivatives trading an easy and profitable venture for its
investors. Through our simple to understand and easy to implement research and advisory
solutions, traders can now efficiently take advantage of the derivatives market.

COMMODITY:
Commodity market offers more than 40 commodities across various segments such as
bullion, metals, energy, and a number of agri-commodities on its platform. The MCX
Exchange is the world's largest exchange in Silver and Gold, 2nd largest in Natural Gas
and the 3rd largest in Crude Oil with respect to the number of futures contracts traded.


CURRENCY:
The currency market is the largest and most liquid financial market in the world with a
turnover of more than $ 5 Trillion on a daily basis. With the introduction of currency
derivatives in 2008, the Indian market is poised for growth by increasing its share in the
world forex trade.
Swastika extends the opportunity to benefit from this market in India. We offer a simple,
convenient and profitable platform to trade and hedge in the Currency derivatives market
and diversify your investment portfolio.

DEPOSITORY SERVICES:
Demat services provide solutions to problems faced by investors while dealing with
securities. A DP account is necessary for each and every participant in the stock market.
It is a safe and fast means to trade and invest in the securities market.

MERCHANT BANKING:
We are delighted to add another feather in our cap. We have registered ourselves with
SEBI as a Category-I Merchant Banker. We are one of the very few listed companies
who are involved in Merchant Banking Services. We have a dedicated team of Merchant
Banking Professionals striving hard to provide excellent services and complete
satisfaction to our clients.
Our ongoing projects include IPO for SMEs in sectors of Agtrotech, Education, Exports
and NBFC. We are also currently providing Debt Syndication for companies involved in
Sugar, Organic and Chemical Industries. With the experience gained, we are ready to
serve all the sectors of the industry.


PORTFOLIO MANAGEMENT:
In today's complex financial environment, investors have unique needs, which are
derived from their risk appetite and financial goals. But regardless of this, every investor
seeks to maximize his returns on investments without capital erosion. While there are
many investment avenues such as fixed deposits, income funds, bonds, equities etc It is
a proven fact that Equities as an asset class typically tend to outperform all other asset
classes over the long run.
Investing in equities, require knowledge, time and a right mind-set. Equity as an asset
class also requires constant monitoring may not be possible for you to give the necessary
time, given your other commitments.
We at Swastika recognize this, and manage your investments professionally to achieve
specific investment objectives, and not to forget, relieving you from the day-to-day
hassles which investment require.
Swastika Investmart Ltd with more than 1.5 decade of experience & expertise in stock
broking and equity research offers professional PMS product to you.
When you invest through our PMS, you can be assured of the best research being used
for the investment decisions. We have experienced finance professionals Chartered
Accountants, Chartered Financial Analysts, MS-Finance and MBAs all working just to
make your money grow steadily in a disciplined manner.
MUTUAL FUND:
A Mutual Fund is a body corporate that pools the savings of a number of investors and
invests the same in a variety of different financial instruments, or securities.
The investment objectives of a Mutual fund specify the class of securities a Mutual Fund
can invest in. Mutual Funds invest in various asset classes like equity, bonds, debentures,
commercial paper and government securities.


IPO:
The IPO page of Swastika Investmart Ltd. captures the details on its Issue Open Date,
Issue Close Date, Listing Date, Face Value, Price band, Issue Size, Issue Type, and
Listing Date's Open Price, High Price, Low Price, Close price and Volume. It also
captures the Holding Period Returns and Annual Returns.

INSURANCE:
The Companys Assets Are Adequately insured against the Loss of Fire and Other Risks,
As Considered Necessary by the Management From Time To Time .The Company Has
Also Taken Insurance Cover for Any Claims /Losses Arising out Of Its Core Business of
Security Broking.


1.7 Branches:

State

City Contact
Person
Address Contact Details
Gujarat Ahmedabad Mr. Rishabh
Bagadiya
Labdhi Stock, 7/C, 7th Floor, Center Point, C.
G. Road, Near Panchwati, Ahmedabad
079 26445208
Gujarat Ahmedabad Mr. Nikhil
Shah
SWASTIKA INVESTMART LTD. 302, Sarita
complex, Stt. Xaviers College Road,
Navranpura, Ahmedabad. 380009
07930409000
Gujarat Gandhidham Ranjit Patel Shop 16.,AUM Corner 1st Floor Plot no 336-
337,343,12 B Gandhidham opp Axis Bank,
Gujarat -370201
02836-229056
Gujarat Maninagar Jaydeep Joshi 304, Rajvi complex, Opp. Maninagar police
station, Ram bag, Maninagar,
Ahmedabad(Gujarat)
079-40321231
Gujarat Paldi Mr. Rajesh
Thakkar
307,Half Business Center, above ICICI Bank &
HDFC Bank, Beside Ankur School,Fatehnagar
Paldi
079-40372970
Gujarat Rajkot Mr. Tanmay
Shah
Prarthana House, Off Dhebar Road, Mira
Furniture Street,14 Milapara, Rajkot- 360002
0281-2225214
Gujarat Surendranagar Mr. Sanjay V.
Sheth
26 New Market,Praful Cycle
Street,Surendranagar,Gujarat
02752-222296
Gujarat Vadodra Mr. Jitesh
Vasava
FF1 Vyavsay Complex, Behind Dinesh Mill,
Akota, Vadodra 390020
9227546333
Gujarat Vadodra Mr. Manish
Desai &
Dinesh Koli
FF 7 Helix Complex, Opp. Surya Hotel, Near
PM Regency, Sayajiganj, Vadodra 390005
0265-23611200
Andhra
Pradesh
Hyderabad Mr. Pavan
Reddy
Mallampati
102, Imperial House, Opp. Green Park Hotel,
Ameerpet, Hyderabad
040-66021234
Chhattisgarh Raipur Mr. Adarsh
Shukla
H-23, Maruti Business Park, G.E. Road,
Raipur
0771-4043600


Delhi Delhi Mr. Sheker
Gahlawat
18-19, Neta Ji Subhash Marg, Opp. Golcha
Theater, Daryaganj, Delhi 110002
011-30775000
Haryana Gurgaon Mr. Siddhartha
Tiwari
Shop No 10-11 2nd Floor, Old Delhi Road,
Opp. Axis Bank Sector 14, Gurgaon-122001
0124-4233128
Haryana Panipat Deepak
Kumar
3rd Floor, Classic Tower, Near Vodafone
Store, Gt Road, Panipat - 132103
0180-4000083
Karnataka Bangalore Mr. Pankaj
Kumar
B-2, !St Floor,Jyouti Complex, 134/1,Near
Sony Center, Infantry Road, Bangalore-
560001,Karnataka
080-41223494
Madhya
Pradesh
Bhopal Mr. Saurabh
Nuwal
22-Zone Ii, Maharana Pratap Nagar, Bhopal 0755-3345000
Madhya
Pradesh
Chhindwara Mr. Kamlesh
Soni
F-56, 2nd Floor, Mansarovar Complex, Bus
Stand, Chhindwara- 480001
07162-244363
Madhya
Pradesh
Gwalior Mr.Anand
Pathak
Opposites Punjab National Bank, Sarafa
Bazar Lashkar, Gwalior-474001
0751-4004167
Madhya
Pradesh
Indore Mr. Manoj
Sawner
8, Mezzanine Floor, Akashdeep Sapna
Sangeeta Road, Indore
0731-4090900
Madhya
Pradesh
Indore Mr. Vijay
Sharma
101, 1st Floor 728, Usha Nagar, Annapurna
Main Road, Indore
0731-4263200
Madhya
Pradesh
Indore Mr. Lokesh
Soni
202, Navneet Darshan Appt.16/2, Old Palasia,
Indore
0731-2562284
Madhya
Pradesh
Indore Mr. Surendra
Jain
F-16, Crossroad Building, Vijay agar, Indore 0731-4042789
Madhya
Pradesh
Indore Mr. Rajendra
Mundra
39, Patel Nagar, Aerodrum Road, Indore 0731-3533300
Madhya
Pradesh
Indore Mr. Manoj
Choube
198 Jawahar Marg, Opp.Nema Dharmshala,
Malganj Square, Indore - 452002
0731- 2340470
Madhya
Pradesh
Indore Mr. Vijay Jain 22/19, Y.N. Road, Opp. Rani Sati Gate,
Indore
0731-6688000
Madhya
Pradesh
Jabalpur Mr. Rajendra
Patel
324,1st Floor, Beside Icici Lombard, Russel
Chowk, Napier Town, Jabalpur
0761-4083308
Madhya
Pradesh
Neemuch Mr.Jitesh
Singhal
30 C 1st Floor Jaroli Trade Centre, Opp. Jama
Masjid Fawwara Chowk , Neemuch 458441
07423- 229555
Madhya
Pradesh
Ratlam Mr. Pratyush
Choudhary
19 Lunawat Plaza, College Road, Ratlam 07412-407212
Madhya
Pradesh
Ujjain Mr. Ashok
Singh Atal
8-9-10, 2nd Floor, L.N. Complex, Tower
Chowk, Free Ganj, Ujjain
0734-4012829
Maharashtra Ahmednagar Mr. Kanifnath
B. Bhapkar
Shop No.2/G,Shri Complex, Near By Shardha
Hotel,Zopdi Sawedi, Manmade Road,
Ahmednagar-414001
0241-6603713


