Summer Training Report On “Commodities Market” AT UNICON INVESTMENT SOLUTIONS. HYDERABAD Prepared By Mr. DIXITH GANDHE Roll No.

09PG017 Batch 2009-11

Under the Guidance of Mr. Kiran Kumar (Business head) (Company Guide) Prof. Dr.REKHA (Faculty Guide)

In partial fulfillment of the Course-Industry Internship Programme (IIP) in Term – IV of the Post Graduate Programme in Management (Batch: Aug. 2009 – 2011)

Bangalore

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Post Graduate Programme Post Graduate Programme in Management: Aug.2009 – 2011 Term – IV: Industry Internship Programme (IIP) Declaration This is to declare that the Report entitled “………………………………….” has been made for the partial fulfillment of the Course: Industry Internship Programme (IIP) in Term – IV (Batch: Aug. 2009-2011) by me at UNICON INVESTMENT SOLUTIONS (organization) under the guidance of Dr. Rekha. I confirm that this Report truly represents my work undertaken as a part of my Industry Internship Programme (IIP). This work is not a replication of work done previously by any other person. I also confirm that the contents of the report and the views contained therein have been discussed and deliberated with the Faculty Guide.

Signature of the Student Name of the Student (in Capital Letters) Registration No

: : :

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Post Graduate Programme in Management

Certificate This is to certify that Mr. / Ms. ___________________ Regn. No. _______ has completed the Report entitled ___________________________________________ under my guidance for the partial fulfillment of the Course: Industry Internship Programme (IIP) in Term – IV of the Post Graduate Programme in Management (Batch: Aug. 2009 – 2011).

Signature of Faculty Guide:

Name of the Faculty Guide:

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ACKNOWLEDGEMENT

I would like to express my deep sense of gratitude to the faculty at Alliance Business School, particularly Dr.Rekha , Senior Professor- Finance to guide me through my internship program. I would like to express heartfelt thankfulness to my industry mentor, Mr Kiran Kumar who has given me his precious time and expertise people to help me keep learning during my internship. A special mention of Mr. Suresh, Mr. Abishek, for having made a positive difference towards the whole learning process and giving me the best of the information and training. Dixith Gandhe Place: hyderabad Date:

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TABLE OF CONTENTS Pg.no 1. EXECUTIVE SUMMARY 2. INTRODUCTION 2.1. INDUSTRY OVERVIEW 2.2. COMPANY OVERVIEW 3. PROJECT PROFILE 4. OBJECTIVE OF STUDY 5. OBSERVATIONS 6. ANALYSIS 7. FINDINGS 8. RECOMMENDATIONS AND CONCLUSION 9. LEARNING OUTCOME 10. BIBILOGRAPHY 11.ANEXURE 6 8 13 20 26 28 41 50 64 67 70

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EXECUTIVE SUMMARY Our endeavour is to find out the status of commodity Derivatives as they stand in the overall economical, social and demographic picture of our system. The impact in economical system is very much clear and beyond any dispute as Commodities are themselves economical propositions. But commodities are also subject matter of our social fabrication. Any society contains two set of people: Traders and farmers. Commodities have a huge impact on lives of both set of people. Their business practices and strategies are rapidly changing and commodity market is very much influencing it. We have studied that impact. It is noteworthy that the new world economic order is of convergence. All sectors, economies and trades are being interrelated. Whether we like it or not, our businesses are no more ours. Total world economy is involved into it. The same applies to commodities. Whether one participates into it or keeps himself aloof, he, in no ways can escape its effects . However, it has to be kept in mind that as an asset class and even as a tool of risk minimization (for Traders, Farmers and businesses); it is a very new and nascent proposition in India. Even though Commodity futures have their long history in this country, periodical bans and derogatory government policies have hindered their prospects to develop as a tool for hedgers (risk minimization), leave alone the matter of their development as an investment avenue. Their primary goal of true price discovery is also much waited.

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2 INTRODUCTION CLASSIFICATION OF MARKETS The vast geographical extent of India and her huge population is aptly complemented by the size of her market. The broadest classification of the Indian Market can be made in terms of the commodity market and the bond market. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Such markets are social institutions that facilitate exchange of goods for money. The cost of goods is estimated in terms of domestic currency. Indian Commodity Market can be subdivided into the following two categories:  Wholesale Market  Retail Market The traditional wholesale market in India dealt with the whole sellers who bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the consumers. With the passage of time the importance of whole sellers began to fade out for the following reasons: o The whole sellers in most situations, acted as mere parasites that did not add any value to the product but raised its price which was eventually bear by the consumers. o The improvement in transport facilities made the retailers to directly interact with the producers and hence the need for whole sellers was not felt.

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In recent years, the extent of the retail market (both organized and unorganized) has evolved in leaps and bounds. In fact, the success stories of the commodity market of India in recent years has mainly centered on the growth generated by the Retail Sector. Almost every commodity under the sun both agricultural and industrial is now being provided at well distributed retail outlets throughout the country. Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure. The organized sector on the other hand is owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually selling a wide range of articles such as agricultural and manufactured, edible and inedible, perishable and durable. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. However the growth of such markets has still centered on the urban areas primarily due to infrastructural limitations. The share of retail trade in the country's gross domestic product (GDP) was between 8–10 per cent in 2007. It is currently around 12 per cent, and is likely to reach 22 per cent by 2010. A McKinsey report 'The rise of Indian Consumer Market', estimates that the Indian consumer market is likely to grow four times by 2025. Commercial real estate services company, CB Richard Ellis' findings state that India's retail market is currently valued at US$ 511 billion. India's overall retail sector is expected to rise to US$ 833 billion by 2013 and to US$ 1.3 trillion by 2018, at a compound annual growth rate (CAGR) of 10 per cent. A Brief History of future Markets In the 1840s, Chicago had become a commercial center with railroad and telegraph lines connecting it with the East. Around this same time, the McCormick reaper was invented which eventually lead to higher wheat production. Midwest farmers came to Chicago to sell their wheat to dealers who, in turn, shipped it all over the country.

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Farmers brought their wheat to Chicago hoping to sell it at a good price. The city had few storage facilities and no established procedures either for weighing the grain or for grading it. In short, the farmers were often at the mercy of the dealer. 1848 saw the opening of a central place where farmers and dealers could meet to deal in "spot" grain - that is, to exchange cash for immediate delivery of wheat. The futures contract, as we know it today, evolved as farmers (sellers) and dealers (buyers) began to commit to future exchanges of grain for cash. For instance, the farmer would agree with the dealer on a price to deliver to him 5,000 bushels of wheat at the end of June. The bargain suited both parties. The farmer knew how much he would be paid for his wheat, and the dealer knew his costs in advance. The two parties may have exchanged a written contract to this effect and even a small amount of money representing a "guarantee." Such contracts became common and were even used as collateral for bank loans. They also began to change hands before the delivery date. If the dealer decided he didn't want the wheat, he would sell the contract to someone who did. Or, the farmer who didn't want to deliver his wheat might pass his obligation on to another farmer the price would go up and down depending on what was happening in the wheat market. If bad weather had come, the people who had contracted to sell wheat would hold more valuable contracts because the supply would be lower; if the harvest were bigger than expected, the seller's contract would become less valuable. It wasn't long before people who had no intention of ever buying or selling wheat began trading the contracts. They were speculators, hoping to buy low and sell high or sell high and buy low. THE FUTURES CONTRACT Unlike a stock, which represents equity in a company and can be held for a long time, if not indefinitely, futures contracts have finite lives. They are primarily used for hedging commodity price-fluctuation risks or for taking advantage of price movements, rather than for the buying or selling of the actual cash commodity. The word "contract" is used 11

because a futures contract requires delivery of the commodity in a stated month in the future unless the contract is liquidated before it expires. The buyer of the futures contract (the party with a long position) agrees on a fixed purchase price to buy the underlying commodity (wheat, gold or T-bills, for example) from the seller at the expiration of the contract. The seller of the futures contract (the party with a short position) agrees to sell the underlying commodity to the buyer at expiration at the fixed sales price. As time passes, the contract's price changes relative to the fixed price at which the trade was initiated. This creates profits or losses for the trader. In most cases, delivery never takes place. Instead, both the buyer and the seller, acting independently of each other, usually liquidate their long and short positions before the contract expires; the buyer sells futures and the seller buys futures. Arbitrageurs in the futures markets are constantly watching the relationship between cash and futures in order to exploit such mispricing. If, for example, an arbitrageur realized that gold futures in a certain month were overpriced in relation to the cash gold market and/or interest rates, he would immediately sell those contracts knowing that he could lock in a risk-free profit. Traders on the floor of the exchange would notice the heavy selling activity and react by quickly pushing down the futures price, thus bringing it back into line with the cash market. For this reason, such opportunities are rare and fleeting. Most arbitrage strategies are carried out by traders from large dealer firms. They monitor prices in the cash and futures markets from "upstairs" where they have electronic screens and direct phone lines to place orders on the exchange floor.

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2.1 INDUSTRY OVERVIEW:

Stock Broking Sector in India The Indian broking industry is one of the oldest trading industries that has been around even before the establishment of the BSE in 1875. Despite passing through a number of changes in the post liberalization period, the industry has found its way towards sustainable growth. In this section our purpose will be of gaining a deeper understanding about the role of the Indian stock broking industry in the country’s economy.

