COMMODITY TRADING AN INDIAN PERSPECTIVE

EXECUTIVE SUMMARY:

Commodity futures trading began to be permitted in several commodities,

and the ushering in of the Twenty-first Century saw the emergence of new
National Commodity Exchanges with countrywide reach for trading in
almost all primary commodities and their products. A futures contract is a
type of forward contract defined as "a contract for the delivery of goods
and which is not a ready delivery contract.”
In commodity market a ready delivery contract is one, which provides for
the delivery of goods and the payment of price therefore, either
immediately or within such period not exceeding 11 days after the date of
the contract.
In the study of analysis there is Price differences in certain pair of
commodities between exchanges. The study includes study of ten
commodities taken from two exchanges in India, the study restricts to
construction of portfolio of pairs of commodities.

The analysis is carried out with a hypothesis testing on whether there is

difference in returns between the two exchanges.

The result of the analysis tells us that there is a significant difference between the
returns of the two commodity exchanges and there are chances of arbitrage
opportunity between the exchanges for a certain pair of commodities which leads
to optimal investments and maximum returns.

ALLIANCE BUSINESS ACADEMY