Maharashtra Akola Mr. Ravindra
Rokade
Patil Market,2nd Floor, Behind Sa College,
Civil Lines, Akola 440001
0724-2414010
Maharashtra Amravati Mr. Manish
Jadhao
Shop No. 18, 1st Floor, Gulshan Plaza,
Rajateth, Amravati 444601
0721-2567178
Maharashtra Aurangabad Mr. Manish
Gaikwad
C/O B.S Bajaj & Company(Charted
Accountant), Kandi Tower, 2nd Floor, Jalna
Road, Aurangabad
0240-2354977
Maharashtra Jalgaon Mr. Sandeep
Dhage
269, Shivaji Chowk, Near Kishore Regency,
C/O Kavadiya Associate, United Bank
Jalgaon 425 001
0257-2241971
Maharashtra Mumbai Mr. Ravi
Shrivastava
1st Floor, 102 Poonam Pearl, Opp. New India
Staff Quarter, Juhu Lane, Andheri (W),
Mumbai - 400058
022-26254569
Maharashtra Mumbai Mrs. Archana
Matta
1st Floor, Bandukwala Building, British Hotel
Lane, Fort, Mumbai - 400001
022-66330000
Maharashtra Nagpur Mr. Vaibhav
Palod
1st Floor, Block No. 11, Diwan Plaza,
Wardha Road, Nagpur
0712-3044100
Maharashtra Nashik Mr. Tushar
Joshi
Shop No. 7, Navarachana Complex, Sawarkar
Nagar, Opp. Madhur Sweet, Gangapur Road,
Nashik- 422005
0253-6611093
Maharashtra Pune Mr. Sudesh
Chandra
Shop No. 53,B Wing Shopper Orbit, Nandi
Road,Vishranewadi, Pune - 411001
020-41260020
Orissa Bhubaneswar Mr. Manoj
Bebortha
Shop No. 407, 4th Floor, Janpat Tower Ashok
Nagar Bhubaneswar
8456845587
Orissa Bhubaneswar Mr. Manoj
Bebortha
Shop No. 407, 4th Floor, Janpat Tower Ashok
Nagar Bhubaneswar (Orissa)
0674-2530160
Punjab Ludhiana Mr.
Gagandeep
Batra
Sco 15, Cabin No. 107, 1st Floor, San Plaza
Building, Ludhiana 141 001
0161-5091023
Rajasthan Ajmer Mr. Manoj
Jain
Swastika Investmart Ltd ,Shop No. 11,2nd
Floor, Ajmer Tower, Kutchery Road, Ajmer
305001
0145-2629005
Rajasthan Barmer Mr. Madan
Singh
Chouhan
Shop No:- 2, Near Central Bank Of India,
Kamdar Company, Rai Colony Road, Barmer-
344001
02982-220704
Rajasthan Bhilwara Mr. Rajendra
Swarnkar
First Floor ,Shop No.34,Heera Panna
Market,Pur Road, Bhilwara-311001
01482- 650500
Rajasthan Bikaner Mr. Ramdev
Chhimpa
Babu Ji Plaza, Shop No. 311,1st Floor ,Near
Kote Gate Bikaner-334001
0151-2204135
Rajasthan Jaipur Mr. Giriraj
Prasad
Agrawal
13 A/B, Yudhistar Marg, Opp. Yojana
Bhawan, C-Scheme, Jaipur
0141-3345000
Rajasthan Jodhpur Mr. Narendra
Dadhich
Swastika Investmart Ltd. 178. Narayanam
Chopasani Road, Near Bombay Mother
Circle, Jodhpur-342001 (Rajasthan)
0291-3012000


Rajasthan Kota Mr. Ritesh
Nama
344,Mewara Plaza, Shopping Centre, Rawat
Bhata Road, Kota
0744-6633000
Rajasthan Udaipur Mr. Hardik
Sanadhya
Plot No. 15, 2nd Floor, Shyam Plaza, 15-
Hazareshwar Mahadev Colony, Udaipur -
313001
0294-5102054
Uttar Pradesh Jhansi Mr. Anil
Bundela
125/1 Civil Line, Patwala House Nr. Sales
Tax Office Jhansi 284001
0510-2370020
Uttar Pradesh Kanpur Mr. Kapil
Tiwari
709, 7th Floor, Krishna Tower, Opp. Green
Park Stadium, Civil Lines Kanpur 208001
0512-3019407
Uttar Pradesh Lucknow Mr. Sukesh
Agarwal
1st Floor,Himanshu Sadan, 5, Park Road,
Lucknow - 226001
0522-2238346
West Bengal Kolkata Mr. Vikash
Sanganeria
7th Floor, No. 10 C Middleton Row Kolkata
700071 (West Bengal)
033- 40069552

1.8 Membership:

Capital Market:

National Stock Exchange of India Ltd.
Bombay Stock Exchange Ltd.
Over-the-Counter Exchange of India Ltd.

Commodities Derivatives:

National Commodity & Derivatives Exchange Ltd.
Multi Commodity Exchange of India Ltd.
Dubai Gold & Commodities Exchange Ltd.

Currency derivatives:

Multi Commodity Exchange-Stock Exchange Limited.

Depository Operations:

National Securities Depositories Ltd. (NSDL)
Central Depository Services (India) Ltd.
Securities and Exchange Board of India.
Forward Markets Commission Ltd.


1.9 Competitors:

For Broking From:

Share Khan
Karvy
Motilal & Sons
Anagram
Kotak
Angel Broking
Kuwarji

For Demat:

SKSE
Nagrik Bank
Stock Holding


CHAPTER-2
COMMODITY
INTRODUCTION



2.1 INTRODUCTIONS TO COMMODITY MARKET:
What is Commodity?
Any product that can be used for commerce or an article of commerce which is traded on an
authorized commodity exchange is known as commodity. The article should be movable of
value, something which is bought or sold and which is produced or used as the subject or
barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts
(Regulation) Act (FCRA), 1952 defines goods as every kind of movable property other
than actionable claims, money and securities.
In current situation, all goods and products of agricultural (including plantation), mineral
and fossil origin are allowed for commodity trading recognized under the FCRA. The
national commodity exchanges, recognized by the Central Government, permits commodities
which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned
and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur,
potatoes and onions, coffee and tea, rubber and spices. Etc.
What is a commodity exchange?
A commodity exchange is an association or a company or any other body corporate
organizing futures trading in commodities for which license has been granted by regulating
authority.
What is Commodity Futures?

A Commodity futures is an agreement between two parties to buy or sell a specified and
standardized quantity of a commodity at a certain time in future at a price agreed upon at the
time of entering into the contract on the commodity futures exchange.
The need for a futures market arises mainly due to the hedging function that it can perform.
Commodity markets, like any other financial instrument, involve risk associated with
frequent price volatility. The loss due to price volatility can be attributed to the following
reasons:


Consumer Preferences: - In the short-term, their influence on price volatility is
small since it is a slow process permitting manufacturers, dealers and wholesalers
to adjust their inventory in advance.

Changes in supply: - They are abrupt and unpredictable bringing about wild
fluctuations in prices. This can especially noticed in agricultural commodities
where the weather plays a major role in affecting the fortunes of people involved
in this industry. The futures market has evolved to neutralize such risks through a
mechanism; namely hedging.

The objectives of Commodity futures:
Hedging with the objective of transferring risk related to the possession of physical assets
through any adverse moments in price. Liquidity and Price discovery to ensure base
minimum volume in trading of a commodity through market information and demand
supply factors that facilitates a regular and authentic price discovery mechanism.

Maintaining buffer stock and better allocation of resources as it augments reduction in
inventory requirement and thus the exposure to risks related with price fluctuation declines.
Resources can thus be diversified for investments.

Price stabilization along with balancing demand and supply position. Futures trading
leads to predictability in assessing the domestic prices, which maintains stability, thus
safeguarding against any short term adverse price movements. Liquidity in Contracts of
the commodities traded also ensures in maintaining the equilibrium between demand and
supply.

Flexibility, certainty and transparency in purchasing commodities facilitate bank financing.
Predictability in prices of commodity would lead to stability, which in turn would eliminate the
risks associated with running the business of trading commodities. This would make funding
easier and less stringent for banks to commodity market players.


Benefits of Commodity Futures Markets:
The primary objectives of any futures exchange are authentic price discovery and an efficient
price risk management. The beneficiaries include those who trade in the commodities being
offered in the exchange as well as those who have nothing to do with futures trading. It is because
of price discovery and risk management through the existence of futures exchanges that a lot of
businesses and services are able to function smoothly.
1. Price Discovery:-Based on inputs regarding specific market information, the demand and
supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government
policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures
exchanges. This transforms in to continuous price discovery mechanism. The execution of trade
between buyers and sellers leads to assessment of fair value of a particular commodity that is
immediately disseminated on the trading terminal.

2. Price Risk Management: - Hedging is the most common method of price risk management. It
is strategy of offering price risk that is inherent in spot market by taking an equal but opposite
position in the futures market. Futures markets are used as a mode by hedgers to protect their
business from adverse price change. This could dent the profitability of their business. Hedging
benefits who are involved in trading of commodities like farmers, processors, merchandisers,
manufacturers, exporters, importers etc.

3. Import- Export competitiveness: - The exporters can hedge their price risk and improve
their competitiveness by making use of futures market. A majority of traders which are
involved in physical trade internationally intend to buy forwards. The purchases made
from the physical market might expose them to the risk of price risk resulting to losses.
The existence of futures market would allow the exporters to hedge their proposed
purchase by temporarily substituting for actual purchase till the time is ripe to buy in
physical market. In the absence of futures market it will be meticulous, time consuming
and costly physical transactions.


4. Predictable Pricing: - The demand for certain commodities is highly price elastic. The
manufacturers have to ensure that the prices should be stable in order to protect their
market share with the free entry of imports. Futures contracts will enable predictability in
domestic prices. The manufacturers can, as a result, smooth out the influence of changes
in their input prices very easily. With no futures market, the manufacturer can be caught
between severe short-term price movements of oils and necessity to maintain price
stability, which could only be possible through sufficient financial reserves that could
otherwise be utilized for making other profitable investments.

