Comoditiy Market

Project on Commodity Market
CHAPTER I
1.1 INTRODUCTION
Linguistically, the word commodity came into use in English in the 15th century, derived from
the French word "commodité", meaning today's (2000) "convenience" in terms of quality of
services. The Latin root meaning is commoditas, referring variously to the appropriate measure
of something; a fitting state, time or condition; a good quality; efficaciousness or propriety; and
advantage, or benefit. The German equivalent is die Ware, i.e. wares or goods offered for sale.
The French equivalent is "product de base" like energy, goods, or industrial raw materials. India,
a commodity based economy where two-third of the one billion population depends on
agricultural commodities, surprisingly has an under developed commodity market. Unlike the
physical market, futures markets trades in commodity are largely used as risk management
(hedging) mechanism on either physical commodity itself or open positions in commodity stock.
For instance, a jeweler can hedge his inventory against perceived short-term downturn in gold
prices by going short in the future markets.
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.
The term commodities are often used to describe commodity trading. It can be assumed as such
terms which describe the markets.Commodity markets are markets where raw or primary
products are exchanged. These raw commodities are traded on regulation commodities
exchanges in which they are bought and sold in standardized contracts. It covers the physical
products or goods (corn, soybeans, gold, crude oil, food, etc.) markets but not the ways that
services, including those of governments, nor investment, nor debt can be seen as a commodity.
It is the relationship between simple commodity money and the more complex instruments
offered in the commodity markets. Commodities are those which we come across in our daily
life. Such markets are social institutions which facilitate exchange of goods for money.
A market that transacts business with commodities of all nature referred as commodity markets.
Commodity market was initially meant only for agricultural products and that too in the local
market. Industrializations, globalizations, technological advancements, increasing demand from
consumers and intense competition from other players has paved way for commodity markets to
cross boundaries and break barriers with regards to the commodity traded. Commodity markets
deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both
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perishable non perishable, finished goods, raw materials and semi finished goods will be traded
in this market at the international level. Commodity market does not necessarily require you to
buy or sell the commodities but you can even exchange them.
Commodity markets are maturing as a key investment option. Corporates with exposure to
commodities are using the commodity markets as a hedging option whereas the investor
community is diversifying their investments in equity markets with exposures to commodity
markets. Banks are trying to understand their risks in corporate credit and trade finance portfolio
with large commodity exposure. CRISIL Research aims to address these needs through its new
research solution CRISIL Commodity View. The dynamic growths of commodities prices in
recent years have put them in the center of the scope of many investors’ interest. This is
especially the case with oil, gold, silver and industrial metals like copper, aluminum, zinc or
nickel. The relatively high price of raw materials has a significant impact on the condition of the
global economy. Commodities are amongst the oldest market of the world. Their beginnings date
back to ancient times, and the first organized commodities exchanges were organized in Western
Europe in XII century. The history of financial markets has been marked by the first infamous
crash of the so called “tulip mania”. Development and burst of the speculative bubble in XVII
century markets in Amsterdam and London was the first, but not the last example of the interplay
between greed and fear dominating the process of speculative trading. The development of new
technologies that occurred at the end of XX-century has resulted in the dynamic growth of
volumes traded on commodities markets. Commodities and their derivatives are quoted both on
Over the Counter and regulated stock exchange markets. Brokerage house X-Trade Brokers
Trading offers the possibility to trade contracts for difference on a broad range of commodity
markets. Oil, gold, silver, platinum, copper and many more are available for real trading. Real
time quotes, charts and analysis come as standard along with the real trading platform that we
provide for our clients. 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.
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Precious metals, crude oil and natural gas are not the only commodities that have taken part in
this bull. These commodities do command the lion’s share of attention but let’s not overlook
those others that play an integral part in the global economy. Below are many of the popular
hard commodities and their bull-to-date highs since the beginning of 2001.
- Aluminum +94%
- Gold +124%
- Silver +142%
- Platinum +159%
- Zinc +220%
- Lead +252
- Copper +280%
- Crude Oil +300%
- Nickel +302%
- Butane +330%
- Propane +346%
- Heating Oil +360%
- Gasoline +578% (+333% not including Katrina/Rita 3-day spike)
- Natural Gas +807% (+429% not including Katrina/Rita spike)
As it is seen, these hards have had quite a run thus far. But in addition to these above, there are
many other soft and hard commodities that trade in the futures markets. As you can imagine,
barring the occasional bear-market rally, commodities have been out of favor for quite some
time. Today’s commodities bull is finally reflecting the importance of commodities and the
realization that in this growing global economy the resources that support it are not to be taken
for granted.
Sugar is the truly interesting story among the softs. It has performed very well in this bull
market, but for reasons that would exhibit the characteristics of a hard commodity. It recently hit
a 25-year high not because more people are putting sugar in their coffee, but rather due to the
huge increase in ethanol demand.
Sugar happens to be a common compound in ethanol production with well over 50% of the
global ethanol supply coming from it. Ethanol consumption has significantly increased over the
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years and its demand is expected to continue to rise sharply in the years to come. As more and
more countries are implementing ethanol as an alternate energy source we are now faced with a
supply-deficit in sugar.
Even with sugar as the stand-out soft commodity, it is evident that hard commodities are the
strongest of the group and have been pulling their weight, hoisting the overall index. Hard
commodities now become more of a focus and the results going forward should reflect more on
their performance. A dollar today has nowhere near the purchasing power it did in 1981. And it
is necessary to highly consider this when the true value of a commodity is involved.
Now that we’ve established the fact that commodities have enormous potential even at the
nominal highs we are seeing today, how does an investor jump on board and leverage his capital
in order to profit from this? Softs are nowhere near as exciting as hards, but regardless, softs are
just plain more difficult to invest in.
Well, if you look real hard you will find various hedge funds out there that have recognized
sugar’s potential and have thrown capital in its direction. But ultimately for the common
investor there is really not an easy way to get a piece of the pie. Soft commodities are almost
exclusively traded in the futures markets. You would be hard pressed to find a publicly traded
company that produces a soft commodity and is exposed to its price fluctuations.
Hard commodities, on the other hand, offer wonderful opportunities for investors to join the
party. Because of the massive capital expenditures and operating costs necessary to produce
hard commodities, and because funding is always a challenge, most producers and servicers of
these sorts are publicly traded in the stock markets. Its custodian’s goal is to reflect the
commodities that are most important and influential in today’s economy. Energy and metals are
such commodities today and are currently faced with serious economic and fundamental
challenges.
1.2 Commodity Markets - To or Not to Invest?