SEBI and its role : The Securities and Exchange Board of India (SEBI) is the regulatory authority in India established under Section 3 of SEBI Act, 1992. SEBI Act, 1992 provides for establishment of Securities and Exchange Board of India (SEBI) with statutory powers for (a) protecting the interests of investors in securities (b) promoting the development of the securities market and (c ) regulating the securities market. Its regulatory jurisdiction extends over corporates in the issuance of capital and transfer of securities, in addition to all intermediaries and persons associated with securities market. SEBI has been obligated to perform the aforesaid functions by such measures as it thinks fit. In particular, it has powers for: ● Regulating the business in stock exchanges and any other securities markets ● Registering and regulating the working of stock brokers, sub–brokers etc. ● Promoting and regulating self-regulatory organizations ● Prohibiting fraudulent and unfair trade practice.

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● Calling for information from, undertaking inspection, conducting inquiries and audits of the stock exchanges, intermediaries, self- regulatory organizations, mutual funds and other persons associated with the securities market. Broking houses in India India is a country having a big list of Broking Houses. The Equity Broking Industry in India has several unique features like it is more than a century old, dynamic, forward looking, and good service providers, well conversant, highly innovative and even adaptable. The regulations and reforms been laid down in the Equity Market has resulted in rapid growth and development. Basically, the growth in the equity market is largely due to the effective intermediaries. The Broking Houses not only act as an intermediate link for the Equity Market but also for the Commodity Market, Foreign Currency Exchange Market, and many more. The Broking Houses has also made an impact on the Foreign Investors to invest in India to certain extent. In the last decade, the Indian brokerage industry has undergone a dramatic transformation. From being made of close groups, the broking industry today is one of the most transparent and compliance oriented businesses. Long settlement cycles and large scale bad deliveries are a thing of the past with the advent of T+2 settlement cycle and dematerialization. Large and fixed commissions have been replaced by wafer thin margins, with competition driving down the brokerage fee, in some cases, to a few basis points. There have also been major changes in the way business is conducted. Technology has emerged as the key driver of business and investment advice has become research based. At the same time, adherence to regulation and compliance has vastly increased. The scope of services have enhanced from being equity and commodity products to a wide range of financial services. Investor protection has assumed significance,. Major Players in the industry 14

Religare Securities , ICICI Direct, India Info line Security Pvt. Ltd HDFC Securities ,India bulls ,Kotak Securities,Reliance Money ,Share khan Securities,Motilal Oswal,Anand Rathi Securities,Unicon securities pvt ltd

Comparison of major players

Brokerage Equity Intraday Name of Firm Angel Broking Ltd. Reliance Money Sharekhan Securities Motilal Oswal Securities India Infoline ICICI Direct Kotak Securities India Bulls Anand Rathi Securities Religare Securities Hem Securities (In Paisa) 5 5 5 3 3 7.5 3 3 3 2 1.5 Delivery (In Paisa) 50 50 25 30 25 75 30 30 20 25 20 SubBroker 75 35 50 40 15 0 0 0 25 80 40 DMAT in Rs. 760 950 850 650 805 499 300 888 736 750 660 Margin Money 5000 0 10000 5000 5000 5000 5000 0 0 5000 7000

Comparison of major players in the industry : 15

Fund Services Religare Securities ICICI Direct India Infoline Security Pvt. Ltd. HDFC Securities Indiabulls Kotak Securities Reliance Money Sharekhan Securities Motilal Oswal Anand Rathi Securities Hem Securities

Yes

No Yes Yes

Yes

Yes

Yes

No

No

No

Yes

Mutual

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes No No Yes Yes Yes Yes Yes Yes Yes Yes

Yes

Yes Yes Yes Yes Yes

Yes

No

Yes

Yes Yes Yes Yes Yes

Yes Yes Yes Yes Yes

Insurance

No

No

Yes Yes Yes Yes

No

PMS

Yes Yes Yes

Yes Yes Yes

Yes Yes Yes

Back office

Advisory E-Broking

Investment

Yes

No No No

No

No

No

No

No

No

No

M-Connect

No

Yes No Yes

No

No

No

No

No

No

No

Funding

Loans

Yes

Yes Yes Yes

Yes

Yes

Yes

Yes

Yes

No

No

Personal

Yes

Yes Yes Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes 16

Software

Comparison of services provided by major players:

Fund Services Unicon Investment solutions ICICI Direct India Infoline Security Pvt. Ltd. Indiabulls Kotak Securities Reliance Money Anand Rathi Securities

yes

No Yes Yes

Yes

Yes

No

In fact, the size of the commodities markets in India is also quite significant. Of the country's GDP of Rs 13, 20,730 crore (Rs 13,207.3 billion), commodities related (and dependent) industries constitute about 58 per cent. Currently, the various commodities 17

Mutual

yes

Yes Yes Yes Yes Yes No Yes Yes Yes Yes Yes No Yes Yes Yes

Yes Yes Yes Yes Yes

Yes

Yes Yes Yes Yes Yes

Insurance

yes

No

PMS

yes

Yes Yes Yes

Back office

yes

Advisory E-Broking

yes

Investment

yes

No No No

No

No

No

M-Connect

yes

Yes No No

No

No

No

Funding

Loans

No

Yes Yes Yes

Yes

Yes

No

Personal

yes

Yes Yes Yes

Yes

Yes

Yes

Software

across the country clock an annual turnover of Rs 1, 40,000 crore (Rs 1,400 billion). With the introduction of futures trading, the size of the commodities market grows many folds here on. 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 18

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. The Commodity Trading Market of established itself in India as a dominant market form much before the 1970s. In fact, in the last phase of 1970s, the commodity trading market of India started to loose its' vibrancy. This happened because, from the late 1970s, numerous regulations and restrictions started to be introduced in the commodity market of India and these restrictions were acting as obstacles in the path of smooth functioning In the recent years, many restrictions, which were negatively affecting commodity trading market, have been removed. So, now the commodity trading market of India has again started to grow in a fast pace. Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market. India is arguably the largest bullion market in the world. It has been until now, the undisputed single-largest Gold bullion consumer, with its own final demand outweighing the next largest market – China by almost 57 percent. But it seems now, that the Chinese Gold buyers have caught up during 2008 as Chinese demand is surging rapidly (up by 15 19

percent year-on-year). Indian demand fell as Indian Gold sales collapsed by about 65 percent in the year 2008. In spite of being the largest consumer of gold, India plays no major role globally in influencing this precious metal's pricing, output or quality issues. India‘s total gold holdings are between 10,000 tonnes and 15,000 tonnes of which the Reserve Bank of India has only around 400 tonnes. India has the largest number of gold Jewellery shops in the world. 2.2. COMPANY OVERVIEW UNICON is a financial services company which has emerged as a one-stop investment solutions provider. It was founded in 2004 by two visionary and hard working entrepreneurs, Mr. Gajendra Nagpal and Mr. Ram M. Gupta, who possess expertise in the field of Finance. The company is headquartered in New Delhi, and has its corporate office in Mumbai with regional offices in Kolkata, Chennai, Hyderabad and Noida. UNICON is a professionally managed company led by a team with outstanding managerial acumen and cumulative experience of more than 400 man years in the financial markets The Company is supported by more than 4500 Uniconians and has a team of over 900 business offices in 235 cities across India. With a customer base of over 200,000 the Unicon Group has an eye for the intricate financial needs of its clients and caters to both their short – term and long – term financial needs through a comprehensive bouquet of investment services. It has been founded with the aim of providing world class investing experience to the investing community. These services range from offline & online trading in equity, commodities and currency derivatives to debt markets to corporate finance and portfolio management services. The company has a sizable presence in the distribution of 3rd party financial products like mutual funds, insurance products and property broking. It also provides expert Advisory on Life Insurance, General Insurance, Mutual Funds and IPO’s. The distribution network is backed by in-house back office support to provide prompt and efficient customer service 20

The Equity broking arm – UNICON Securities Pvt. Ltd offers personalized premium services on the NSE, BSE & Derivatives market. The Commodity broking arm Unicon Commodities Pvt. Ltd offers services in Commodity trading on NCDEX and MCX. The UNICON group also has a PCG division providing investments solutions for High Net worth Individuals. The Corporate Advisory Services arm – Unicon Capital Services (P) Ltd offers entire gamut of Investment Banking services to corporate. UNICON can boast of some of the most respected names in the private equity space like Sequoia Capitals, Nexus India Capital and Subhkam Ventures as its shareholders. UNICON Edge:  Among the Top 20 Equity Brokers in India.  Professional promoter pedigree  Dynamic management team  Diverse and versatile business model  Vast distribution network and reach  Strong Brand Recognition within a short span  Robust & strong IT backbone  Advisory team from top management institutes like FMS & IIM CORPORATE MILESTONES:  Milestone 1 (2004): UNICON Started as Franchisee of Fortis Securities and Pioneered the concept of National Business Partner.  Milestone 2 (2005): UNICON acquired the NSE, BSE ticket.  Milestone 3 (2006): UNICON raised its first round of Private Equity by Subhkam ventures, Commodities business was launched, and Rolled out its Third Party Distribution Wing. 21

 Milestone 4 (2007): UNICON became one of the top five Life Insurance distributors in the country and Started Property Broking Business.  Milestone 5 (2008): UNICON acquired its PMS license, Raised 2nd Round of Private Equity of 120 cr. From Sequoia Capital & Nexus, Completed entire bouquet of financial products, and Launched Fixed Income Group.  Milestone 6 (2009); UNICON started Retail Wealth Management, Rolled out its research wings, and Acquired category 1 Merchant Banking License. OFFERINGS: Equity:  20th largest broking house of India in term of trading terminal (Source: Dun and Bradstreet, 2009).  Rapid growth in client base Trading Member of NSE, BSE & F&O  Depository Participant with CDSL of Capital Market.  Equity Clients rose from 5582 in 2006 to 94386 in 2009. Commodity:  Started operation in March 2006.  Rapid Growth in client base.  Trading & clearing member for NCDEX, MCX & NMCE.  Current Market share is approx 1%.  Average turnover of 250 Cr per day.  Commodity clients rose from 101 in 2006 to 22272 in 2009. Distribution:  Preferred distributor for many Insurance and Real Estate companies. 22