5. Benefits for farmers/Agriculturalists: - Price instability has a direct bearing on farmers
in the absence of futures market. There would be no need to have large reserves to cover
against unfavorable price fluctuations. This would reduce the risk premiums associated
with the marketing or processing margins enabling more returns on produce. Storing
more and being more active in the markets. The price information accessible to the
farmers determines the extent to which traders/processors increase price to them. Since
one of the objectives of futures exchange is to make available these prices as far as
possible, it is very likely to benefit the farmers. Also, due to the time lag between
planning and production, the market-determined price information disseminated by
futures exchanges would be crucial for their production decisions.

6. Credit accessibility: - The absence of proper risk management tools would attract the
marketing and processing of commodities to high-risk exposure making it risky business activity
to fund. Even a small movement in prices can eat up a huge proportion of capital owned by
traders, at times making it virtually impossible to pay back the loan. There is a high degree of
reluctance among banks to fund commodity traders, especially those who do not manage price
risks. If in case they do, the interest rate is likely to be high and terms and conditions very
stringent. This posses a huge obstacle in the smooth functioning and competition of commodities
market. Hedging, which is possible through futures markets, would cut down the discount rate in
commodity lending.


7. Improved product quality: - The existence of warehouses for facilitating delivery with
grading facilities along with other related benefits provides a very strong reason to
upgrade and enhance the quality of the commodity to grade that is acceptable by the
exchange. It ensures uniform standardization of commodity trade, including the terms of
quality standard: the quality certificates that are issued by the exchange-certified
warehouses have the potential to become the norm for physical trade.

2.2 OVERVIEW OF THE INDIAN COMMODITY MARKET:
Despite intermittent curbs, Indias six-year-old commodity futures market has seen a
steady stream of new entrants, drawn by the promise of richer rewards. The intense
growth, even in the absence of basic reforms, has attracted financial institutions, trading
companies and banks to set up large commodity bourse. Since, Indian Commodity
Exchange (ICEX), promoted by India bulls Financial Services Ltd in partnership with
MMTC is going to start its operation from November 2009; it is expected to create an
extensive competition among national level commodity exchanges. Commodity
derivatives market of India is drawing attention from all over the world, albeit FMC had
banned nine commodities since early 2007, out of which 4 are still out of trade and even
financial institutions and foreign entities are barred from trading in the market. Even,
industry players are of the view that commodity market regulator (FMC) should permit
banks and financial institutions to trade in commodity futures, allow options, exchange-
traded indices and some more powers to the market regulator from Ministry of Consumer
Affairs to develop the market.


2.3 EVOLUTION AND HISTORY OF COMMODITY MARKETS:

The history of organized commodity derivatives in India goes back to the nineteenth
century when Cotton Trade Association started futures trading in 1875, about a decade
after they started in Chicago. Over the time datives market developed in several
commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay
(1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in
Bombay (1920).

However many feared that derivatives fuelled unnecessary speculation and were
detrimental to the healthy functioning of the market for the underlying commodities,
resulting in to banning of commodity options trading and cash settlement of commodities
futures after independence in 1952. The parliament passed the Forward Contracts
(Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The
act prohibited options trading in Goods along with cash settlement of forward trades,
rendering a crushing blow to the commodity derivatives market. Under the act only those
associations/exchanges, which are granted reorganization from the Government, are
allowed to organize forward trading in regulated commodities. The act envisages three
tire regulations: (i) Exchange which organizes forward trading in commodities can
regulate trading on day-to-day basis; (ii) Forward Markets Commission provides
regulatory oversight under the powers delegated to it by the central Government. (iii) The
Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs,
Food and Public Distribution- is the ultimate regulatory authority.

The commodities future market remained dismantled and remained dormant for about
four decades until the new millennium when the Government, in a complete change in a
policy, started actively encouraging commodity market. After Liberalization and
Globalization in 1990, the Government set up a committee (1993) to examine the role of
futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing
futures trading in 17 commodity groups. It also recommended strengthening Forward


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 elses 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 (NCDEX) Mumbai, Multi Commodity
Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of
India Limited (NMCEIL) Ahmedabad. There are other regional commodity exchanges
situated in different parts of India.
2.4 THE SIZE OF THE MARKET:
The trading of commodities consists of direct physical trading and derivatives trading.
Exchange traded commodities have seen an upturn in the volume of trading since the start of
the decade. This was largely a result of the growing attraction of commodities as an asset
class and a proliferation of investment options which has made it easier to access this
market.
The global volume of commodities contracts traded on exchanges increased by a fifth in
2010, and a half since 2008, to around 2.5 billion million contracts. During the three years
up to the end of 2010, global physical exports of commodities fell by 2%, while the
outstanding value of OTC commodities derivatives declined by two-thirds as investors
reduced risk following a five-fold increase in value outstanding in the previous three years.
Trading on exchanges in China and India has gained in importance in recent years due to
their emergence as significant commodities consumers and producers. China accounted for
more than 60% of exchange-traded commodities in 2009, up on its 40% share in the
previous year.
Commodity assets under management more than doubled between 2008 and 2010 to nearly
$380bn. Inflows into the sector totaled over $60bn in 2010, the second highest year on
record, down from the record $72bn allocated to commodities funds in the previous year.
The bulk of funds went into precious metals and energy products. The growth in prices of
many commodities in 2010 contributed to the increase in the value of commodities funds
under management.


2.5 HOW TO COMMODITY MARKET WORK:
There are two kinds of trades in commodities. The first is the spot trade, in which one pays cash
and carries away the goods. The second is futures trade. The underpinning for futures is the
warehouse receipt. A person deposits certain amount of say, good X in a ware house and gets a
warehouse receipt. Which allows him to ask for physical delivery of the good from the
warehouse? But someone trading in commodity futures need not necessarily posses such a
receipt to strike a deal.
A person can buy or sale a commodity future on an exchange based on his expectation of
where the price will go. Futures have something called an expiry date, by when the buyer
or seller either closes (square off) his account or give/take delivery of the commodity.
The broker maintains an account of all dealing parties in which the daily profit or loss
due to changes in the futures price is recorded. Squiring off is done by taking an opposite
contract so that the net outstanding is nil. For commodity futures to work, the seller
should be able to deposit the commodity at warehouse nearest to him and collect the
warehouse receipt.
The buyer should be able to take physical delivery at a location of his choice on
presenting the warehouse receipt. But at present in India very few warehouses provide
delivery for specific commodities.
Following diagram gives a fair idea about working of the Commodity market.


Today Commodity trading system is fully computerized. Traders need not visit a
commodity market to speculate. With online commodity trading they could sit in the
confines of their home or office and call the shots.
The commodity trading system consists of certain prescribed steps or stages as follows:
I. Trading: - At this stage the following is the system implemented-
- Order receiving
- Execution
- Matching
- Reporting
- Surveillance
- Price limits
- Position limits

II. Clearing: - This stage has following system in place-
- Matching
- Registration
- Clearing
- Clearing limits
- Notation
- Margining
- Price limits
- Position limits
- Clearing house.

III. Settlement: - This stage has following system followed as follows-
- Marking to market
- Receipts and payments
- Reporting
- Delivery upon expiration or maturity.


2.6 CURRENT SCENARIO IN INDIAN COMMODITY MARKET:
India is among top 5 producers of most of the Commodities, in addition to being a major consumer of
bullion and energy products.

Agriculture contributes about 22% GDP of Indian economy. It employees around 57% of the labor force
on total of 163 million hectors of land Agriculture sector is an important factor in achieving a GDP
growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of
commodity derivatives.

Trends in volume contribution on the three National Exchanges:-
Pattern on Multi Commodity Exchange (MCX)

MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has
even become the third largest in bullion and second largest in silver future trading in the world.

Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4
commodities contribute for more than 80 percent of total trade volume. As per recent data the largely
traded commodities are Gold, Silver, Energy and base Metals.

Incidentally the futures trends of these commodities are mainly driven by international futures prices
rather than the changes in domestic demand-supply and hence, the price signals largely reflect
international scenario.

Among Agricultural commodities major volume contributors include Gur, Urad, and Mentha Oil etc.
Whose market sizes are considerably small making then vulnerable to manipulations.

Pattern on National Commodity & Derivatives Exchange (NCDEX)
NCDEX is the second largest commodity exchange in the country after MCX. However the major volume
contributors on NCDEX are agricultural commodities.

But, most of them have common inherent problem of small market size, which is making them
vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes
from guar seed, chana and Urad (narrow commodities as specified by FMC).

Pattern on National Multi Commodity Exchange (NMCE)
NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities.

Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc.
But, in subsequent period, the pattern has changed and slowly moved towards commodities with small
market size or narrow commodities.


Analysis of volume contributions on three major national commodity exchanges reveled the following
pattern, Major volume contributors: -

Majority of trade has been concentrated in few commodities that are

Non Agricultural Commodities (bullion, metals and energy)

Agricultural commodities with small market size (or narrow commodities) like guar, Urad, Mentha etc.
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2.7 COMMODITY EXCHANGE IN INDIA:

National Level Multi Commodity Exchanges:
Sr. No Name and Address Commodities
1.
Multi Commodity Exchange
of India Ltd., Mumbai

Gold, Silver, Aluminum, Copper ,Nickel, Sponge Iron, Steel Flat,
Steel Long (Bhavnagar), Tin, Castor Oil, Castor Seeds Castor
Seeds (Disa), Cottonseed, Crude Palm Oil, Groundnut Oil,
Kapasia Khalli (Cottonseed Oilcake), Mustard Seed (Hapur),
Mustard seed (Jaipur), Mustard / Rapeseed Oil, Mustard Seed
(Sirsa), RBD Palmolein, Refined Soy Oil, Sesame seed, Soymeal,
Soy Seeds, Ghana, Masur, Tur, Urad, Yellow peas, Rice, Basmati
Rice, Wheat, Maize, Sarbati Rice, Black pepper, Red Chilli, Jeera,
Turmeric, Cashew Kernel, Rubben Kapas, Cotton long staple,
medium staple, short staple). Guar seed, Guargum, Gur, Mentha
Oil, Sugar, High Density Polyethylene (HOPE), Polypropylene
(PP), Brent Crude Oil, Crude Oil, Furnace Oil., Natural Gas, etc.


