Professional Documents
Culture Documents
“COMMODITY MARKET”
AT
BY
VELLUPALLY VAMSHI
OSMANIA UNIVERSITY
2018-2020
CHAPTER-1
INTRODUCTION
SCOPE OF THE STUDY
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
INDUSTRY PROFILE
COMPANY PROFILE
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
CHAPTER-5
SUGGESTION
FINDINGS & CONCLUSION
BIBLIOGRAPHY
1.1 INTRODUCTION
Commodity includes all kinds of goods. FCRA defines “goods” as “every kind of moveable
property other than actionable claims, money and securities”. Or any product that can be used
The commodity futures trading, consists of a futures contract, which is a legally binding
agreement providing for the delivery of the underlying asset or financial entities at specific
date in the future. Like all future contracts, commodity futures are agreements to buy or sell
something at a later date and at a price that has been fixed earlier by the buyer and seller. So,
for example, a cotton farmer may agree to sell his output to a textiles company many months
Commodity Market
The commodity market is a market where forwards, futures and options contracts are traded
The stage is now set for banks to trade in commodity futures. This could help producers of
agricultural products bankers and other participants of the commodity markets. Banks have
started acknowledging the commodity derivatives market. In this context the Punjab National
Bank and the Corporation Bank have sanctioned loans worth Rs 50 crore to commodity
In the present global economic scenario, due to various factors such as inflation, political
factors, natural factors, the variations in prices of all commodities are a natural phenomenon.
So,from the point of the cultivators of the commodity (in case of agricultural products) or
dealers in the metals, there is a genuine need for them, an instrument with which they can
hedge their risks. Thus, a commodity future is one of the most important derivative securities.
With this they will be able to reduce risks.
Consequently, the speculators who play an important part, in determining the price also come
in the picture. Thus with the help of their speculative expertise, it can also be a very lucrative
investment opportunity. Through this, project, an attempt is made to prove that commodity
futures can be used effectively as a risk reduction instrument and also as a very good
investment opportunity.The futures market in commodities offers both cash and delivery-
based settlement. Investors can choose between the two. If the buyer chooses to take delivery
of the commodity, a transferable receipt from the warehouse where goods are stored is issued
in favour of the buyer. On producing this receipt, the buyer can claim the commodity from
the warehouse. All open contracts not intended for delivery are cash-settled. While
speculators and arbitrageurs generally prefer cash settlement, commodity stockiest and
wholesalers go for delivery. The option to square off the deal or to take delivery can be
changed before the last day of contract expiry. In the case of delivery-based trades, the
margin rises to 0-25% of the contract value and the seller is required to pay sales tax on the
transaction.Trading in any contract month will open on the twenty first day of the month,
three months prior to the contract month. For example, the December 2005 contracts open on
21 September 2005 and the due date is the 20-day of the delivery month. All contracts
settling in cash will be settled on the following day after the contract expiry date. Commodity
trading follows a T+1 settlement system, where the settlement date is the next working day
after expiry. However, in case of delivery-based traders, settlement takes place five to seven
research is in on the commodity futures and analysis of risk and return involved in
commodity futures.
Achieving hedging efficiency in the main reason opt for futures contracts. For
instance, in February, 2007 India had to pay $52 per barrel more for importing oil
The utility of a future compact for hedging or risk management purpose parallel on
near-parallel relationship between the spot and future price over time. In other words,
the efficiency of a futures contract for hedging essential envisages that the price in the
physical and future markets move in close union not only in the direction but also by
almost same magnitude so that loses in one market are offset by gains in the others
Theoretically( and ideally), in perfectly competitive market with surplus supplies and
abundant stock round the year, future price will exceed the spot price by the cost of
storage till the maturity of the future contract but such storage cost declines has the
by the future contract over the spot delivery over its life and eventually becomes zero
during the delivery month when the spot and futures price virtually converge.
The efficiency of a futures contract for hedging depends on the prevalence of such an
One month spot prices for commodity futures like Gold, Silver, Cotton, Nickel,
The above mentioned commodity futures are more traded in the market in terms of
volume.
1.4 OBJECTIVES OF THE STUDY
Methodology states that how the research studies should be undertaken. This includes the
design specifications, sources of data, methods of primary data collection, methods used for
Primary Data
It is a raw data collected from any source before the study, this data is taken as the use to
Secondary Data
Mainly secondary data has been used for the study. Secondary data consists of collecting
information from various financial sites. It includes the records and reports of research
In this study standard deviation and Beta are used for calculating Risk and Return of
commodity futures.
5.3 LIMITATIONS OF THE STUDY:
Due to non-availability of sufficient time one month data was taken for analysis.
The data are available in the date of the expiry of the contract.
Most of the information gathered for the study is from Internet and magazines etc. that are in
the printed form. Hence, the level of accuracy cannot be expressed to be 100 per cent.
BIBLIOGRAPHY
BOOKS REFERRED
Kothari, C.R., Research Methodology, New Delhi, New Age International Pvt Ltd,
2003.
JOURNALS
Chan, M. L., & Mountain, D. C. (1988), the interactive and causal relationships
Ma, C. (1985), spreading between the gold and silver markets: is there parity? Journal
Simon, M. A. (1996), the outlook for and inter-relationship between gold and silver,
Wahab, M., Cohn, R., &Lashgari, M. (1994), the gold–silver spread: integration, co-
707–756
NEWS PAPERS
Business Standard
Business Line
Mint
WEBSITES
1. http://www.rbi.org.in
2. http://www.goldresearch.org.in
3. http://www.gold.org
4. http://www.investopedia.com
5. http://www.investing.com
6. http://www.mcxindia.com
7. http://www.kitco.com
8. http://www.indiagoldrate.com