 Dedicated workforce of more than 2000 employees.  Distribution arm awarded the fastest growing business partner of the year by ICICI Prudential Life Insurance in 2008-09.  Distribution arm declared Number 1 partner Pan India by Reliance Life Insurance in 2008-09.  Insurance customers rose from 4650 in 2007 to 80000 in 2009.  In depth analysis of the IPO issues.  We distribute more than 5000 Schemes from 35 mutual funds.  We not only search for the ideal combination of products and services, but also provide our clients with the possibility of fine tuning every aspect that is specific to them.  Started Life Insurance business in 2006.  First broking house to achieve more than 100 Cr. Target in the first year.  More than 3000 General Insurance advisors across India.  UNICON offers all products of General Insurance under one umbrella.  UNICON team evaluates the client’s business environment and studies the risk profile and suggests the most cost effective, integrated insurance package.  We have highly experienced & professional teams in both Retail and Commercial streams.  We offer a total solution to our clients inclusive of market research, marketing strategy, sales or leasing of the property. Fixed Income: The Fixed Income Group undertakes following activities: 23

 Dealing in money market instruments viz. CP, CD and T-Bills.  Retailing of government securities and Bonds.  Securitization of receivable portfolio-Pass through certificates.  Raising of resources both by way of Debt and Equity (IPO/FPO)  Arranges for Private placement of Bonds. Investment Banking:  Private Equity (PE) Syndication: We specialize in the syndication of the private equity for the Indian companies in high-growth markets on their capitalization/re-capitalization strategies, which helps them to achieve their growth targets. Our team of professionals ensures complete confidentiality, strong focus on implementation and quick turnaround time. Access to key decision makers at PE funds gives us an edge in optimal structuring and efficient closure of transactions. We service our clients through various stages of the PE deal namely collateral preparation, investor short listing, commercial term sheet, due diligence and final closure.  Mergers & Acquisitions (M&A) Advisory: We provide both buy-side and sell-side advisory services as part of our M&A advisory offering. We advise clients during the entire transaction process right from target identification to deal closure. We have an experienced and highly qualified team with more than 40+ man-years of experience which specializes in identification and short listing of potential targets, strategic planning of an acquisition and arranging capital for the transaction, if needed.  Debt Syndication Our offerings include: o Project Finance / Term Loans for Expansion - Arranging Long-term loans for setting up new projects from Financial Institutions and Banks. 24

o External Commercial Borrowings (ECBs) - Arranging LIBOR-linked loans. Foreign Currency Convertible Bonds (FCCB)-Arranging FCCB Loans. o Working Capital Facilities - Arranging fund-based and non-fund based limits for clients from Banks at competitive rates. Trade Finance Arrangement of trade finance (Buyer's / Supplier’s Credit). o Inter-Corporate Deposits Borrowing and Placement.

Currency Derivatives: Currently in India, futures contracts of 4 currencies are traded against the Indian Rupee (INR). US Dollar Indian Rupee (USD INR) currency futures were the first to be introduced in Aug 2008 and have seen a 1500% burst in volume growth in this period. On Feb 1, 2010 the trading of Euro (€) Rupee (EUR INR), Pound Sterling (£) Rupee (GBP INR) and Yen (¥) Rupee (YEN INR) was introduced in India. As in the case of USD INR, trading happens on 2 exchanges – NSE and MCX-SX. Unicon offers clients the opportunity to trade these products, either in online or offline mode as per their needs. The products provide ample liquidity to function both as a speculative tool and as a hedging instrument for exporters and importers. The attractive features of the product are as follows:  Unlike currency forwards offered by banks, currency futures trading does not have to be backed by an underlying merchant transaction exposure  Tight bid ask spreads; usually 0.25 paisa wide  Margin requirements less than 5% to take exposure on a lot size of $1000, €1000, £1000 and ¥1,00,000 respectively  New asset class for diversification for all resident individuals

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 Commodity traders can hedge against unfavourable movements since gold, crude etc.  For exporters and importers, no credit line required from their Banker as is the case with forwards  Ideal tool for those with smaller exposures, as in the case of travel needs, educational payments etc. Unicon Advantage  Online & Offline trading facility on all the bourses  Exclusive daily commentary and research reports by our Currency analyst team  Regular updates on Dollar INR movement with calls to buy and sell  Special consultancy to Exporters, Importers & Corporate for their Forex transactions  Receive education on the product through seminars/con-calls organized by Unicon  Your Cash Margin with Unicon Securities can be used for either segment – Equity or Currency. Other awaited products Currency options are also expected to be added to the basket of products soon.

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3) PROJECT PROFILE: Firstly, my prime job here in Unicon Investment Solutions Ltd is, that is to do analyzing the commodity market in MCX,NCDEX add up clients in the company for investing in equity and commodity market. They gave some fundamental knowledge about the company and its policies, strengths etc which helps for me in convincing the people to join the company. I will be given a chance to sit along with the advisory team to provide service. This provides me understanding in client’s behaviour towards fluctuating markets and also the sensitivity of markets to the behaviour of the investors. Secondly, we were asked to observe a scripts consistently and find the reasons for the changes in its share price, and how This again provides good learning of different factors affecting share and commodity market. I have chosen GOLD in the commodity market for my analysis, and observing the factors affecting that market , strategies involving in trading in commodity market to reduce risk, observing long hedge and short hedging and observing profits. Thirdly, a group of two each among the batch here were asked to choose a sector to perform fundamental and technical analysis and draft a report. We have to choose the industry and see the future outlook ,past performance .It provides a way to deal with clients and to predict whether the share prices for a particular sector will enhance/wane.

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OBJECTIVES OF THE STUDY The basic purpose of undergoing this project was: I. To study the working of commodities market in detail. II. To know the application of various technical & statistical tools. III. To be able to foresee the future prospects. SCOPE As the project report is fully based on personal learning & observation it can be used to have detailed knowledge about the working of Commodity Market. Also the report can be used for decision making by a customer whether to go for Commodity futures Trading or not? METHODOLOGY: The primary data is based on the questionnaire collected from the people of Hyderabad in different places about the equity and commodity market. The secondary data reveals investing in equity and commodity are inversely related and investing in commodity market is very risky. And also about the commodity market, and what are the factors affecting that in real world scenario, volumes traded in the market And the interaction of the clients to know how they will trade and the strategies followed by them to get a maximum return on their investment, also done analysis of the sector when to buy/sell the shares in the market with the help of trend analysis and other techniques such as moving averages

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LIMITATIONS I. The study is based on historical data. II. An attempt has been made to predict the future of market which may not come true. The commodity market in India is in its infantry stage COMMODITY A commodity may be defined as an article, a product or material that is bought and sold. It can be classified as every kind of movable property, except Actionable Claims, Money & Securities. Commodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand the equity markets, may find commodities an unfathomable market. But in fact commodities are easy to understand as far as fundamentals of demand and supply are concerned. Retail investors should understand the risks and advantages of trading in commodity futures before taking a leap. Historically, pricing in commodity futures has been less volatile compared with equity, thus providing an efficient portfolio diversification option. A cash commodity must meet three basic conditions to be successfully traded in the futures market: I. It has to be standardized and, for agricultural and industrial commodities, must be in a basic, raw, unprocessed state. There are futures contracts on wheat, but not on flour. Wheat is wheat (although different types of wheat have different futures contracts). The miller who needs wheat futures contract to help him avoid losing money on his flour transactions with customers wouldn't need flour futures. A given

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amount of wheat yields a given amount of flour and the cost of converting wheat to flour is fairly fixed & hence predictable. II. Perishable commodities must have an adequate shelf life, because delivery on a futures contract is deferred. III. The cash commodity's price must fluctuate enough to create uncertainty, means both risk and potential profit. which

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STRUCTURE OF COMMODITY MARKET

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Ministry of Consumer Affairs

FMC (Forwards Market Commission)

Commodity Exchange

National Exchange

Regional Exchange

NCDEX

MCX

NMCE

NBOT

20 other regional exchanges

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SPOT MARKET
Quality Certificatio n Agencies

Warehouses

Hedger (Exporters / Millers Industry)
Producers (Farmers/Co operatives/In stitutional)

Clearing Bank

Commodities Ecosystem MCX

Transporter s/ Support agencies

Consumers (Retail/ Institutional)

Traders (speculators) arbitrageurs/ client)

GLOBAL COMMODITIES MARKET

DIFFERENT SEGMENTS IN COMMODITIES MARKET 35

The commodities market exits in two distinct forms namely the Over the Counter (OTC) market and the Exchange based market. Also, as in equities, there exists the spot and the derivatives segment. The spot markets are essentially over the counter markets and the participation is restricted to people who are involved with that commodity say the farmer, processor, wholesaler etc. Derivative trading takes place through exchange-based markets with standardized contracts, settlements etc. REGULATORS Each exchange is normally regulated by a national governmental (or semi-governmental) regulatory agency: Country Australia Chinese mainland Hong Kong India Pakistan Singapore UK USA Malaysia Regulatory agency Australian Securities and Investments Commission China Securities Regulatory Commission Securities and Futures Commission Securities and Exchange Board of India and Forward Markets Commission (FMC) Securities and Exchange Commission of Pakistan Monetary Authority of Singapore Financial Services Authority Commodity Futures Trading Commission Securities Commission

LEADING COMMODITY MARKETS OF INDIA 36

The government has now allowed national commodity exchanges, similar to the BSE & NSE, to come up and let them deal in commodity derivatives in an electronic trading environment. These exchanges are expected to offer a nation-wide anonymous, order driven; screen based trading system for trading. The Forward Markets Commission (FMC) will regulate these exchanges. Consequently four commodity exchanges have been approved to commence business in this regard. They are:

S.NO. 1 2 3 4

Commodity Market in India Multi Commodity Exchange (MCX), Mumbai National Commodity and Derivatives Exchange Ltd (NCDEX), Mumbai National Board of Trade (NBOT), Indore National Multi Commodity Exchange (NMCE), Ahmadabad

BENEFITS TO INDUSTRY FROM FUTURES TRADING 37

 Hedging the price risk associated with futures contractual commitments.  Spaced out purchases possible rather than large cash purchases and its storage.  Efficient price discovery prevents seasonal price volatility.  Greater flexibility, certainty and transparency in procuring commodities would aid bank lending.  Facilitate informed lending.  Hedged positions of producers and processors would reduce the risk of default faced by banks. * Lending for agricultural sector would go up with greater transparency in pricing and storage.  Commodity Exchanges to act as distribution network to retail agri-finance from Banks to rural households.  Provide trading limit finance to Traders in commodities Exchanges. BENEFITS TO EXCHANGE MEMBER  Access to a huge potential market much greater than the securities and cash market in commodities.  Robust, scalable, state-of-art technology deployment.  Member can trade in multiple commodities from a single point, on real time basis.