2.
National Commodity &
Derivatives Exchange Ltd.,
Mumbai

Cashew, Castor Seed, Ghana, Chili, Coffee - Arabica, Coffee -Robusta,
Common Raw Rice, Common Parboiled Rice ,Crude Palm Oil, Cotton
Seed Oilcake, Expeller Mustard Oil, Grade A Parboiled Rice, Grade A
Raw Rice, Groundnut (in shell). Groundnut Expeller Oil, Guar gum,
Guar Seeds, Gur, Jeera, Jute sacking bags Lemon Tur, Indian Parboiled
Rice, Indian Raw Rice, Indian 28 mm Cotton, Indian 31 mm Cotton,
Maharashtra Lai Tur, Masoor Grain Bold, Medium Staple Cotton ,
Mentha Oil, Mulberry Green Cocoons, Mulberry Raw Silk, Mustard
Seed, Pepper, Raw Jute, Rapeseed-Mustard Seed Oilcake, RBD
Palmolein, Refined Soy Oil, Rubber, Sesame Seeds, Soyabean, Sugar,
Yellow Soybean Meal, Turmeric, Urad, V-797 Kapas, Wheat, Yellow
Peas, Yellow Red Maize Electrolytic Copper Cathode, Mild Steel Ingots,
Sponge Iron, Gold, Silver, Brent Crude Oil, Furnace Oil, etc.
3.
National Multi Commodity
Exchange of India Limited.
Ahmedabad

Gur, RBD Pamolein, Groundnut Oil, Sunflower Oil, Rapeseed/
Mustard seed, Rapeseed/Mustard seed Oil, Rapeseed/ Mustard
seed oilcake. Soy bean. Soy Oil, Copra, Cottonseed, Safflower,
Groundnut, Sugar, Sacking, Coconut oil, Castor seed. Castor-oil,
Groundnut oil cake, Cottonseed oil, Sesamum, Sesamum oil,
Sesamum Oilcake, Safflower Oilcake, Rice Bran Oil, Safflower
Oil, Sunflower Oilcake, Sunflower Seed, Pepper, Crude Palm Oil,
Guar seed. Castor Oilcake, Cottonseed ce Oilcake, Aluminum
Ingots, Nickel, Vanaspati, Soybean Oilcake, Rubber, Copper,
Zinc, Lead, Tin, Linseed, Linseed Oil, Linseed Oilcake, Coconut
Oilcake, Gram, Gold, Silver, Rice, Wheat, Cardamom, Kilo oe
Gold, Masoor, Urad, Tur, etc.


Regional Exchanges
Sr.No Name and Address Commodities

1 Bhatinda om & oil exchange ltd., Bhatinda. Gur
2 The bombay commodity exchange ltd., mumbai Groundnut oil, sunflower oil, cottonseed
safflower, groundnut, castor seed, castor
see cottonseed oil, sesamum oil, sesamum
oilcake safflower oilcake, rice bran, rice
bran oil, rice bran oilcake, safflower oil,
crude palm oil
3 The Rajkot Seeds oil & Bullion Merchants" As-
sociation Ltd.,Rajkot

Groundnut Oil, Castor seed
4 The meerut agro commodities exchange co. Ltd.,
meerut
Gur
5 The Spices and Oilseeds Exchange Ltd. Turmeric
6 Ahmedabad commodity exchange ltd.,
Ahmedabad

Cottonseed, castor seed

7 Vijay beopar chamber ltd., muzaffarnagar Gur, mustard seed
8 India pepper & spice trade association.
Kochi
Pepper domestic-mg 1, pepper domestic-
500g/ 1, black pepper int'l-mls asta, black
pepper int'l-vb asta, black pepper int'l faq,
rubber rss 4
9 Rajdhani Oils and Oilseeds Exchange Ltd., Delhi Gur, Rapeseed/Mustard seed
10 National Board of Trade (NBOT), Indore Rapeseed / Mustard seed, rapeseed /
Mustard seed oil Rapeseed / Mustard seed
oilcake, soy bean, soy meal soy oil, crude
palm oil.
11 The Chamber of Commerce, Hapur Gur, Rapeseed / Mustard seed
12 The east india cotton association, mumbai (eica) Indian cotton
13 The central india commercial exchange ltd.,
Gwalior
Gur, rapeseed / mustard seed


14 The east india jute & hessian exchange ltd.,
Kolkata
Hessian sacking
15 First Commodity Exchange of India Ltd., Kochi Copra, Coconut oil, copra cake
16 Bikaner commodity exchange ltd, Bikaner Rapeseed / mustard seed,
rapeseed/mustard seed oil
Rapeseed / mustard seed oilcake,
Guarseed, gram, gaur gum
^
17 The coffee futures exchange india ltd. (cofc),
Bangalore
Coffee - plantation a, coffee - Robusta
cherry abs, raft coffee Arabica parchment,
raw coffee robusta clieny '^
18 E-Sugar-india Ltd. Sugar Grade - M, Sugar Grade - S
19 Surendranagar Cotton Oil and Oilseeds Assoc.
Ltd., Surendranagar
Kapas

20 Haryana commodities ltd., hisser Rapeseed, mustard seed, rapeseed /
mustard seed oil

A
21 E-Commodities Ltd. And Bombay Bullion
Association

Structure of Indian Exchange Based Commodity Market:

Ministry of
consumer
affairs
FMC
Commodity
exchanges
National
NCDEX MCX NMCE
Regional
NBOT
21 other
regional
exchanges


2.8 MAIN EXCHANGE OF INDIA COMMODITY MARKET:

Multi Commodity Exchange of India Limited (MCX):

The Multi Commodity Exchange of India Limited (MCX), Indias first listed exchange,
is a state-of-the-art, commodity futures exchange that facilitates online trading, and
clearing and settlement of commodity futures transactions, thereby providing a platform
for risk management. The Exchange, which started operations in November 2003,
operates within the regulatory framework of the Forward Contracts (Regulation) Act,
1952.

MCX offers trading in varied commodity futures contracts across segments including
bullion, ferrous and non-ferrous metals, energy, agri-based and agricultural
commodities. The Exchange focuses on providing commodity value chain participants
with neutral, secure and transparent trade mechanisms, and formulating quality
parameters and trade regulations, in conformity with the regulatory framework. The
Exchange has an extensive national reach, with over 2100 members, operations through
more than 400,000 trading terminals (including CTCL), spanning over 1900 cities and
towns across India. MCX is Indias leading commodity futures exchange with a market
share of about 86 per cent in terms of the value of commodity futures contracts traded in
9M FY2013-14.

To ease participation, the Exchange offers facilities such as calendar-spread facility, as
also EFP (Exchange of Futures for Physical) transactions which enables participants to
swap their positions in the futures/ physical markets. The Exchanges flagship index, the
MCXCOMDEX, is a real-time composite commodity futures price index which gives


information on market movements in key commodities. Other commodity indices
developed by the exchange include MCXAgri, MCXEnergy, and MCXMetal. MCX has
been certified to three ISO standards including ISO 9001:2008 quality management
standard, ISO 27001:2005 information security management standard and ISO
14001:2004 environment management standard.

With an aim to seamlessly integrate with the global commodities ecosystem, MCX has
forged strategic alliances with leading international exchanges such as CME Group,
London Metal Exchange (LME), The Baltic Exchange, Dalian Commodity Exchange
(DCE) and Taiwan Futures Exchange (TAIFEX). The Exchange has also tied-up with
various trade bodies, corporate, educational institutions and R&D centres across the
country. These alliances enable the Exchange in improving trade practices, increasing
awareness, and facilitating overall improvement of commodity futures market.

MCXs ability to use and apply technology efficiently is a key factor in the development
of its business. The exchanges technology framework is designed to provide high
availability for all critical components, which guarantees continuous availability of
trading facilities. The robust technology infrastructure of the exchange, along with its
with rapid customization and deployment capabilities enables it to operate efficiently
with fast order routing, immediate trade execution, trade reporting, real-time risk
management, market surveillance and market data dissemination.

The Exchange is committed to nurturing communities that are vital for the development
of its business. To achieve our goal of inclusive growth, we collaborate with diversified
partners. Garmin Suvidha Kendra, our social inclusion programmer in partnership with
India Post, seeks to enhance farmers value realization from agricultural activities.

MCX has been continuously raising the bar through effective research and product
development, intelligent use of information and technology, innovation, thought
leadership and ethical business conduct.


National Commodity & Derivatives Exchange Limited (NCDEX):

National Commodity & Derivatives Exchange Limited (NCDEX) is a professionally
managed on-line multi commodity exchange. The shareholders of NCDEX comprises of
large national level institutions, large public sector bank and companies.

Promoter shareholders: ICICI Bank Limited (ICICI)*, Life Insurance Corporation of
India (LIC), National Bank for Agriculture and Rural Development (NABARD) and
National Stock Exchange of India Limited (NSE).
Other shareholders: Canara Bank, Punjab National Bank (PNB), CRISIL Limited,
Indian Farmers Fertilizer Cooperative Limited (IFFCO), Goldman Sachs, Intercontinental
Exchange (ICE), Shree Renuka Sugars Limited, Jaypee Capital Services Limited and
Build India Capital Advisors LLP, Oman India Joint Investment Fund, IDFC Private
Equity Fund III.