A market that transacts business with commodities of all nature referred as commodity markets.
Commodity market was initially meant only for agricultural products and that too in the local
market. Industrializations, globalizations, technological advancements, increasing demand from
consumers and intense competition from other players has paved way for commodity markets to
cross boundaries and break barriers with regards to the commodity traded. Commodity markets
deal in the trade of commodities like gold, cotton, crude oil, orange juice etc. Many items both
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perishable non perishable, finished goods, raw materials and semi finished goods will be traded
in this market at the international level. Commodity market does not necessarily require you to
buy or sell the commodities but you can even exchange them.
Commodity market works on certain principles. Firstly the trading has to be done only for
standard products. Secondly the transaction takes place through a future contract. According to
this contract the commodities will be sold or bought on a future date. However the price at which
they are sold will be the price agreed during the contract. Similarly commodity marketing also
makes use of another type of contract called spot contract. In this contract the goods are to be
transferred as soon as the contract is made. However it has also been argued that the purpose of a
spot contract is to exercise a future contact in due course of time. Some of the commodities
investing market are commodity food market, commodity petroleum market and commodity
fund investing.
1.3 Investing in Commodities

Commodity investing was initially received well only by a few sectors. Commodities investing
were first restricted to the trade and exchange of commodities meant for regular and day to day
use. However the awareness in the subsequent stages has brought all sectors into the manifold of
commodity investing and has enabled speedy movements, transfer and transaction of goods and
services.
Reduced Risks
As an investor your chances of risks are very less if you choose to invest in commodity.
Therefore the gains from commodity investing will be helpful for you to balance other losses due
to other financial instruments in your portfolio. The chances of risks are lower because
commodity investing primarily deals with diverse items. Moreover when the contracts are
entered for a future date at the current time you can exercise reasonable care and see to it that the
chances of risks are reduced or nil
Helps to Fix Price Easily

The performance of commodity market can be monitored by analyzing the performance of bond
and share market because in most cases a commodity market will perform well when the others
don't perform and vice versa. It is therefore possible to easily predict the prices and make the
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contracts by considering the ups and downs in other markets. A prerequisite for this is that the
assets in the commodity market should not be correlated with the stock and bond market.
1.4 Why do retail investors lose in commodity markets?