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 Traders would be trained to be Rural Advisors and Commodity Specialists and through them multiple rural needs would be met, like bank credit, information dissemination, etc. WHY COMMODITY FUTURES? One answer that is heard in the financial sector is "we need commodity futures markets so that we will have volumes, brokerage fees, and something to trade''. We have to look at futures market in a bigger perspective -- what is the role for commodity futures in India's economy? In India agriculture has traditionally been an area with heavy government intervention. Government intervenes by trying to maintain buffer stocks, they try to fix prices, and they have import-export restrictions and a host of other interventions. Many economists think that we could have major benefits from liberalization of the agricultural sector. In this case, the question arises about who will maintain the buffer stock, how will we smoothen the price fluctuations, how will farmers not be vulnerable that tomorrow the price will crash when the crop comes out, how will farmers get signals that in the future there will be a great need for wheat or rice. In all these aspects the futures market has a very big role to play. If we think there will be a shortage of wheat tomorrow, the futures prices will go up today, and it will carry signals back to the farmer making sowing decisions today. In this fashion, a system of futures markets will improve cropping patterns. Next, if I am growing wheat and am worried that by the time the harvest comes out prices will go down, then I can sell my wheat on the futures market. I can sell my wheat at a price, which is fixed today, which eliminates my risk from price fluctuations. These days, agriculture requires investments -- farmers spend money on fertilizers, high yielding varieties, etc. They are worried when making these investments that by the time 39

the crop comes out prices might have dropped, resulting in losses. Thus a farmer would like to lock in his future price and not be exposed to fluctuations in prices. The third is the role about storage. Today we have the Food Corporation of India, which is doing a huge job of storage, and it is a system, which -- in my opinion -- does not work. Futures market will produce their own kind of smoothing between the present and the future. If the future price is high and the present price is low, an arbitrager will buy today and sell in the future. The converse is also true, thus if the future price is low the arbitrageur will buy in the futures market. These activities produce their own "optimal" buffer stocks, smooth prices. They also work very effectively when there is trade in agricultural commodities; arbitrageurs on the futures market will use imports and exports to smooth Indian prices using foreign spot markets. In totality, commodity futures markets are a part and parcel of a program for agricultural liberalization. Many agriculture economists understand the need of liberalization in the sector. Futures markets are an instrument for achieving that liberalization The NCDEX System Every market transaction consists of three components i.e. trading, clearing and settlement. A brief overview of how transactions happen on the NCDEX’s market. TRADING The trading system on the NCDEX provides a fully automated screen based trading for futures on commodities on a nationwide basis as well as online monitoring and surveillance mechanism. It supports an order driven market and provides complete transparency of trading operations. Order matching is essential on the basis of commodity, its price, time and quantity. All quantity fields are in units and price in rupees. The exchange specifies the unit of trading and the delivery unit for futures contracts on various commodities. The 40

exchange notifies the regular lot size and tick size for each of the contracts traded from time to time. When any order enters the trading system, it is an active order. It tries to finds a match on the other side of the book. If it finds a match, a trade is generated. If it does not find a match, the order becomes passive and gets queued in the respective outstanding order book in the system. Time stamping is done for each trade and provides the possibility for a complete audit trail if required. NCDEX trades commodity futures contracts having one month, two month and three month expiry cycles. All contracts expire on the 20th of the expiry month. Thus a January expiration contract would expire on the 20th of January and a February expiry contract would cease trading on the 20th of February. If the 20th of the expiry month is a trading holiday, the contracts shall expire on the previous trading day. New contracts will be introduced on the trading day following the expiry of the near month contract. CLEARING National Securities Clearing Corporation Limited (NSCCL) undertakes clearing of trades executed on the NCDEX. The settlement guarantee fund is maintained and managed by NCDEX. Only clearing members including professional clearing members (PCMs) only are entitled to clear and settle contracts through the clearing house. At NCDEX, after the trading hours on the expiry date, based on the available information, the matching for deliveries takes place firstly, on the basis of locations and then randomly, keeping in view the factors such as available capacity of the vault/warehouse, commodities already deposited and dematerialized and offered for delivery etc. Matching done by this process is binding on the clearing members. After completion of the matching process, clearing members are informed of the deliverable/ receivable positions and the unmatched positions. Unmatched positions have to be settled in cash. The cash settlement is only for the incremental gain/loss as determined on the basis of final settlement price. SETTLEMENT 41

Futures contracts have two types of settlements, the MTM settlement which happens on a continuous basis at the end of each day, and the final settlement which happens on the last trading day of the futures contract. On the NCDEX, daily MTM settlement and the final MTM settlement in respect of admitted deals in futures contracts are cash settled by debiting/crediting the clearing accounts of clearing members (CM) with the respective clearing bank. All positions of a CM, brought forward, created during the day or closed out during the day, are market to market at the daily settlement price or the final settlement price at the close of trading hours on a day. On the date of expiry, the final settlement price is the spot price on the expiry day. The responsibility of settlement is on a trading cum clearing member for all trades done on his own account and his client’s trades. A professional clearing member is responsible for settling all the participants’ trades, which he has confirmed to the exchange. On the expiry date of a futures contract, members submit delivery information through delivery request window on the trader workstations provided by NCDEX for all open positions for a commodity for all constituents individually. NCDEX on receipt of such information matches the information and arrives at delivery position for a member for a commodity. The seller intending to make delivery takes the commodities to the designated warehouse. These commodities have to be examined by the exchange specified . The commodities have to meet the contract specifications with allowed variances. If the commodities meet the specifications, the warehouse accepts them. Warehouse then ensures that the receipts get updated in the depository system giving a credit in the depositor’s electronic account. The seller the gives the invoice to his clearing member, who would courier the same to the buyer’s clearing member. On an appointed date, the buyer goes to the warehouse and takes physical possession of the commodities.

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OBSERVATIONS: Characteristics of commodity markets In commodity futures market, the calculation of profit and loss will be slightly different than on a normal stock exchange. The main concepts in commodity market are: 1) Margins. In the futures market, margin refers to the initial deposit of good faith made into an account in order to enter into a futures contract. This margin is referred to as good faith because it is this money that is used to debit any losses. When you open a futures account, the futures exchange will state a minimum amount of money that you must deposit into your account. This original deposit of money is called the initial margin. When your contract is liquidated, you will be refunded the initial margin plus or minus any gains or losses that occur over the span of the futures contract. In other words, the amount in your margin account changes daily as the market fluctuates in relation to your futures contract. The minimum-level margin is determined by the futures exchange and is usually 5% to 10% of the futures contract. These predetermined initial margin amounts are continuously under review: at times of high market volatility, initial margin requirements can be raised. The initial margin is the minimum amount required to enter into a new futures contract, but the maintenance margin is the lowest amount an account can reach before needing to be replenished. For example, if your margin account drops to a certain level because of a series of daily losses, brokers are required to make a margin call and request that you make an additional deposit into your account to bring the margin back up to the initial amount. E.g. - Let's say that you had to deposit an initial margin of $1,000 on a contract and the maintenance margin level is $500. A series of losses dropped the value of your account to $400. This would then prompt the broker to make a margin call to you, requesting a deposit of at least an additional $600 to bring the account back up to the initial margin level of $1,000. Word to the wise: when a margin call is made, the funds usually have to be delivered immediately. If they are not, the commodity brokerage can have the right to liquidate 44

your Commodity position completely in order to make up for any losses it may have incurred on your behalf. 2) Leverage Leverage refers to having control over large cash amounts of a commodity with comparatively small levels of capital. In other words, with a relatively small amount of cash, you can enter into a futures contract that is worth much more than you initially have to pay (deposit into your margin account). It is said that in the futures market, more than any other form of investment, price changes are highly leveraged, meaning a small change in a futures price can translate into a huge gain or loss. Futures positions are highly leveraged because the initial margins that are set by the exchanges are relatively small compared to the cash value of the contracts in question (which is part of the reason why the futures market is useful but also very risky). The smaller the margin in relation to the cash value of the futures contract, the higher the leverage. So for an initial margin of $5,000, you may be able to enter into a long position in a futures contract for 30,000 pounds of coffee valued at $50,000, which would be considered highly leveraged investments. You already know that the futures market can be extremely risky, and therefore not for the faint of heart. This should become more obvious once you understand the arithmetic of leverage. Highly leveraged investments can produce two results: great profits or even greater losses. Due to leverage, if the price of the futures contract moves up even slightly, the profit gain will be large in comparison to the initial margin. However, if the price just inches downwards, that same high leverage will yield huge losses in comparison to the initial margin deposit. For example, say that in anticipation of a rise in stock prices across the board, you buy a futures contract with a margin deposit of $10,000, for an index currently standing at 1300. The value of the contract is worth $250 times the index (e.g. $250 x 1300 = $325,000), meaning that for every point gain or loss, $250 will be gained or lost.