NCDEX is the only commodity exchange in the country promoted by national level
institutions. This unique parentage enables it to offer a bouquet of benefits, which are
currently in short supply in the commodity markets. The institutional promoters and
shareholders of NCDEX are prominent players in their respective fields and bring with
them institutional building experience, trust, nationwide reach, technology and risk
management skills.

NCDEX is a public limited company incorporated on April 23, 2003 under the
Companies Act, 1956. It obtained its Certificate for Commencement of Business on May
9, 2003. It commenced its operations on December 15, 2003. Corporate Identity No. is
U51909MH2003PLC140116.


NCDEX is a nation-level, technology driven de-mutualised on-line commodity exchange
with an independent Board of Directors and professional management - both not having
any vested interest in commodity markets. It is committed to provide a world-class
commodity exchange platform for market participants to trade in a wide spectrum of
commodity derivatives driven by best global practices, professionalism and
transparency.

NCDEX is regulated by Forward Markets Commission. NCDEX is subjected to various
laws of the land like the Forward Contracts (Regulation) Act, Companies Act, Stamp Act,
Contract Act and various other legislations.

NCDEX headquarters are located in Mumbai and offers facilities to its members from the
centres located throughout India.

As on March 30, 2013, the Exchange offered 31 contracts for trading of which: 23
agricultural commodities, 3 precious metals, 2 energy, 1 polymer and 2 other metals. The
top 5 commodities, in terms of volume traded at the Exchange, were Soya oil, Soyabean,
RM seed, Chana and Castor Seed.


National Multi Commodity Exchange of india ltd. (NMCE):

In response to the Press Note issued by the Government of India during May'1999, first
state-of-the-art demutualised multi-commodity Exchange, National Multi Commodity
Exchange of India Ltd. (NMCE) was promoted by commodity-relevant public institutions,
viz., Central Warehousing Corporation (CWC), National Agricultural Cooperative
Marketing Federation of India (NAFED), Gujarat Agro-Industries Corporation Limited
(GAICL), Gujarat State Agricultural Marketing Board (GSAMB), National Institute of
Agricultural Marketing (NIAM), and Neptune Overseas Limited (NOL). While various
integral aspects of commodity economy, viz., warehousing, cooperatives, private and public
sector marketing of agricultural commodities, research and training were adequately
addressed in structuring the Exchange, finance was still a vital missing link. Punjab National
Bank (PNB) took equity of the Exchange to establish that linkage. Even today, NMCE is the
only Exchange in India to have such investment and technical support from the commodity
relevant institutions. These institutions are represented on the Board of Directors of the
Exchange and also on various committees set up by the Exchange to ensure good corporate
governance. Some of them have also lent their personnel to provide technical support to the
Exchange management. The day-to-day operations of the Exchange are managed by the
experienced and qualified professionals with impeccable integrity and expertise. None of
them have any trading interest. The structure of NMCE is impossible to replicate in India.
NMCE is unique in many other respects. It is a zero-debt company; following widely
accepted prudent accounting and auditing practices. It has robust delivery mechanism
making it the most suitable for the participants in the physical commodity markets. The
exchange does not compromise on its delivery provisions to attract speculative volume.
Public interest rather than commercial interest guide the functioning of the Exchange. It has


also established fair and transparent rule-based procedures and demonstrated total
commitment towards eliminating any conflicts of interest.
NMCE commenced futures trading in 24 commodities on 26th November, 2002 on a
national scale and the basket of commodities has grown substantially since then to include
cash crops, food grains, plantations, spices, oil seeds, metals & bullion among others.
Research Desk of NMCE is constantly in the process of identifying the hedging needs of the
commodity economy and the basket of products is likely to grow even further. NMCE has
also made immense contribution in raising awareness about and catalyzing implementation
of policy reforms in the commodity sector. NMCE was the first Exchange to take up the
issue of differential treatment of speculative loss. It was also the first Exchange to enroll
participation of high net-worth corporate securities brokers in commodity derivatives
market. It was the Exchange, which showed a way to introduce warehouse receipt system
within existing legal and regulatory framework. It was the first Exchange to complete the
contractual groundwork for dematerialization of the warehouse receipts. Innovation is the
way of life at NMCE.


Indian Commodity Exchange Limited. (ICEX):

Indian Commodity Exchange Limited is a nation-wide screen based on-line derivatives
exchange for commodities and has established a reliable, efficient and transparent trading
platform. It has put in place assaying and warehousing facilities in order to facilitate
deliveries. This exchange is ideally positioned to leverage the huge potential of
commodities market and encourage participation of farmers, traders and actual users to
benefit from the opportunities of hedging, risk management and supply chain
management in the commodities markets.

The Exchange is a public-private partnership with Reliance Exchange next Ltd. as anchor
investor and has MMTC Ltd., India bulls Financial Services Ltd., Indian Potash Ltd.,
KRIBHCO and IDFC among others, as its stakeholders.


National Spot Exchange Limited. (NSEX):

National Spot Exchange Limited (NSEL) is the national level, institutionalized,
electronic, transparent spot trading platform for commodities. It is a structured market
place, set-up to transform the commodity market by way of reducing the cost of
intermediation and thereby improving marketing efficiency. Its state-of-the-art
technology facilitates risk free and hassle free purchase and sale of various commodities.
NSEL provides customized solution to farmers, traders, processors, exporters, importers,
arbitrageurs, investors and other stakeholders pertaining to commodity procurement,
storage, marketing, warehouse receipt financing, etc.

NSEL commenced Live trading on October 15, 2008. At present, NSEL is operational
in 16 States in India, providing delivery-based spot trading in 52 commodities.

National Spot Exchange's stated mission is to develop a common Indian market by
setting up a nation-wide electronic spot market and providing state of art trading,
delivery, and settlement facilities in various commodities. This exchange is now in the
middle of a controversy and all the trades have been stopped.


2.9 TRENDS IN VOLUME CONTRIBUTION ON THE THREE NATIONAL
EXCHANGES:
Pattern on Multi Commodity Exchange (MCX):-

MCX is currently largest commodity exchange in the country in terms of trade volumes,
further it has even become the third largest in bullion and second largest in silver future
trading in the world.

Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3
or 4 commodities contribute for more than 80 percent of total trade volume. As per recent
data the largely traded commodities are Gold, Silver, Energy and base Metals.
Incidentally the futures trends of these commodities are mainly driven by international
futures prices rather than the changes in domestic demand-supply and hence, the price
signals largely reflect international scenario.

Among Agricultural commodities major volume contributors include Gur, Urad, and
Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to
manipulations?

Pattern on National Commodity & Derivatives Exchange (NCDEX):-

NCDEX is the second largest commodity exchange in the country after MCX. However
the major volume contributors on NCDEX are agricultural commodities. But, most of
them have common inherent problem of small market size, which is making them
vulnerable to market manipulations and over speculation. About 60 percent trade on
NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by
FMC).


Pattern on National Multi Commodity Exchange (NMCE):-

NMCE is third national level futures exchange that has been largely trading in
Agricultural Commodities. Trade on NMCE had considerable proportion of commodities
with big market size as jute rubber etc. But, in subsequent period, the pattern has changed
and slowly moved towards commodities with small market size or narrow commodities.

Analysis of volume contributions on three major national commodity exchanges reveled
the following pattern,

Major volume contributors: - Majority of trade has been concentrated in few
commodities that are
Non Agricultural Commodities (bullion, metals and energy)
Agricultural commodities with small market size (or narrow commodities) like guar,
Urad, Mentha etc.

Trade strategy:-
It appears that speculators or operators choose commodities or contracts where the
market could be influenced and extreme speculations possible.
In view of extreme volatilities, the FMC directs the exchanges to impose restrictions on
positions and raise margins on those commodities. Consequently, the
operators/speculators chose another commodity and start operating in a similar pattern.
When FMC brings restrictions on those commodities, the operators once again move to
the other commodities. Likewise, the speculators are moving from one commodity to
other (from methane to Urad to guar etc) where the market could be influenced either
individually or with a group.


2.10 INTERNATIONAL COMMODITY EXCHANGES:
Futures trading is a result of solution to a problem related to the maintenance of a year
round supply of commodities/ products that are seasonal as is the case of agricultural
produce. The United States, Japan, United Kingdom, Brazil, Australia, Singapore are
homes to leading commodity futures exchanges in the world.
The New York Mercantile Exchange (NYMEX):-
The New York Mercantile Exchange is the worlds biggest exchange for trading in
physical commodity futures. It is a primary trading forum for energy products and
precious metals. The exchange is in existence since last 132 years and performs trades
trough two divisions, the NYMEX division, which deals in energy and platinum and the
COMEX division, which trades in all the other metals.
Commodities traded: - Light sweet crude oil, Natural Gas, Heating Oil, Gasoline,
RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum,
Palladium, etc.
London Metal Exchange (LMEX):-
The London Metal Exchange (LME) is the worlds premier non-ferrous market, with
highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the
industrial revolution witnessed in the 19
th
century. The primary focus of LME is in
providing a market for participants from non-ferrous based metals related industry to
safeguard against risk due to movement in base metal prices and also arrive at a price that
sets the benchmark globally. The exchange trades 24 hours a day through an inter office
telephone market and also through a electronic trading platform. It is famous for its open-
outcry trading between ring dealing members that takes place on the market floor.
Commodities traded:- Aluminum, Copper, Nickel, Lead, Tin, Zinc, Aluminum Alloy,
North American Special Aluminum Alloy (NASAAC), Polypropylene, Linear Low
Density Polyethylene, etc.