There has been a strong buzz in the market that retail investors lose more than they gain in the
commodity market. In most cases, it is more important to know HOW one is investing than
WHO is investing. Reports indicate weak retail investment in UK commodity markets but more
interest shown in Germany, Asia.Small retailers and investors usually are looking for an avenue
to diversify their portfolio, to invest their hard earned money to get decent returns. Studies
indicate that commodities are an effective portfolio diversifier and have been around for some
time now. It has taken the recent economic climate for commodities and not just a cyclical
opportunistic market to be regarded as a genuine asset class. Small investors do have an
opportunity to make money in the commodity market, but you need to work equally hard to
multiply your money. Finding a good broking house is important, but even more important is
understanding the trade, researching on your own and taking responsibility of your money. It is
always considered better to start with a couple of commodities you like or understand better.
More preferred commodities can be ones information on which are easily and widely available.
Trading on tips and judgment of others would not assure gains for a longer time.
1.5 Why Invest in Commodities? Diversification and Inflation

Protection
Investor interest in commodities has soared in recent years as the asset class has outperformed
traditional assets such as stocks and bonds. The performance of commodities as an asset class is
usually measured by the returns on a commodity index, such as the Dow Jones-AIG Commodity
Index, which tracks the return from a passive investment in 19 different commodity futures
contracts. Over the five-year period ended March 31, 2006, the Dow Jones AIG Commodity
Index has returned 10.6%, versus 2.6% for the S&P 500.
Commodity prices have been driven higher by a number of factors, including increased demand
from China, India and other emerging countries that need oil, steel and other commodities to
support manufacturing and infrastructure development. The commodity supply chain has also
suffered from a lack of investment, creating bottlenecks and adding an “insurance premium”
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and/or a “convenience yield” to the returns of many commodity futures. Over the long term,
these economic factors are likely to support continued gains in commodity index returns.
Don’t you think stock market is simpler than commodity market?

So why should an investor invest in commodities market?
This question is very valid. Do you know in 1992-93 if you had gone to marry daughter of a
stock broker, your father would have been horrified. After 15 years, people don’t find stock
market as a bad profession. In fact, most people go to broking companies as research analysts
and it is a very reputed job. Now that mindset is there in commodities. Today, maybe after 10
years why people were against commodity broking? It’s a matter of time that things will change.
1.6 Commodity Investment Strategies

Capturing the full benefits of commodity exposure has been a challenge in the past. Investing in
physical commodities—a barrel of oil, a herd of cattle or a bushel of wheat—is impractical, so
investors have tended to seek commodity exposure either by purchasing commodity-related
equities or through actively managed futures accounts.
However, these investment strategies may not capture the potential diversification and other
benefits of commodity exposure in a portfolio. For example, commodity-related equities will not
necessarily reflect changes in the price of commodities.
If an oil producer has already sold its supply on a forward basis, the producer’s stock price may
not fully benefit from a rise in the price of oil. Commodity-related equity returns can also be
affected by the issuer’s financial structure or the performance of unrelated businesses. In fact,
commodity-related equities may actually have a higher correlation to movement in equities than
the commodity market. Actively managed commodity futures accounts also may not provide the
benefits of commodity exposure suggested by historical commodity index performance, because
these accounts tend to reflect the manager’s skills at selecting the right commodities, at the right
time, rather than the inherent returns of the commodity market. The emergence of investment
vehicles that track commodity futures indices has provided investors with another option for
gaining exposure to commodities that may offer better potential to capture the full benefits of the
asset class. Investment vehicles that track commodity futures indices are not the same as actively
managed futures accounts. Instead, commodity index returns provide passive exposure to a broad
range of commodities. For example, the Dow Jones AIG Commodity Index tracks the futures
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price of 19 different commodities, including energy, livestock, grains, industrial metals, precious
metals and “soft” commodities. Changes to the composition of the index are determined by
preset rules rather than a manager’s discretion.
Dow Jones-AIG Commodity Index Components
As of March 31, 2006
Source: AIG
One advantage of commodity exposure that tracks a broad index is that commodities are not
highly correlated with each other and index returns should be less volatile than the returns on an
individual commodity. Another advantage is that commodity indexes themselves have existed
for decades, providing ample historic data for asset allocation studies and research.
While broad commodity exposure can provide investors with a number of potential benefits,
investing in commodities entails risks as well. In particular, commodities may not perform well
during cyclical downturns in the U.S. or global economy, when consumer and industrial demand
slows. Commodities have historically been about as volatile as the equity market. For example,
from December 1990 through March 2006, annualized monthly volatility for the Dow Jones-AIG
Commodity Index was 12.2% compared to 13.8% for the S&P 500. More recently, from June
2001 through June 2006, annualized monthly volatility for the Dow Jones-AIG Commodity
Index was 13.9%, slightly above the 13.5% volatility of the S&P 500 over the same period.
1.7 Why Trade In Commodities?