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If after a couple of months, the index realized a gain of 5%, this would mean the index gained 65 points to stand at 1365. In terms of money, this would mean that you as an investor earned a profit of $16,250 (65 points x $250); a profit of 162%! On the other hand, if the index declined 5%, it would result in a monetary loss of $16,250 —a huge amount compared to the initial margin deposit made to obtain the contract. This means you still have to pay $6,250 out of your pocket to cover your losses. The fact that a small change of 5% to the index could result in such a large profit or loss to the investor (sometimes even more than the initial investment made) is the risky arithmetic of leverage. Consequently, while the value of a commodity or a financial instrument may not exhibit very much price volatility, the same percentage gains and losses are much more dramatic in futures contracts due to low margins and high leverage. 3) Pricing and Limits Contracts in the Commodity futures market are a result of competitive price discovery. Prices are quoted as they would be in the cash market: in dollars and cents or per unit (gold ounces, bushels, barrels, index points, percentages and so on). Prices on futures contracts, however, have a minimum amount that they can move. These minimums are established by the futures exchanges and are known as ticks. For example, the minimum sum that a bushel of grain can move upwards or downwards in a day is a quarter of one U.S. cent. For futures investors, it's important to understand how the minimum price movement for each commodity will affect the size of the contract in question. If you had a grain contract for 3,000 bushels, a minimum of $7.50 (0.25 cents x 3,000) could be gained or lost on that particular contract in one day. Futures prices also have a price change limit that determines the prices between which the contracts can trade on a daily basis. The price change limit is added to and subtracted from the previous day's close, and the results remain the upper and lower price boundary for the day. Say that the price change limit on silver per ounce is $0.25. Yesterday, the price per ounce closed at $5. Today's upper price boundary for silver would be $5.25 and the lower 46

boundary would be $4.75. If at any moment during the day the price of futures contracts for silver reaches either boundary, the exchange shuts down all trading of silver futures for the day. The next day, the new boundaries are again calculated by adding and subtracting $0.25 to the previous day's close. Each day the silver ounce could increase or decrease by $0.25 until an equilibrium price is found. Because trading shuts down if prices reach their daily limits, there may be occasions when it is NOT possible to liquidate an existing futures position at will. The exchange can revise this price limit if it feels it's necessary. It's not uncommon for the exchange to abolish daily price limits in the month that the contract expires (delivery or spot month). This is because trading is often volatile during this month, as sellers and buyers try to obtain the best price possible before the expiration of the contract. In order to avoid any unfair advantages, the CTFC and the Commodity futures exchanges impose limits on the total amount of contracts or units of a commodity in which any single person can invest. These are known as position limits and they ensure that no one person can control the market price for a particular commodity. Strategies for trading in commodity market. Futures contracts try to predict what the value of an index or commodity will be at some date in the future. Speculators in the futures market can use different strategies to take advantage of rising and declining prices. The most common strategies are known as going long, going short and spreads. 1) Going Long When an investor goes long, that is, enters a contract by agreeing to buy and receive delivery of the underlying at a set price, it means that he or she is trying to profit from an anticipated future price increase. For example, let's say that, with an initial margin of $2,000 in June, Joe the speculator buys one September contract of gold at $350 per ounce, for a total of 1,000 ounces or

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$350,000. By buying in June, Joe is going long, with the expectation that the price of gold will rise by the time the contract expires in September. By August, the price of gold increases by $2 to $352 per ounce and Joe decides to sell the contract in order to realize a profit. The 1,000 ounce contract would now be worth $352,000 and the profit would be $2,000. Given the very high leverage (remember the initial margin was $2,000), by going long, Joe made a 100% profit! Of course, the opposite would be true if the price of gold per ounce had fallen by $2. The speculator would have realized a 100% loss. It's also important to remember that throughout the time the contract was held by Joe, the margin may have dropped below the maintenance margin level. He would have thus had to respond to several margin calls, resulting in an even bigger loss or smaller profit.

2) Going Short: A speculator who goes short, that is, enters into a futures contract by agreeing to sell and deliver the underlying at a set price, is looking to make a profit from declining price levels. By selling high now, the contract can be repurchased in the future at a lower price, thus generating a profit for the speculator. Let's say that Sara did some research and came to the conclusion that the price of Crude Oil was going to decline over the next six months. She could sell a contract today, in November, at the current higher price, and buy it back within the next six months after the price has declined. This strategy is called going short and is used when speculators take advantage of a declining market. Suppose that, with an initial margin deposit of $3,000, Sara sold one May crude oil contract (one contract is equivalent to 1,000 barrels) at $25 per barrel, for a total value of $25,000. By March, the price of oil had reached $20 per barrel and Sara felt it was time to cash in on her profits. As such, she bought back the contract which was valued at $20,000. By going short, Sara made a profit of $5,000! But again, if Sara's research had not been 48

thorough, and she had made a different decision, her strategy could have ended in a big loss. 3) Spreads As going long and going short, are positions that basically involve the buying or selling of a contract now in order to take advantage of rising or declining prices in the future. Another common strategy used by commodity traders is called spreads. Spreads involve taking advantage of the price difference between two different contracts of the same commodity. Spreading is considered to be one of the most conservative forms of trading in the futures market because it is much safer than the trading of long / short (naked) futures contracts. There are many different types of spreads, including: Calendar spread: This involves the simultaneous purchase and sale of two futures of the same type, having the same price, but different delivery dates. Inter-Market spread: Here the investor, with contracts of the same month, goes long in one market and short in another market. For example, the investor may take Short June Wheat and Long June Pork Bellies.

Inter-Exchange spread: This is any type of spread in which each position is created in different futures exchanges. For example, the investor may create a position in the Chicago Board of Trade, CBOT and the London International Financial Futures and Options Exchange, LIFFE. Trade in commodity market:

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You can invest in the futures market in a number of different ways, but before taking the plunge, you must be sure of the amount of risk you're willing to take. As a futures trader, you should have a solid understanding of how the market works and contracts function. You'll also need to determine how much time, attention, and research you can dedicate to the investment. Talk to your broker and ask questions before opening a futures account. Unlike traditional equity traders, futures traders are advised to only use funds that have been earmarked as risk capital. Once you've made the initial decision to enter the market, the next question should be, how? Here are three different approaches to consider: • • • Self Directed Full Service Commodity pool

1) Self Directed: As an investor, you can trade your own account, without the aid or advice of a Commodity broker. This involves the most risk because you become responsible for managing funds, ordering trades, maintaining margins, acquiring research, and coming up with your own analysis of how the market will move in relation to the commodity in which you've invested. It requires time and complete attention to the market. 2) Full Service: Another way to participate in the market is by opening a managed account, similar to an equity account. Your broker would have the power to trade on your behalf, following conditions agreed upon when the account was opened. This method could lessen your financial risk, because a professional broker would be assisting you, or making informed decisions on your behalf. However, you would still be responsible for any losses incurred and margin calls.

3) Commodity Pool 50

A third way to enter the market, and one that offers the smallest risk, is to join a commodity pool. Like a mutual fund, the commodity pool is a group of commodities which can be invested in. No one person has an individual account; funds are combined with others and traded as one. The profits and losses are directly proportionate to the amount of money invested. By entering a commodity pool, you also gain the opportunity to invest in diverse types of commodities. You are also not subject to margin calls. However, it is essential that the pool be managed by a skilled broker, for the risks of the futures market are still present in the commodity pool

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ANALYSIS OPPORTUNITIES IN COMMODITY TRADING Speculation: Commercial speculation, i.e. speculation by buyers and sellers of commodities, has been used since the 19th century to enable commodity traders and processors to protect themselves against short-term price volatility. Buyers are protected against sudden price increases, sellers against sudden price falls. For commodity buyers and sellers, commercial speculation is a form of price insurance. Non-commercial speculation takes place not to protect against or “hedge” price risk, but to benefit by anticipating and “betting long” for prices to go up or “short” for prices to go down. Noncommercial speculators provide capital to enable the ongoing function of the market as commercial speculators liquidate their contract positions by paying for the contracted commodity or selling the contract to offset the risk of other contract positions held. Noncommercial speculation is an investment, but one that can overlap with the interests of agriculture when appropriately regulated. However, today’s speculation has become excessive relative to the value of the commodity as determined by supply and demand and other fundamental factors. For example, according to the FAO, as of April 2008 corn volatility was 30 percent and soybean volatility 40 percent beyond what could be accounted for by market fundamentals.11 Price volatility has become so extreme that by July some commercial or “traditional” speculators could no longer afford to use the market to hedge risks effectively.12 Prices are particularly vulnerable to being moved by big speculative “bets” when a commodity’s supply and demand relationship is “tight” due to production failures, high demand and/or lack of supply management mechanisms. The futures contract is the fundamental building block from which other speculative instruments are built. The contract obligates parties to buy or sell a specified quantity of a commodity at a specified price at an agreed date in the near future, usually one to three months from the contract date for agricultural commodities. An options contract does not oblige the parties and costs less to execute but provides less price protection. Futures and 53