The Chicago Board of Trade:-
The first commodity exchange established in the world was the Chicago Board of Trade
(CBOT) during 1848 by group of Chicago merchants who were keen to establish a central
market place for trade. Presently, the Chicago Board of Trade is one of the leading
exchanges in the world for trading futures and options. More than 50 contracts on futures and
options are being offered by CBOT currently through open outcry and/or electronically.
CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable
agricultural commodities and non-agricultural products like gold and silver.
Commodities Traded: - Corn, Soybean, Oil, Soybean meal, Wheat, Oats, Ethanol, Rough
Rice, Gold, and Silver etc.
Tokyo Commodity Exchange (TOCEX):-
The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures
exchange in the world. It trades in to metals and energy contracts. It has made rapid
advancement in commodity trading globally since its inception 20 years back. One of the
biggest reasons for that is the initiative TOCOM took towards establishing Asia as the
benchmark for price discovery and risk management in commodities like the Middle East
Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business
opportunities is seen as one of the steps towards providing platform for futures price
discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S.
that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a
major overhaul of its computerized trading system, TOCOM fortified its clearing system in
June by being first commodity exchange in Japan to introduce an in-house clearing system.
TOCOM launched options on gold futures, the first option contract in Japanese market, in
May 2004.
Commodities traded: - Gasoline, Kerosene, Crude Oil, Gold, Silver, Platinum, Aluminum,
Rubber, etc


Chicago Mercantile Exchange:-
The Chicago Mercantile Exchange (CME) is the largest futures exchange in the US and the
largest futures clearing house in the world for futures and options trading. Formed in 1898
primarily to trade in Agricultural commodities, the CME introduced the worlds first
financial futures more than 30 years ago. Today it trades heavily in interest rates futures,
stock indices and foreign exchange futures. Its products often serves as a financial
benchmark and witnesses the largest open interest in futures profile of CME consists of
livestock, dairy and forest products and enables small family farms to large Agri-business to
manage their price risks. Trading in CME can be done either through pit trading or
electronically.
Commodities Traded: - Butter milk, Diammonium phosphate, Feeder cattle, frozen pork
bellies, Lean Hogs, Live cattle, Non-fat Dry Milk, Urea, Urea Ammonium Nitrate, etc.

2.11 BASIC TERMINOLOGIES:
Spot trading
Spot trading is any transaction where delivery either takes place immediately, or with a
minimum lag between the trade and delivery due to technical constraints. Spot trading
normally involves visual inspection of the commodity or a sample of the commodity, and is
carried out in markets such as wholesale markets. Commodity markets, on the other hand,
require the existence of agreed standards so that trades can be made without visual
inspection.
Forward contracts
A forward contract is an agreement between two parties to exchange at some fixed future
date a given quantity of a commodity for a price defined today. The fixed price today is
known as the forward price.


Futures contracts
A futures contract has the same general features as a forward contract but is transacted
through a futures exchange.
Commodity and futures contracts are based on whats termed forward contracts. Early on
these forward contracts agreements to buy now, pay and deliver later were used as a
way of getting products from producer to the consumer. These typically were only for food
and agricultural products. Forward contracts have evolved and have been standardized into
what we know today as futures contracts. Although more complex today, early forward
contracts for example, were used for rice in seventeenth century Japan. Modern forward, or
futures agreements began in Chicago in the 1840s, with the appearance of the railroads.
Chicago, being centrally located, emerged as the hub between Midwestern farmers and
producers and the east coast consumer population centers.
In essence, a futures contract is a standardized forward contract in which the buyer and the
seller accept the terms in regards to product, grade, quantity and location and are only free to
negotiate the price.
Hedging
Hedging, a common practice of farming cooperatives insures against a poor harvest by
purchasing futures contracts in the same commodity. If the cooperative has significantly less
of its product to sell due to weather or insects, it makes up for that loss with a profit on the
markets, since the overall supply of the crop is short everywhere that suffered the same
conditions.
Delivery and condition guarantees
In addition, delivery day, method of settlement and delivery point must all be specified.
Typically, trading must end two (or more) business days prior to the delivery day, so that the


routing of the shipment can be finalized via ship or rail, and payment can be settled when
the contract arrives at any delivery point.
2.12 GROWTH OF THE COMMODITY MARKET:
Investment in commodity markets has undoubtedly grown, but commentators Found it
difficult to quantify. Even the larger market participants that we spoke to were unable to
accurately gauge the total size of the market, and estimates varied widely. There was a
similarly wide range of estimates regarding the breakdown of Investment by market
sector.
On-exchange volumes have certainly increased greatly in the past five to ten years. There
has been rapid growth in the number of contracts traded on both LIFFE (soft
Commodities) and ICE Futures (energy). ICE Futures has seen volumes almost double in
the last year alone and volumes on LME have increased tenfold since 1990.14 However
in some markets OTC business is equal to several multiples of these volumes. The
December 2006 Bank for International Settlements (BIS) Quarterly Review Includes data
on the amount of outstanding OTC commodity derivatives contracts among those who
report. Figure 6 shows that this market too has increased greatly in recent years.

How will commodity investment grow in the future?
All market participants we spoke to expected investment growth to continue and there are
strong arguments to support their case. The last commodity boom was caused by supply
restrictions whereas this boom has mainly been caused by Dramatic growth in demand
(particularly from the rapidly developing economies of China and India); i.e. it is
underpinned by what seem to be long-lasting fundamentals.

Date June 2004 December
2004
June
2005
December
2005
June 2006
Amount
(US$
billions)
1,270 1,443 2,940 5,434 6,394


It is widely stated that institutional investors will stay for the long Term. Private investors
will continue to invest where they gain the benefits from portfolio diversification, whereas
the hedge funds are likely to trade the short side as well as the long and will happily benefit
from either.

In addition we have already talked of the impact of electronic trading. In many cases remote
traders are indifferent to the nature of the instrument they are trading and simply seek a
contract with a degree of volatility that they can easily trade in and out of.

Studies indicating that commodities are an effective portfolio diversifier have been around
for some time but perhaps it has taken the recent economic climate (dot-com bubble, low
equity and bond returns, commodity bull run) for commodities to become regarded as a
genuine asset class. Many investors now undoubtedly regard it as such. We think therefore it
is a reasonable conclusion that investment in commodities markets will continue to grow, and
is moving away from a cyclical opportunistic market to a genuine asset class. Currently,
global pension funds stand at $18.6 trillion Assets under Management (AUM)
15
of which
estimates suggest about $80 billion estimated to be invested in commodities. As many now
regard commodities as an asset class, most of our correspondents think all institutional
investors should build an exposure of at least 5% (equivalent to $930 billion). So what is
preventing institutional investors? Reaching this level? Only a handful of large UK pension
funds invest in commodities and usually at around 3% of AUM. Pension funds are
traditionally cautious in adopting new investment strategies which is likely to explain this
anomaly. We look more closely at pension funds in Section 6. It seems from our research that
rather than ask how much investment there will be, we should perhaps consider how long it
will take to grow. The limiting factors seem to be the time required to educate new investors
and the availability of suitably experienced staff. We should also ask ourselves what effect
the increasing allocation of pension fund assets may have on the commodity markets. Should
the trend continue of investing mainly in passive indices where the index rolling periods
already have a noticeable effect will the markets be able to sustain these massive influxes?


CHAPTER-3
LITERATURE REVIEW


INTRODUCTION
Following repeated changes in the rules and regulations by the authorities, the Indian
commodity futures market has achieved a surge in values and volumes of traded
commodities over the last decade. The history of commodity futures in India can be
traced back to the end of the 19th century when the Bombay Cotton Trade Association
established cotton contracts. In the interwar period, the futures market underwent rapid
growth, although futures trading came to be prohibited during the Second World War
under the Defence of India Act (FMC, 2011a, 1). After its transient resumption and
prosperity in the mid-1950s, futures trading was again banned in 1966 except for a few
minor commodities, and after that, it was practically deactivated. During the 1980s,
commodity futures trading were partially permitted in a few commodities, but it was in
the liberalization process beginning in 1991 that the Indian government reassessed the
role of commodity futures trading in the economy.

In 2003, the government lifted the prohibition against futures trading in all the
commodities, granting recognition to three electronic exchanges, namely National Multi
Commodity Exchange of India (NMCE), Multi Commodity Exchange of India (MCX),
and National Commodity and Derivatives Exchange (NCDEX), as national level multi-
commodity exchanges (FMC, 2011a, 6). Moreover, Indian Commodity Exchange
(ICEX) and ACE Commodity and Derivative Exchanges were also granted recognition
as the fourth and the fifth national multi-commodity exchanges in 2009 and 2010,
respectively. With the establishment of these exchanges, the commodity futures market
has witnessed massive growth in India. For example, the total value of commodities
traded has steadily increased, and after reaching Rs.52.49 trillion in 2008-09, it has
outperformed the domestic stock market (see Figure 1). Certainly, the commodity
market has grown to be among the major financial markets in India.

Generally, it is said that the futures market has the two important economic functions,
i.e., price risk management and price discovery. By taking equal but opposite positions in
the futures market, both the producer and the consumer can manage the price risk in the
spot market, which is usually called the hedging of price risk in commodities. Apart from


these participants who aim to hedge, there must also be someone in the futures market
who aims to take risk and profit by doing so (Easwaran and Ramasundaram, 2008, 339).
Having market participants with various objectives and information, the futures market
enables the current futures price to act as an accurate indicator of the spot price expected at
the maturity of the futures contract. This is referred to as the price discovery function of
the futures market. Only an efficient futures market can perform these functions. As
proposed by Fame (1970), we consider the market as weak-form efficient if the futures
price reflects all available information for predicting the future spot price and any
participants cannot make profits consistently.
Empirical analyses on market efficiency of commodity futures have been conducted
mainly for developed countries so far. The examples include Choudhary (1991) and
Kellard (2002) for the UK, and Beck (1994) and McKenzie et al. (2002) for the US.
Meanwhile, the relevant studies for emerging countries are significantly growing but
still limited. In this paper, we especially focus on India, one of the emerging countries
with phenomenal growth in its commodity market, and we empirically examine whether
the market efficient hypothesis holds in the Indian commodity market. More
specifically, we first estimate the long-run equilibrium relationship between multi-
commodity futures and spot prices and then test for market efficiency in a weak form
sense by applying the dynamic OLS (DOLS) and the fully modified OLS (FMOLS)
methods, respectively.