Although commodity derivatives command a humble share of 6% in the derivatives segment
across the world, yet these record high volumes in the markets the world over compared to
equity derivatives. In an era where risks to investments are on the rise, India needs to switch to
commodity derivatives and also to weather derivatives (when these are launched), if it needs to
top the list of developed nations. Of course with the other asset classes offering attractive
returns, "Why Commodities?" is the inevitable question that pops in one's mind today, more so
considering that the BSE Sensitive Index is scaling new highs by the day. Well, despite offering
relatively lower returns, commodity derivatives provide unique money-making opportunities to a
wider section of market participants, starting from planters to exporters, importers at all. And to
the agrarian Indian population commodities are obviously not new, nor are the advantages of
trading in them unknown. No balance sheet, P&L statement, EBITDA and reading between the
lines. Commodity trading is about the simple economics of supply and demand. Supports are
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known, only resistance matters! Minimum support price acts as a statutory support for many
commodities. No Dollar-Rupee premiums/discounts. No hedging on the NYMEX. Indian
commodity derivatives hedge both forex and commodity specific risks at a single cost. No
breaking of heads over market direction. Seasonality patterns quiet often provide clue to both
short- and long-term players. No scam, no price rigging. Commodity trading comes with nil
insider trading and company specific risk. What's more, why invite risk by investing in a metal
company when you can trade in the metal itself? After all, while the stock price of the company
is dependent on several factors including the company's own fundamentals, the price of the metal
is driven by the simple economics of demand and supply. The more the demand for the metal,
the higher its price and vice versa. Also compared to equities it is much cheaper to trade in
commodities, where margin requirements are lower.
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1.8 Different types of commodities

A} METALS
Different types of metals are as follows:
1} GOLD:
 Gold is primarily a monetary asset and partly a commodity.
 More than two third of gold’s total accumulated holdings, relating to “value for
investment”, is with central banks’ reserves, private players, and high-karat jewelry.
 Less than one third of gold’s total accumulated holdings is a “commodity” for jewelry in
western markets and usage in industry.
 The Gold market is highly liquid and gold held by central banks, other major institutions
and retail Jewellery keep coming back to the market.
 Due to large stocks of Gold as against its demand, it is argued that the core driver of the
real price of gold is stock equilibrium rather than flow equilibrium.
 Economic forces that determine the price of gold are different from, and in many cases
opposed to the forces that influence most financial assets.
 South Africa is the world's largest gold producer with 394 tons in 2001, followed by US
and Australia.
 India is the world's largest gold consumer with an annual demand of 800 tons.
Market Characteristics:
 The gold market is highly liquid. Gold held by central banks, other major institutions, and
retail jewelry is reinvested in the 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 which is utilized 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 methods of portfolio
diversification often fail when they are most needed, that is during financial “stress”
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(instability). On these occasions, the correlations and volatilities of return for most asset
classes (including traditional diversifications, such as bonds and alternative assets)
increase, thus reducing the intended “cushioning” effect of a diversified portfolio.
Demand and supply:

 South Africa is the world’s largest gold producer with 297 tonnes in 2005, followed by
the US and Australia.
 India is the world’s largest gold consumer with an annual demand of 800 toones.
Demand and supply of gold:
Supply in tonnes
2005 2006 Change%