options contracts enable those who buy and sell commodities to manage short-term price risks and to “discover” the price at which those contracts settle as the due date for fulfilling the contract approaches. According to UNCTAD, futures contracts and other “commodity derivatives are not capable of mitigating the causes of commodity price volatility,” such as failure to manage structural oversupply of commodities. Failure to regulate commodity derivatives adequately has not only contributed to huge increases in food import bills and food insecurity, but also to making futures and options contracts unavailable or too expensive for many farmers and some agribusinesses to use to manage price risk. In the U.S., futures contracts were useful and affordable as long as futures prices and cash (spot) market prices converged as the date for the contract’s execution approached. Futures prices helped commodities traders to set a benchmark price in the cash market. With convergence came some degree of contract predictability needed to calculate when to buy or sell. Similarly, option contracts, in which “buyers have the right but not the obligation”15 to buy or sell a commodity at a specified price at a specified time, relied on price convergence to provide some contract predictability. As prices have become more volatile and convergence less predictable since 2006, the futures market has lost its price discovery and risk management functions for many market participants.16 According to the FAO, as of March 2008, volatility in wheat prices reached 60 percent beyond what could be explained by supply and demand factors.17 “Non-commercial” commodities speculation was a factor, though not the only one, that impeded price convergence and induced extreme market volatility, testified the National Grain and Feed Association (NGFA) to Congress. However, the NGFA and other groups cautioned against over-regulating the commodities markets, lest there be too little capital in the market to enable commercial speculators to hedge their risks with futures contracts. Hedging: Hedging in the futures market is a two-step process. Depending upon the hedger's cash market situation, he will either buy or sell futures as his first position. For 54

instance, if he is going to buy a commodity in the cash market at a later time, his first step is to buy futures contracts. Or if he is going to sell a “cash commodity” at a later time, his first step in the hedging process is to sell futures contracts. The second step in the process occurs when the cash market transaction takes place. At this time the futures position is no longer needed for price protection and should therefore be offset (closed out). If the hedger was initially long (long hedge), he would offset his position by selling the contract back. If he was initially short (short hedge), he would buy back the futures contract. Both the opening and closing positions must be for the same commodity, number of contracts, and delivery month. Basic Commodity Hedging Strategy We'll assume we are talking about an orange juice producer first. This guy has to sell his orange juice in six months. The problem is that any price drop in the orange juice market would have a negative effect on what he can get for his crop once it's harvested. He can get around a large part of that risk by establishing a basic short commodity hedging strategy in the orange juice futures market. This gives him some protection, sort of like an insurance policy against large price fluctuations. How to Put on a Short Hedge in Commodity Futures Let's say the current price for orange juice in the cash market on May 1st is 90 cents per pound *fictional.* The OJ grower feels that's a fair price to cover his costs and make a profit. He also knows that he will have about 15,000 pounds of OJ to bring to the market at harvest in six months. What he does is sell his crop now using the futures market to protect that 90 cent sale price in the future. He goes into the futures market and sells 1 contract *15,000 lbs of OJ* at the current market price of $1 per pound. Now lets fast forward 1 month into the future and see how this protects his profit margins.

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On June 1st the futures price of OJ had dropped to 70 cents per pound and the cash or current price for OJ drops to 65 cents per pound because there looks to be a bumper crop of OJ this year. It doesn't look good as The OJ producer needed to get 90 cents a pound to cover his costs and make a profit. Looks like he won't be buying his kid the GI Joe with the "Kung Fu" grip because he'll be getting $3750 less for his OJ crop. The decimal point has been omitted and the calculation looks like this: 9000 - 6500 = 2500 X 1.50 = $3750 loss per contract. But wait… What about the OJ contract he sold in the futures market? Remember he sold 1 contract at $1 per pound? If he were to buy that contract back right now he would only have to pay 70 cents a pound. He has a profit of $4500 for the futures contract. The decimal point has been omitted and the calculation looks like this 10000 - 7000 = 3000 X 1.50 = $4500 profit per contract. Now let's analyze what the hedge has done to partially protect the OJ grower's price risk. The $3750 cash loss is offset by the $4500 profit in the futures market, leaving him with a theoretical profit on the hedging strategy of $750. Not a bad deal. Note that the cash price and the futures price didn't fluctuate in tandem. The reason is that the cash price is influenced by factors such as storage and transportation costs. They will most likely, but not always follow the same trend higher or lower, but rarely at the same rate. Let's go another month into the future. On July 1st another report shows that the first report overestimated the OJ supply and the price has risen to $1.20 a pound and the cash price of OJ has gone up to $1.05 because of the simple economics of supply and demand.

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The grower can now get $2250 more for his for his OJ. The calculation looks like this: 10500 - 9000 = 1500 X $1.50 = $2250 more profit…but hold the phone. He shouldn't run out and buy his wife that new BMW he promised her just yet. Let's see what happened with the futures contract hedge. It will cost him $1.20 per pound to buy back the futures contract he sold at $1. That gives him a loss of $3000 for his futures hedge. The calculation looks like this: 10000 - 12000 = 2000 X $1.50 = $3000 loss. Now let's see how the commodity futures hedge has limited his potential profit margin. The $2250 gain on the cash price of the OJ crop is offset by the $3000 loss he currently has on his commodity futures hedge. The net result of liquidating the hedge right now would be a loss of $750. This example shows the importance of maintaining the hedge (regardless of price fluctuations) until the crop is ready for delivery. The cash price and the futures price will converge and become almost equal at the expiration month of the futures contract except for costs such as carrying charges (also known as "the basis"). By liquidating the futures contract and breaking the protection of the hedge before expiration, the grower then becomes at risk to price fluctuations. He also loses money on the costs associated with the futures portion of the hedge itself. How to Put on a Long Hedge in Commodity Futures The counterpart to the grower and producer is the supplier or processor. In our example here, the processor will need to buy OJ and process it for consumption or other uses. Since the processor must make a future purchase, she wants to protect herself from price increases at the time of delivery. She will use the futures market as an insurance policy against price risk by putting on a "Long Hedge" in the futures market by buying futures now, thus locking in her price plus the cost of placing the long hedge in commodity futures. 57

We can look at the price variations and how they affect the processor by simply inverting all the figures from our short hedge example. A rise in the futures price would be a gain for the processor while a fall in the futures price would be a loss. A rise in the cash price would be a loss to the processor while a fall in the cash price would equal a gain. The risk of future price increases is transferred to the futures market because of the hedge. There you have it. A basic commodity hedging strategy and how producers and suppliers use the futures markets to protect price variations and profits. This strategy is used in all commodity markets from financials to livestock, agricultural products and even precious metals. Hedging is generally not considered risky if it is based on covering short-term requirements. However, if the hedging party places a wrong bet, then they may miss out on potential savings. For instance, if a copper manufacturer has a capacity of 200 tonne and decides to sell 300 tonne on the futures exchange the remaining 100 tonne is considered as speculation in the market. If prices fall then he stands to benefit, however if prices go up the 200 tonne he produces can be delivered on the exchange but he would have to incur losses on the additional 100 tonne. Arbitrage: Arbitrage refers to the opportunity of taking advantage between the price difference between two different markets for that same stock or commodity. In simple terms one can understand by an example of a commodity selling in one market at price x and the same commodity selling in another market at price x + y. Now this y is the difference between the two markets is the arbitrage available to the trader. The trade is carried simultaneously at both the markets so theoretically there is no risk. (This arbitrage should not be confused with the word arbitration, as arbitration is referred to solving of dispute between two or more parties.)

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The person who conducts and takes advantage of arbitrage in stocks, commodities, interest rate bonds, derivative products, forex is know as an arbitrageur. Arbitrage opportunities exist between different markets because there are different kind of players in the market, some might be speculators, others jobbers, some marketmarkets, and some might be arbitrageurs. The simultaneous purchase and sale of something at different prices sounds like a purely hypothetical transaction that shouldn't ever exist. But various flavors of arbitrage or neararbitrage do exist, offering profits that are attractive compared to the risk borne by the arbitrageur. Before the NSE came into existence, the price of the same stock varied across exchanges. Therefore, it was easy to make money by buying at one exchange and selling at a higher price on another. But nowadays, with real-time transfer of information, the difference between the prices of the same stock on different exchanges is minuscule. That’s why people play more in derivatives and arbitrage between the price differences in the cash and the futures markets. In the Indian context arbitrage is largely concentrated in stock futures; index arbitrage is not very popular as yet. In the bull market, investors are willing to pay a slight premium to the underlying cash price in the futures market as they expect the stock to rise in the short term and are willing to pay the premium (discounts do also happen at times of dividend and bearishness in the stocks). BENEFITS OF ARBITRAGE: • • • • Security Greater Flexibility Higher Returns, Risk Free Investment

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GOLD IN INDIA COMMODITY MARKET: Importance and Uses: Gold has mainly three types of uses: Jewellery Demand, Investment Demand and Industrial uses. Jewellery Demand- Jewellery consistently accounts for around three-quarters of gold demand. In terms of retail value, the USA is the largest market for gold jewellery, whereas India is the largest consumer in volume terms, accounting for 25% of demand in 2007. Investment demand- Investment demand in gold has increased considerably in recent years. Since 2003, investment has representing the strongest source of growth in demand, with an increase in value terms to the end of 2007 of around 280%. Industrial Demand- Industrial and dental uses account for around 13% of gold demand (an annual average of over 425 tonnes from 2003 to 2007 inclusive. Major Gold Mines in India There is a huge mismatch between demand and primary supply in India, the balance being made up by imports. The only major gold mine currently in production is the Hutti mine, owned by Hutti Gold Mines Company Limited, which produces around 3 tons of gold a year. Hindustan Copper also produces some gold as a by-product . State Karnataka Jharkhand Gujarat Total

2005-06 2.846 0.201 6.710 9.757

2006-07 2.334 0.154 10.335 12.823

2007-08 2.831 0.027 9.135 11.993 60

As given in the above table, gold production in India is ruling lower in recent years. Karnataka was the leading producer of this precious metal with the output ranging from 2 to 3 tons per annum during 2005-06 and 2007-08. Jharkhand also produces small quantity of gold.