This paper is organized as follows. The next section briefly reviews the relevant
literature and discusses the contributions of this study. Section 2 explains the definitions,
sources, and properties of the data, while the third section presents the model and shows
the empirical results. In the final section, we summarize the main findings of this study
and suggest policy implications.
LITERATURE REVIEW
Since the introduction of co integration theory, a growing body of literature has
empirically tested market efficiency of commodity futures around the world. If the non-
stationary spot and futures prices are co integrated, it ensures that there exists a long-run
equilibrium relationship between them. However, if these two price series are not co


integrated, they diverge without bound, such that the futures price would provide little
information about the movement of the spot price (Lai and Lai, 1991, 569). Therefore, co
integration between the spot price and the futures price is a necessary condition for
market efficiency (ibid. 568). Market efficiency also requires that the futures price is an
unbiased predictor on average, indicating that these two price indices have a co
integrating vector. So far, market efficiency has mainly been studies for developed countries
such as the US and the UK, and studies on emerging and developing counties are few. Among
the latter, examples other than India include Wang and Ke (2005) for wheat and soybeans and
Xin et al. (2006) for copper and aluminum, both of which examine the commodity market
efficiency in China using co integration methods.

The prior research on India consists of Bose (2008), Jabir and Gupta (2011), and Goyari and
Jena (2011).
2
Bose (2008) examines some characteristics of Indian commodity futures in order to
judge whether the prices fulfill the efficient functions of the markets or not. She analyzes this
issue by applying different methods such as correlation, co integration and causality and using
the price indices from the MCX and the NCDEX from June 2005 to September 2007. The results
show that the multi-commodity futures indices help to reduce volatility in the spot prices of
corresponding commodities and provide for effective hedging of price risk, while the agricultural
indices do not exhibit these features clearly. Also, Jabir and Gupta (2011) analyze the efficiency
of 12 agricultural commodity markets by examining the relationships between the futures and
spot prices from 2004 to 2007. As the results from their co integration and causality tests, they
indicate that co integration exists in these indices for all commodities except wheat and rice and
that the direction of causality is mixed, depending on the commodities. Finally, Goyari and Jena
(2011) examine the commodity futures market from June 2005 to January 2008 using the daily
spot and futures prices of gold, crude oil and guar seed. The results of their co integration test
state that the spot price and the futures price are co integrated for three commodities, suggesting
that they have a long-run relationship.

As mentioned above, all these studies use the period before 2008 as their sample period and so
do not cover the period during which Indian commodity futures gained momentum significantly.
Besides, they conduct the Johansen co integration test but do not test the co integrating
parameter restriction for the unbiasedness hypothesis. This paper differs from the surveyed
studies on these two points.


CHAPTER-4
RESEARCH
METHODOLOGY


OBJECTIVES OF THE STUDY:

To study the concepts of commodities Trading in India.

To study of The Various Trends In Commodity Trading

To Study The Role of Commodities In Indian Financial Markets

To study In detail The Role of Futures And Forwards.

To analyze the present situation of the commodities in

Indian market and suggest for any improvements there after

RESEARCH METHODOLOGY:

To achieve the object of studying the commodities market in stock market data have
Been collected. Research
Methodology carried for this study is purely from Secondary data from various web sites
mentioned below.

WEBSITES:

http://www.indiainfoline.com/
http://www.swastika.co.in/
http://www.investopedia.com/
http://business.mapsofindia.com/


LIMITATIONS OF THE STUDY:

The study is limited to Commodity Trading Investment and Speculation in the
Indian context.

1. The study cannot say as totally perfect as it is subjected to any alteration.
2. The study is not based on the international perspective of Commodity markets. It is
limited to national level only.
3. The finding of the study is based on information which was given by the respondent. It
may be possible that the respondents ware not provided the right information.
4. There can be business from researcher or responds side.


CHAPTER-5
DATA ANALYSIS
&
INTERPRETATION


Q.1 Do you have any investment plan?
TABLE 1.1

CHART 1.1

INTERPRETATION
In our study, we have put down this question to check the analytical aspect of the
investors.
We have found in our study that 68% of the investors would prefer to investment
plan in it and only 32% of the investors would not prefer to investment plan.

Investment plan
Frequency Percent
YES 32 32.0
NO 68 68.0
Total 100 100.0


Q.2 If Yes, Where you would like to invest your money?
TABLE 2.1

CHART 2.1

INTERPRETATION
The above graph shows preferred mode of investment by investors.
As we have taken sample of investors who invest in commodity market, it is
obvious that commodity market is most preferable mode of investment for them.
The graph represents that Bank FD is second preferable mode of investment by
investors, i.e., 32% of the investors invest in Bank FD.

Mode Of Investments
Frequency Percent

Bank F.D 10 10.0

Commodity Market 13 13.0

Share Market 6 6.0

Other 3 3.0

Total 32 32.0

System 68 68.0
Total
100 100.0
Bank F.D Commodity Market Share Market Other


Q.3 If No, what reasons?
TABLE 3.1
Reasons
Frequency Percent
Not Aware About Invest Avenues 28 28.0
Insufficient Income 37 37.0
Other 3 3.0
Total 68 68.0
System 32 32.0
TOTAL 100 100.0

CHART 3.1

INTERPRETATION
In Our study, we have found that 55% of the investors have not aware about the invest
avenues.
We also found that 41% of the inventors have insufficient income.
We also found that 4% of the investors have other reason to not invest in money.

41%
55%
4%
Reasons
NOT AWARE ABOUT INVEST
AVENUES
INSUFFICIENT INCOME
OTHER


Q.4 Do you aware about Commodity Market?
TABLE 4.1

CHART 4.1

INTERPRETATION
In our study, we have put down this question to check the analytical aspect of the
investors.
We have found in our study that 71% of the investors would prefer to not aware about
the commodity market and 29% of the investors would prefer to yes aware about the
commodity market.
Whereas 29% of the investors analyze the market with the help of brokers / financial
advisors or themselves.

Aware About Commodity Market
Frequency Percent
YES 29 29.0
NO 71 71.0
Total 100 100.0
29%
71%
Aware About Commodity Market
YES
NO


Q.5 If yes, which Commodity Exchange you will prefer for investment?

TABLE 5.1

CHART 5.1

INTERPRETATION
From the above graphical presentation, we can say that investors are mostly preferred
NCDEX (NATIONAL COMMODITY &DERIVATIVES EXCHANGE LTD.) &
NMCE (NATIONAL MULTI COMMODITY EXCHANGE) for trading in
commodities.
MCX holds a market share of over 80% of the Indian commodity futures market, and
more than 2000 registered members operating through over 100,000 trader work station,
across India.
24%
28%
28%
17%
3%
Chart Title
MCX
NCDEX
NMCE
Can't Say
Other

Frequency Percent
MCX 7 7.0

NCDEX 8 8.0

NMCE 8 8.0

Can't Say 5 5.0

Other 1 1.0

Total 29 29.0
System 71 71.0
Total 100 100.0


We also found that 24% of the investors preferred MCX for trading in commodity
market.
From the above chart we can say that 17% of the investors preferred cant say and 3% of
the investors use preferred local trading exchange for trading for trading in commodity
market.

Q.6 what is your perception about Commodity Market?

TABLE 6.1

Frequency Percent

Less Risk 30 30.0

Risk 52 52.0

Very Risk 18 18.0

Total 100 100.0

CHART 6.1

INTERPRETATION
I can know that commodity is risky because the inventor says that there is no one can
predict to the commodity price in a market so that commodity is risky for the investing.
We also that found that the 30% peoples are commodity is less risky and 18% peoples are
commodity is very risky.
30%
52%
18%
Perception About Commodity
Less Risk
Risk
Very Risk


Q.7 For each statement given below, please tick mark in the box to in the indicate your
opinion.
Objective: To check the effectiveness of factors in determining commodities
price from investors perspective.
TABLE 7.1

TABLE 7.2
Mean and Standard Deviation

Factors which affects to determine commodities price
Statement Strongly
Agree
Agree Neutral Disagree Strongly
Disagree
Export-import data of commodities issued by
government to the commodities price.
47 26 15 10 2
Flood, earthquake, droughts and tsunami create
fluctuation incommodities price.
26 39 17 14 4
If buyers are standing less than suppliers, reduces
the price of commodities.
33 19 25 21 2
Government policies like monetary and fiscal
policy affects commodities price.
19 27 30 21 3
Crude oil inventory level data affects commodities
prices.
18 29 16 28 9
Seasons like monsoon, winter and summer affects
to the price of commodities.
20 27 19 21 13
Statement Mean Standard Deviation
1.94 1.099
2.31 1.125
2.40 1.206
2.62 1.108
prices.
2.81 1.277
2.80 1.333


CHART 7.1

INTERPRETATION
From the above graphical presentation and tables, we can say that investors are almost
agree with the all the statements related to the factors which affect to determine
commodity prices.
We have calculate the mean and standard deviation for each of the statements and their
mean ranges from 1.94 to 2.81 which represent that investors are agree about that all the
factors are more or less important in determining commodity prices.
The most important factors that affects the price of commodities are Export-Import data
of commodities issued by government, Flood, Earthquake, Droughts and Tsunami, If
buyers are standing less than suppliers, Government policies like monetary and fiscal
policy, interest rate issues by RBI and Foreign Exchange rate affects to commodities
price, having mean of 1.94, 2.31, 2.4, 2.62, 2.81 and 2.8 respectively

1.94
2.31
2.4
2.62
2.81 2.8
1.099
1.125
1.206
1.108
1.277
1.333
1 2 3 4 5 6
Mean Standard Deviation


Q.8 Give your opinions about the followings.