Mine production 658 635 -3
Net producer -14 62 -

hedging
Total mine supply 644 573 -11
Official sector sales 85 59 -31
Old gold scrap 211 192 -9
Total supply 940 824 -12
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Demand
Fabrication - - -
Jewelry 659 664 1
Industrial & dental 108 114 5
Sub total of above 768 778 1

fabrication
Bar & coin retail 93 100 7

investment
Other retail -8 -8 0
investment
ETFs & similar 38 19 -49
Total demand 890 889 0
Balance 50 -65 -
Factors influencing the market:

 Above ground supply from sales by central banks, reclaimed scrap, and official gold
loans.
 Producer/ miner hedging interest.
 World macroeconomics factors such as the US dollar and interest rate.
 Comparative returns on stock markets.
 Domestic demand based on monsoon and agriculture output.
2} SILVER:
Silver has unique properties such as its strength malleability, ductility, electrical and thermal
conductivity, sensitivity, high reflectance of light, and reactivity.
There are few substitute metals for silver in most application, particularly in high-tech uses in
which reliability, precision, and safety are paramount.
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Today, silver is sought as a valuable and practical industrial commodity and as an appealing
investment.
The largest industrial users of silver are the photographic, jewelry, and electronic industries.
Newly-mined metal provides most of the needed supply.
Mexico, United States, and Peru are the primary producers.
Secondary silver sources include coin melt, scrap recovery, and dis-hoarding from countries
where export is restricted. Secondary sources are price sensitive.
Demand for silver is based on three main factors: industrial and decorative uses, photography,
and jewelry and silverware. These three categories together have more than 95% of annual silver
consumption. In 2005, 409.3 million ounces of silver was consumed for industrial applications,
over 164.8 million ounces I the photographic sector, and 249.6 million ounces in the jewelry and
silverware markets.
Indian Scenario:
 Silver imports into India for the domestic consumption fell sharply by 25% to about 3400
tonnes in 2005, against the record year 2001 when over 4540 tonnes of silver was
imported.
 Indian industrial demand was estimated to about 1680 tonnes for the year 2005. India is
one of the largest users of silver in the world, ranking alongside industrial giants like
Japan and United States.
 GFMS data shows Indian jewelry and silverware fabrication was around 1520 tonnes in
2005.’
World markets:
 Silver is predominantly traded on the London Bullion Association (LBNA) and COMEX
in New York. LBNA is the global hub of over-the-counter (OTC) trading in silver and is
the main physical market. Comex is the futures and options exchange, where most fund
activity is focused.
 Silver is invariably quoted in US dollars per troy ounce.
Demand and supply:
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 After seeing a solid growth in 2005, total fabrication demand slightly dipped by around
3% in 2006.
 Industrial demand marginally increased year-on-year in 2006.
 Photographic demand continuously dipped due to impact of digital technology.
 Import of silver into collapsed in 2006 due to impact of high prices, stocks carried over
from 2005, and the government selling silver in local markets.
 Coins demand has increased in 2006.
 Investment demand has grown again.
Demand of silver in 2006:
Coins 5%
Investment 9%
Photography 16%
Jewellary& 24%
silverware
Industrial 46%
3} COPPER:
Copper is a metal that has the desirable physical properties of being malleable (it can be
hammered and molded into shapes) and ductile (it can be drawn into wire). As a result,
copper pipes are used to bring water to and from our buildings.
Copper is a good conductor of electricity; million of miles of copper wire crisscross the
landscape and run through our buildings.
Copper alloys (such as brass) are important components in many household products and
machines.
1.9 Demand and supply:
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Copper is not a rare metal; it is produced in many countries. Today, copper supply arises from
two sources; its majority (88%) comes from primary production-new copper that is mined from
the ground. But the most important is its secondary supply, which accounts for 12% of total
refined copper supply. The secondary supply comes from recycling of the copper scrap. Between
1900 and 2000, copper demand grew from02 million tonnes to around 13 million tonnes with an
accelerating growth since the 1950s. With many widespread uses, copper demand is growing.
Now with China, India, and many other developing countries starting to industrialize and
urbanize, copper demand is likely to grow extensively. The per capita demand for copper rises in
line with GDP. Japan consumers around 12 kg of copper per capita, north America around 10 kg
per capita, and Europe around 9 kg per capita. The large populations of China, India, Eastern
Europe, and South America are all consuming less than 2 kg per capita. This is a clear indicator
of the future copper demand.
Indian scenario:
Major producers of refined copper: Hindalco, stertile industries, and & Hindustan