Gold Demand in India Gold, the ultimate safe haven in troubled times, remained the hot commodity throughout the year. It scaled new heights in the global markets and in India, which is the largest buyer of the metal.

Year 2004 2005 2006 2007 2008 Source: GFMS

(IN TONNES) 617.7 721.6 721.9 769.2 660.2

World (IN TONNES) 2961.5 3091.9 2681.9 2810.9 2906.8

% share of World Demand 20.86 23.34 26.92 27.36 22.71

Indian demand for Gold accounts for on an avg. 25% share of world gold demand. In 2008, demand for gold has decreased in India because of high price amid global financial crisis.

CHINESE COMMODITY MARKET (GOLD) Introduction Gold plays a vital role in Chinese culture. The Chinese have a strong affinity to gold when compared with Western countries. Gold has been present in Chinese history since the time of the Han Dynasty and even today is regarded as a sign of prosperity, an ornament, a currency and an inherent part of Chinese religion. Weddings are important 61

gold-buying occasions amongst the Chinese. Gold is also traditionally bought as a gift during the Chinese New Year. According to the Chinese lunar calendar, 2010 is the Year of the Tiger and the year which started on 14 February 2010, promises to be a year of excitement, prosperity and potential good luck for almost everyone. Those who make a real effort will enjoy an auspicious wave of success when the brave and resilient Tiger rules. Some Chinese also describe 2010 as the Golden Tiger Year. Today, China is the second largest gold consumption market and the world‘s largest producer. Gold demand from China‘s two largest sectors, (jewellery and investment) reached a combined total of 423 tonnes in 2009. Total domestic mine supply contributed only 314 tonnes during the same year. WGC studies indicate that in the long term, gold demand is likely to continue to accelerate, driven by investment demand in China, while current jewellery consumption is likely to continue to grow despite higher gold prices. Gold could also gain further momentum from central bank purchasing. Chinese gold demand is catching up with Western consumption levels. This is because market liberalization tends to have a dramatic impact in a local market. In India, for example, its gold consumption more than doubled from around 300 tonnes in the early 1990s to over 700 tonnes at the end of 2008 when the liberalization process was in full swing. WGC estimates that a substantial increase in gold demand would take place if demand in China were to rise to Japanese, USA or Taiwanese levels. In this case, total annual incremental demand ranges from another 1,000 tonnes at USA and Japanese per capita consumption levels, and still more, if Chinese consumption per capita were to rise to Taiwanese levels

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1. Investor’s preferences: -

Most of the people are interested in investing in share market when compared to commodity market and the real estate the risk involving in above markets are comparatively higher than share market. And also people want to reduce their risk in investing bank fixed deposits here customers are mainly focusing on their return in short interval time.

Analysis of data revels that majority of people prefer investment in Real Estate (28.81% of total sample) which specified in other category investment and it is greater than share market investment preference.

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2) People’s knowledge about Commodity Market: -

Very few people heard of commodity market. Vast majority of people are unaware about Commodity Market 3. Investor’s interested to invest in Commodity Market: (Out of those, who know Commodity Market)

Though some people heard of commodity market due to lack of complete knowledge about it half of then are not interested in investing in Commodity Market.

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4. Commodity Market Investors Preferences

Above data revels that majority of commodity investors like to invest in Bullion (Gold & Silver). 5. Perception about Commodity Market

Analysis of data shows that majority of people who are aware about commodity market; feel that investment in commodity market is very risky. So efforts should be done to minimize the risk in commodity investment and make peoples about minimum risk incommodity investment. 6 opinion about the commodity market:

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There is no second opinion amongst commodity investors, that commodity market advertisements do not give all the necessary information.

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FINDINGS . Risk associated with Commodities Market No risk can be eliminated, but the same can be transferred to someone who can handle it better or to someone who has the appetite for risk. Commodity enterprises primarily face the following classes of risk. Namely: The price Risk, the quantity risk, the yield/output risk and the political risk, talking about the nationwide commodity exchanges, the risk of the counter party not fulfilling his obligations on due date or at any time therefore is the most common risk. This risk is mitigated by collection of the following margins:• • • • Initial margins Exposure margins Mark to Market on daily positions Surveillance.

Gold is a unique asset based on few basic characteristics. First, it is primarily a monetary asset, and partly a commodity. As much as two thirds of gold‘s total accumulated holdings relate to ―store of value‖ considerations. Holdings in this category include the central bank reserves, private investments, and high-cartages jewelers bought primarily in developing countries as a vehicle for savings. Thus, gold is primarily a monetary asset. Less than one third of gold‘s total accumulated holdings can be considered a commodity, the jewelers bought in Western markets for adornment, and gold used in industry. The distinction between gold and commodities is important. Gold has maintained its value in after-inflation terms over the long run, while commodities have declined. Some analysts like to think of gold as a ―currency without a country‘. It is an internationally recognized asset that is not dependent upon any government‘s promise to 67

pay. This is an important feature when comparing gold to conventional diversifiers like T-bills or bonds, which unlike gold, do have counter-party risk. What makes gold special?  Timeless and Very Timely Investment  Gold is an effective diversifier  Gold is the ideal gift  Gold is highly liquid  Gold responds when you need it most

The gold market is highly liquid. Gold held by central banks, other major institutions, and retail jewelery is reinvested in market. Due to large stock of gold, against its demand, it is argued that the core driver of the real price of gold is stock equilibrium rather than flow equilibrium. Effective portfolio diversifier: This phrase summarizes the usefulness of gold in terms of ―Modern Portfolio Theory‖, a strategy used by many investment managers today. Using this approach, gold can be used as a portfolio diversifier to improve investment performance. Effective diversification during ―stress‖ periods: Traditional method of portfolio diversification often fails when they are most needed, that is during financial stress (instability). On these occasions, the correlations and volatilities of return for most asset class (including traditional diversifiers, such as bond and alternative assets) increase, thus reducing the intended ―cushioning‖ effect of the diversified portfolio.

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RECOMMENDATIONS: The correlation between stock and commodity is very low it means they move inversely .Each and every individual who are really want to invest in those markets they should go for portfolio management services due to this there will optimization of the risk. Most of the customers really had a strong belief that when they are investing in commodities they think they may occur huge losses. But they have to use different strategies in order to get a huge profits such as averaging method and also trying to reduce the hedging and directly not going for speculation. There is a need to reduce information asymmetry and make a robust market available to the end producer. The cycle for commodities have a long periods of either bull run are bear run. And the recommendations for the company are it does not have good advertising campaigns in south India even though it was famous in North India. It should also give more free calls to the customers in the initial stages to get more attractive towards the company and also there should be a all financial products in the same area.

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CONCLUSION: Commodity Trading is finding favor with Indian investors and is been seen as a separate asset class with good growth opportunities. For diversification of portfolio beyond shares, fixed deposits and mutual funds, commodity trading offers a good option for long-term investors and arbitrageurs and speculators. And, now, with daily global volumes in commodity trading touching three times that of equities, trading in commodities cannot be ignored by Indian investors. Online commodity exchanges need to revamp certain laws governing futures in commodities to make the markets more attractive. As a matter of fact, derivative instruments, such as futures, can help India become a global trading hub for select commodities. Commodity trading in India is poised for a big take-off in India on the back of factors like global economic recovery and increasing demand from China for commodities. Considering the huge volatility witnessed in the equity markets recently with the Sensex touching 21000 level commodities could add the required zing to investors' portfolio. Therefore, it won't be long before the market sees the emergence of a completely redefined set of retail investors. Presently the market is in bullish one for commodities (gold) due to the financial crisis happened in the European countries (PIGS) Portugal, Italy, Greece and Spain. So every investor really want to invest in a gold as a safe side for their investment

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LEARNING OUTCOMES: Following are the outcomes of the study: Buying behaviour of the customers includes the way customer behaves when they see new promotions and how the customer passes the adoption process. So how should company should develop the marketing strategy so that proper investment is done during the introduction phase of the new product or a service How to interact with customers effectively One of the major learning outcomes from this research project was how to interact with the customers effectively. It gives the experience that how to deal with the customers and make them convince by explaining and by questioning them regarding the service. Company has to know in detail that where the customers are dissatisfied and in terms of the minute factors in which it operates, so that after knowing satisfaction, depending upon the perception they has segmentation can be done to know where the customers are located in the customer development process so that brand loyal program has to be implemented to retain the existing customers and the strategy to move the new customer to next level and to make him as a client or a member of the company. It also explain me about the markets regarding futures and spot markets how the market fluctuates in a daily markets and a good experience on commodity market in terms of factors affecting that gold how they trade and the strategies implemented by the buyer when to trade and getting maximum return on their investment.

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Bibliography: While making the report , information was taken from various sources and used as a reference .