Objective: To check investors perception as compared to equity market and currency market
and to check views over reliability and transiency of on line trading in commodity market.

TABLE 8.1
Statement Strongly
Agree
Disagree
Commodity market gives more return than equity
market and currency market.
43 24 9 19 5
Commodity market consists more risk than equity
19 33 24 23 1
Commodity market is less volatile then equity
17 24 32 20 7
Commodity market fluctuation makes impact on
equity market and currency market.
17 32 28 19 4
Online trading in commodity market is
transparent.
16 30 22 26 6
Online trading in commodity market is reliable. 17 18 17 26 22

TABLE 8.2
Statement Mean Standard Deviation
Commodity market gives more return than
2.19 1.308
Commodity market consists more risk than
2.54 1.077
2.76 1.164
Commodity market fluctuation makes impact
on equity market and currency market.
2.61 1.100
transparent.
2.76 1.182
Online trading in commodity market is reliable. 3.18 1.410


CHART 8.1

INTERPRETATION
From the above graphical presentation and graph we can come to know that investors
opinion is approximately neutral for the two statements. The statements are commodity
market and give more return than Equity market and currency market and commodity
market consists more risk than Equity market which has mean of 2.19 and 3.18
respectively and on the basis of that we can say that investors are neutral about both the
statements.
In our study, we also found that investors are agreeing about the following statements.
Commodity market is less volatile than Equity market and currency market, commodity
market fluctuation makes impact on Equity market and currency market , online trading
in commodity market is transparent, online trading in commodity market is reliable
because their means are 2.54, 2.76, 2.61 and 2.76 respectively.

2.19
2.54
2.76
2.61
2.76
3.18
1.308
1.077
1.164
1.100
1.182
1.410
.00
.50
1.00
1.50
2.00
2.50
3.00
3.50
1 2 3 4 5 6
Mean Standard Deviation


PERSONAL DETAILS

1. GENDER:
TABLE 9.1
Gender Frequency Percent
Male 79 79.0
Female 21 21.0
Total 100 100.0

CHART 9.1

INTERPRETATION

In our study, we have taken a sample of 100 investors who invest in commodity market.
Out of 100, there are approximately 79% respondent are male while rest of the
respondents are female.

79%
21%
Gender
Male
Female


2. AGE GROUP:

TABLE 9.2

CHART 9.2

INTERPRETATION
The above chart shows the graphical presentation of age group of investors who in
commodity market.
From the graph, we can say that majority of the respondents are of age group between 20-
30 year i.e. 42% of the respondent having their age between 20-30 year.

30%
42%
15%
10%
2%
1%
AGE GROUP
Below 20
20-30
31-40
41-50
51-60
Above 60
Frequency Percent
Below 20 30 30.0
20-30 42 42.0
31-40 15 15.0
41-50 10 10.0
51-60 2 2.0
Above 60 1 1.0
Total 100 100.0


3. OCCUPATION:

TABLE 9.3

CHART 9.3

INTERPRETATION
The above graphical presentation shows the occupation of respondents.
Out of total of respondents, 26% are self Employed, 18% government employees, 11%
are private sector employees, 17% are professional employees, and 26% are other
respondents.
18%
26%
17%
5%
11%
23%
Occupation
Government Employee
Self Employee
Professional
Farmer
Employee In Private Sector
Other
Frequency Percent
Government Employee 18 18
Self Employee 26 26
Professional 17 17
Farmer 5 5
Employee In Private Sector 11 11
Other 23 23
Total 100 100


4. Monthly Income of Family (in Rs.):

TABLE 9.4

CHART 9.4

INTERPRETATION
The above chart shows the graphical presentation of monthly income of family of
respondents.
In this data there is mostly 43% investors has more than Below 10000 incomes per month
that reason is family business in market and it is well settled because if you have no
43%
24%
18%
9%
3%
3%
Monthly Income
Below 10000
10000-20000
20000-30000
30000-40000
40000-50000
Above 50000
Frequency Percent
Below 10000 43 43.0
10000-20000 24 24.0
20000-30000 18 18.0
30000-40000 9 9.0
40000-50000 3 3.0
Above 50000 3 3.0
Total 100 100.0


sufficient income so you cannot payout of deal that when you get big loss that time you
have to pay and you have no more income.

5. Educational Qualification:
TABLE 9.5

Frequency Percent
Below HSC 18 18.0
Undergraduate 13 13.0
Graduate 42 42.0
Post Graduate 26 26.0
Other 1 1.0
Total 100 100.0

CHART 9.5

INTERPRETATION
The above chart shows the graphical presentation of Education Qualification of investors
who invest in commodity market.
From the graph, we can say that majority of the respondents are Graduate.

18%
13%
42%
26%
1%
Educational Qualification
Below HSC
Undergraduate
Graduate
Post Graduate
Other


CHAPTER-6
FINDINGS


FINDINGS

In India MCX is trading in bullion market.
Goldsmiths get their raw material from wholesale dealers.
They fix the prices on daily trading bases.
Hence there is positive correlation between both market traders can easily predict the
future prices of the commodities and hedge their positions.
The investors expect that the brokers should provide them the genuine information
regarding the market.
Also they want moderate brokerage and good services from the brokers.
Mostly investor of commodity is trading in NCDEX or MCX Exchange.
For the commodity deal the brokerage house provides a research advisory, delivery
facility for their clients.
Most of investors say that commodity market is risky market for the investment.
We have also found that maximum number of investors of investors are agree or
strongly agree with the statement that international commodity market affects national
trading activity.
The most important factors that affects the price of commodities are Export-Import data
of commodities issued by government, if buyers are standing less than suppliers, red,
Government policies like Monetary and Fiscal policy, interest rate issue by RBI and
Foreign rate affects to commodities price.
In our study we have also found that commodity market is lee volatile than Equity market
and currency market, commodity market fluctuation makes impact on Equity market and
currency market, Online trading in commodity market is transparent and online trading in
commodity market is reliable.


CHAPTER-7
CONLUSION


CONCLUSION
The trading in commodity derivatives started on Dec. 2003.
Within a short span of 3 years the trading volume in commodity derivatives increased
in a rapid manner, now it going to equalize with the financial derivatives trading
volumes.
First derivatives emerged as hedging products in commodities.
These commodities are the risk management instruments which transfers the pricing
risks to other parties.
Internationally, commodity derivatives are exchange - traded.
In the bullish market, the investors can earn profits by buying the commodity futures.
In the bearish market, the investors can earn profits by selling the commodity futures.
The hedgers can transfer their risks to other parties by ways of long hedge and short
hedge.
The speculators can build large positions with little margins by way of leverage and
their profit/loss potential is unlimited.
The arbitragers can also earn risk less profits by ways of cash and-carry arbitrage
and reverse cash-in-carry arbitrage.
These commodity products are very much new to India.
The SEBI is taking necessary actions to create awareness into the investors.


CHAPTER-8
BIBLIOGRAPHY


BIBLIOGRAPHY
http://www.indiainfoline.com/
http://www.swastika.co.in/
http://www.investopedia.com/
http://www.managementparadise.com/
http://www.scribd.com/
http://www.gujaratmba.com/
http://www.citesales.com/
http://www.mcxindia.com/
http://www.commodityonline.com/
http://www.moneycontrol.com/
http://www.icexindia.com/
http://www.ncdex.com/
http://businesstoday.intoday.in/
http://economictimes.indiatimes.com/
http://www.slideshare.net/
https://www.linkedin.com/
http://www.nationalspotexchange.com/
http://www.nmce.com/


CHAPTER-9
ANNEXURE


Questionnaire

Dear Sir / Madam,

We Are Student Of MBA Programmer From S.V.Institute Of Management, Kadi. As A Part
Of Our Study, We Are Required To Prepare A Comprehensive Project For Which We Have
Selected The Topic A Study On Commodity Market. We Ensure That The Information
Provided By You Will Be Kept Confidential & Exclusively Used For Academic Purpose Only.

1. Do you have any investment plan?

YES
NO
(If NO move to question no. 4)
2. If, yes, where you would like to invest your money?

Bank F.D
Commodity Market
Share Market
Other (specify) ----------------------------------------------------------------
3. If no, why?

Not aware about invest avenues
Insufficient income
Other (specify) ----------------------------------------------------------------
4. Do you aware about Commodity Market?

YES
NO
(If NO move to question no. 7)


5. If yes, which Commodity Exchange you will prefer for investment?

MCX NCDEX
NMCE Cant Say
Other (Specify) ----------------------------------------------------------
6. What is your perception about Commodity Market?

Less Risk Risk Very Risk
7. For each statement given below, please tick mark in the box to in the indicate your
opinion.

8. Give your opinions about the followings..
Statement Strongly
Agree
Disagree
Commodity market gives more return than equity

Commodity market consists more risk than equity


Commodity market fluctuation makes impact on

transparent.

Online trading in commodity market is reliable.

Factors which affects to determine commodities price
Statement Strongly
Agree
Disagree




prices.



PERSONAL DETAILS:

1. Name:

2. Gender:

Male Female

3. Age:

Below 20 20 30

31-40 41-50

51-60 Above 60

4. Occupation:

Government employee Self-employee

Professional Farmer

Employee in Private Sector Others

5. Monthly family income:

Below 10,000 10,000-20,000

20,000-30,000 30,000-40,000

40,000-50,000 Above 50,000

6. Educational qualification:

Below HSC Undergraduate

Graduate Post graduate

Others please specify ____________________________________


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