copper.
Indian copper market: roughly 3% of the global market.
Indian production of refined copper: 650000 MT annually.
Indian demand for refined for refined copper: 450000 MT annually.
India is emerging as a net exporter of refined copper.
Over 90% of the concentrate requirement is imported.
There are numerous factors that can influence production-consumption of copper and so its
prices. In North America and South America, copper production is often affected by labor unrest;
in parts of Asia and Africa, the production can be affected by political unrest; additional
influences can be from weather, floods, and droughts either hitting the production process or the
transport of raw materials. New production also takes years to commission as the scale of mining
is large, it takes enormous financing and requires endless environmental permissions and needs
extensive infrastructure as well. All these factors make it hard for the market to balance the
supply and demand. Copper prices change constantly as the market attempts to balance the
supply and demand at any given time. Price fluctuations generate risk and opportunity to
different participants in the market, and the metal exchanges around the world provide the means
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for all those involved with the market to either hedge their risk or take risk as an investor or
speculator.
4} ZINC:
 Zinc is the fourth most widely used metal after steel, aluminium, and copper.
 Zinc also exists in many compounds.
 Due to its resistance to non-acidic atmosphere corrosion, zinc is instrumental in
extending the life of buildings, vehicles, ships, and steel goods, structures of every kind.
 Zinc is a bluish white lustrous metal. It is normally covered with a white coating on
exposure to the atmosphere.
 Zinc dust is flammable when exposed to heat and burns with a bluish green flame.
 Zinc plays a very significant role in normal human growth, but exposure to high levels of
zinc through inhalation,
 Ingestion and dermal contact can cause adverse health effects.
Galvanized steel is used extensively in construction, engineering, and auto industry to increase
the corrosion resistance of cars, trucks, and trailers.
The engineering industry also uses zinc pressure die casting to produce thousands of components
for cars, household items, and industry in general. These range from carburetors, casing, water
pumps, moldings, the side and back panels of washing machine, cooker, etc. Zinc sheet is used in
some countries for roofing, guttering, and general weather-proofing.
Demand:
The growth of Zinc demand in the western world is relatively quiet, and downturn in
construction and auto industries is likely to depress the western demand further. However, Asia,
and especially China, has seen a remarkable increase in Zinc demand. And with an increasing
infrastructure development in china, Zinc demand is likely to grow strongly for many years to
come.
Supply:
Zinc production stars with the mining of bulk ores, which often contain a mixture of lead
zinc, and silver. Zinc concentrates are electrolytically smelted to produce “high grade” and
“special high grade” zinc, with purities of 99.95%and 99.99% respectively. The latter-quality
zinc is the benchmark grade for LME contracts. Zinc is produced extensively in North America,
South America, Asia, Australia, and Europe.
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Indian Scenario:
The Indian zinc industry entered its transformation phase with the privatization of the largest
zinc producer, Hindustan Zinc Ltd. The domestic zinc industry is now completely under private
sectors and is in the midst of an extensive expansion program. The size of the Indian zinc market
is 4.5 lakh tones per annum. By 2020, India is expected to attain a complete self sufficiency in
meeting its zinc demand. Thereafter, the process of India becoming an important zinc supplier to
the world would be initiated, provided that another phase of capacity expansion is effected.
Hindustan Zinc Ltd. Is the largest zin producer in India with a capacity of 4 lakh tones per
annum. Binani Zinc is the other major player with a capacity of 38000 tonnes per annum. Over
the next five or six years, zinc demand is likely to grow at 12-15 percent
annually, against the global average of 5 %. Even if one assumes that the zinc demand grows by
10% till 2010 and at slower 7%, India would require zinc capacity of 14 lakh tpa by 2020 in
order to be self reliant. The next round of large capacity addition would, therefore, be warranted
from 2008 onward. Buoyancy in the domestic zinc demand primarily emanates from the boom in
the steel industry, given that over 70% of zinc is used for galvanizing.
Changes in inventory level at LME warehouses
Economic growth rate of major consuming countries
Global growth and demand in major consuming industries
Prices of the alternative metal(s)
Participation of funds
5} ALUMINIUM:
 Aluminium is the third most abundant element found in the earth’s crust. It exists in very
stable combinations with other materials particularly and oxides.
 Aluminium is lightweight and weights only one third as compared to copper; while its