Websites: www.bseindia.com www.ncdex.com www.sebi.gov.in, SEBI Bulletin www.indiaexpress.com www.mcxindia.com www.indiamba.com www.commodityindia.com www.business.mapsofindia.com www.nmce.com www.nbotind.org www.gold.org Books: Fundamentals of futures and option market ,John C Hul

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Questionnaire:
Survey was conducted across Hyderabad City (in areas like Begumpet, banzara hills, kondapur, dilsukhnagar) to judge the awareness of peoples regarding investment in Commodity Market. Sample size 30 peoples COMMODITY MARKET Questionnaire for Investors 1. Do you have any investment plan? a. YES b. NO (if no move to question no. 4) 2. If, yes, where you would like to invest your money? a. Bank F.D. b. Share Market c. Commodity Market d. Other (specify) 3. Why you prefer specific investment? ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------4. If no, why? a. Not aware about invest avenues b. Insufficient income c. Other (specify) 5. Do you aware about Commodity Market? a. YES b. NO (if no move to question no 12) 6. Are you willing to invest in Commodity Market? (If in Q. 2 Commodity Market, skip this question) a. If YES, why? -----------------------------------------------------------------------------b. If NO, why? -----------------------------------------------------------------------------(If no move to the Question no.10) 7. If yes, which Commodity Exchange you will prefer for investment? a. MCX b.NCDEX c.NMCE d Other (specify) e. Can’t Say 75

8. Why you prefer specific Commodity Exchange for investment? (if answer to Q.7 f, skip this question) ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------9. In which Commodities you will prefer to Invest? And why? a. Bullion b. Agricultural c. Metals d. Fossils/Energy -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10. What is your perception about Commodity Market? a. Less Risky b. Risky c. Very Risky 11. What you think Commodity Market Advertisements (hoardings, prints etc) are explanatory enough to give needed useful information? a. YES b. NO 12. Gender a. Male b. Female 13. Age Group a. Below 21 Years 40 years e. Above 50 years b. 21 years – 30 years d. 41 years – 50 years c.31 years –

14. Occupation a. Govt. Job b. Private Job c. Business d. Other (specify) 15. Income Group (Per month) a. Nil b. Below 10,000/- c. 10,000 – 20,000/d. 20,000 – 30,000/- e. Above 30,000/---------------------------------------------------------------------------

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DIFFERENT TYPES OF COMMODITIES TRADED World-over one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following groups: Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, Zinc Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI, Silver M Cotton L Staple, Cotton M Staple, Cotton S Staple, Cotton Yarn, Kapas Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M. E. Sour Crude Oil Cardamom, Jeera, Pepper, Red Chilli Arecanut, Cashew Kernel, Coffee (Robusta), Rubber Chana, Masur, Yellow Peas HDPE, Polypropylene(PP), PVC Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Bean, Soy Seeds Maize Guargum, Guar Seed, Gurchaku, Mentha Oil, Potato (Agra), Potato (Tarkeshwar), Sugar M-30, Sugar S-30 77

METAL

BULLION FIBER ENERGY SPICES PLANTATIONS PULSES PETROCHEMICALS

OIL & OIL SEEDS

CEREALS OTHERS

Fortnightly Status Report Sl.N : 1 Reg. No : 09PG017 Date : 30 april 2010

Name of the Student : DIXITH GANDHE Submitted to TITLE : Dr.REKHA : Analysis of Commodity Market.

Work carried out during the fortnight under report : a. Books / Chapters read / procured : Financial Management –Prasanna Chandra Corporate Finance -Ross Westerfield b. Research Papers / Articles read / procured / downloaded : Commodity Market. Futures and options. NCFM modules c. Internet searching results, if any : Analysis of equity market , Derivatives , online/offline equity trading. d. Visits to Institutions / Libraries / Companies, if any : Not yet , yet to visit to the companies in next week. e. Designing of a questionnaire and administered, if any : We have just collected the feedback from the clients regarding how they invest and their opinion on share and commodity market. 78

f. Meeting with target group members, if any : We have met the potentinal customers and explained them about the UNICON financial products and tried to convince them to add as clients of UNICON g. Analysis of Data collected : We have analyzed the data based on feed back collected from the clients and find that unicon had a strong research team and high customer base and their service is very good i,e (24*7) , and has a strong advisory panel whose success rate is 75% in the month of march. h. Draft write up prepared, if any : NO i. Proposed steps during the next fortnight : I have choosen the commodity market for my internship program for next fortnight i will analyse the commodity markets ,which have a huge impact on the factors affecting it. j. Any other relevant information : Along with this project work I am generating leads to the company as on job training.For this I am interacting with different clients and by this I am leaning how to deal with different people.

Date: ..................... (Signature of the student)

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Fortnightly Status Report Sl.N : 2 Reg. No : 09PG017 Date : 14 may 2010

Name of the Student : DIXITH GANDHE Submitted to TITLE : Dr.REKHA : Analysis of Commodity Market.

Summary of Previous Fortnight(s) report: Understanding of market and how different factors are affecting the market. Analyzing the fundamental analysis of the company. Work carried out during the fortnight under report : a. Books / Chapters read / procured : Financial Management –Prasanna Chandra Chapter on Securities & Markets of an e-book on Finanacial management by Frank J Fabozzi. b. Research Papers / Articles read / procured / downloaded : Commodity Market. Weekly reports of unicon from techinical analysts NCFM modules c. Internet searching results, if any : www.nseindia.org www.bseindia.org 80

Analysis of equity market , Derivatives . d. Visits to Institutions / Libraries / Companies, if any : Not yet , yet to visit to the companies in next week. e. Designing of a questionnaire and administered, if any : Continuing with the designed questionnaire while working on minor manipulations based on the problems f. Meeting with target group members, if any : We have met the potentinal customers and explained them about the UNICON financial products and tried to convince them to add as clients of UNICON and explaining them about the various products trading in the market g. Analysis of Data collected : We have analyzed the data based on questionarie collected from the clients and find that new clients are eyeing mostly on equity share market and not other markets. h. Draft write up prepared, if any : NO i. Proposed steps during the next fortnight : Adding up some more clients to the company and providing service at the terminal points with the support of the dealers here. Further enhancement of my learning by consistent watch on the stock market.

Date: 14 may 2010 (Signature of the student)

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Fortnightly Status Report Sl.No: 3 Reg. No: 09PG017 Date: 28/05/2010 Name of the Student: DIXITH.GANDHE

Submitted to: Dr.REKHA Title: ANALYSIS OF COMMODITY MARKETS Summary of Previous Fortnight(s) report Project started with referring to concepts in text book and articles that are mentioned in previous report. Work constituted in generating leads in commodity market and convinced them to make them as clients of UNICON SECURITIES PVT LTD. In the course of time we established a good relationship with traders by informing them with buy and sell calls. Started observing the commodity market and observed the benefits and advantages of the commodity market over other markets. Work carried out during the fortnight under report: Books / Chapters read / procured: Getting Started In Commodity-----By George A. Fontanills Chapter 1: Getting Started Chapter 2: How the Commodities Markets Work Chapter 3: Commodity Trading in the Stock Market Chapter 4: Commodity Trading in the Index Markets Research Papers / Articles read / procured / downloaded: How to spot a trend – Joe Ross Charting made easy – John J Murphy Internet searching:  www.fxstreet.com  www.newyorkfed.org 82

 www.netdani.com  www.cnbc.com Meeting with target group members: As mentioned in the previous report, with the instructions of the industry guide I generated leads in market. I am visiting gold shops and gold showrooms and then convincing them to invest in commodity market and getting their contact details so that we can send best sell and buy calls and make the clients with good returns so that they get convinced and they will become the loyal customers of UNICON SECURITIES PVT LTD. Proposed steps during the next fortnight:  Factors Affecting Commodities  Forecasting of Commodity market by Fundamental Analysis of Commodity Market  Interacting with more target audience of gold market  Generating more leads and converting them as clients of UNICON Any other relevant information: I started a demo commodity account and started operating with virtual account and virtual money in the commodity market so that I can observe the market closely, implement some strategies virtually, apply the fundamental analysis of commodity market and forecast the market for the detailed analysis which would help me through the IIP in UNICON SECURITIES PVT. LTD.

Date: 28/05/2010 student)

(Signature of the

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Fortnightly Status Report
Sl.No: 4 Date: 11/06/2010 Reg. No: 09PG017 Name of the Student: DIXITH.GANDHE Submitted to: Dr.REKHA Title: ANALYSIS OF COMMODITY MARKETS Summary of Previous Fortnight(s) report

 Factors Affecting Commodities  Forecasting of Commodity market by Fundamental Analysis of Commodity Market  Interacting with more target audience of gold market  Generating more leads and converting them as clients of UNICON Work carried out during the fortnight under report:
Books / Chapters read / procured: Getting Started In Commodity-----By

George A. Fontanills Chapter 3: Commodity Trading in the Stock Market Chapter 4: Commodity Trading in the Index Markets

Chapter on Securities & Markets of an e-book on Financial management by Frank J Fabozzi.
Research Papers / Articles read / procured / downloaded:

o Getting started in commodity 84

o Common sense approach in trading with commodities o Weekly reports of unicon from technical analysts o NCFM modules
Internet searching:

 www.fxstreet.com  www.newyorkfed.org  www.netdani.com  www.moneycontrol.com Designing of a questionnaire and administered, if any : Continuing with the designed questionnaire while working on minor manipulations based on the problems and ultimately we sort the problems what unicon was facing and the investors opinion about unicon. Analysis of Data collected : We have analyzed the data based on questionnaire collected from the clients and find that new clients are eyeing mostly on equity share market and not other markets especially in commodity and forex
Meeting with target group members:

I met several employees of the organization as even before, I got the needful information on the topic and also a series of discussions with the investors, friends who are in the field of trade and investment Along with the above said sources I have gone through several sources like publications, websites, research articles etc Draft write up prepared, if any : Yes on the analysis of questionnaire what we have prepared regarding stock and various markets
Proposed steps during the next draft:

I would like to complete the rough draft in a week time touching the aspects, concepts with respect to Commodity market.

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Date: 11/06/2010 student)

(Signature

of

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