density is only one third that of steel.
 It is resistant to common atmosphere gases and a wide range of liquids. Hence,
aluminium is known for its durability and high resale value.
 It has high reflectivity and therefore has more decorative uses.
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 Besides a good conductor of heat and electricity, aluminium also keeps its toughness
down to very low temperature without becoming brittle like carbon steels. So, it is easily
worked and molded.
Applications:
Aluminium is widely used in the construction, transportation, and packaging industries. Its
attributes are ideal for the construction business. The metal is strong, light, corrosion resistant,
and versatile. It is used in constructing windows, doors, cladding, weather-proofing, and in light
constructions such as conservatories and canopies. In the transportation industry, aluminium is
used in the auto, aerospace, railways, and marine industries. Its strength, light, and resistance to
corrosion are ideally suited for the construction of the shell and bodies as well as in working
parts, fixtures, fittings, and engine components. In air craft, aluminium and aluminium alloys
account for around 80% of unladen weight. In auto production, aluminium is gaining market
share from steel. In packaging industry, aluminium is used extensively for the protection,
storage, and preparation of food and drinks. It can also be easily recycled, which makes it an
environment-friendly packaging material. Aluminium is used in overhead and underground
power lines and power cables.
Demand and supply:
Aluminium is the largest base metal consumed annually. It benefits the rapid industrialization
and urbanization of developing countries like china and India. The aluminium demand is set to
accelerate sharply. The primary aluminium demand has risen from 2 million in 1950 to 9.5
million tones in 1970, and then 15 million tonnes in 1990, which is expected to rise to 35 million
tonnes in 2007.
There are three stages of production of primary aluminium. It starts with the mining of bauxite, a
reddish brown aluminous earth found in tropical latitudes in Australia, South America, India, the
Caribbean, and Africa. Bauxite is then refined to produce alumina, which is then smelted to
produce aluminium. To produce one tonne of primary aluminium, we need two tonnes of
alumina, which in turn takes about four tonnes of bauxite. The reduction of aluminium from its
oxide, alumina is very power-intensive, which is why the significant world primary aluminium
production is located near cheap energy sources, whether it be hydroelectric power in Canada or
oil and gas fields in middle east. It is important to understand the huge energy requirement to
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produce primary aluminium. The Hillside smelter in South Africa produces around 460000 tpy
of aluminium, but to do so it consumes about 5% of all electricity consumed in South Africa.
Global Scenario:
Aluminium ores (most commonly, bauxite) are in abundance and found mainly in tropical and
subtropical areas of Africa, West Indies, South America, and Australia. Some deposits are also
found in Europe. The leading aluminium producing countries include the United States of
America, Russia, Canada, the European Union, China, Australia, Brazil, Norway, South Africa,
Venezuela, the Gulf countries (Bahrain and the United Arab Emirates), India, and New Zealand.
These countries together represent more than 90% of the global primary aluminium production.
Indian Scenario:
India is the fifth largest producer of aluminium in the world. India produces approximately 3037
million tonnes of all categories of bauxite. At current levels of consumption, the existing reserves
will have an estimated life of over 350 years. India’s reserves are estimated to be 705% of the
global deposits, and the installed capacity is about 3% globally. In terms of demand and supply,
India is self sufficient and has a competitive export potential. India’s annual export of aluminium
is about 82000 tonnes. India’s annual consumption of aluminium is around 0.61 million tonnes
and is projected to increase to 0.78 million tonnes during 2007. The primary Indian aluminium
producers include NALCO, HINDALCO, and Vedanta Group. Aluminium prices in India are
fixed on the basis of the prices prevailing on LME.
Factors Influencing the Market:
The production of aluminium requires alumina and uninterrupted supply of electricity. However,
in recent years there have been a host of issues, which have affected aluminium supply; most
important of these is electricity. In 2001, energy shortages in US resulted in electricity prices
spiraling higher to the extent that it was more profitable for some aluminium smelters to stop
producing aluminium and to sell their electricity quotes to other users. So at peak energy usage
times, such as during the summer when air conditioning consumes huge amounts of energy,
aluminium smelters have to cut production to release electricity for other users.
The following are some other factors that can influence the aluminium market:
Changes in inventory stocks at LME, SHFE, COMEX, and TOCOM warehouses
World aluminium mine production through exploration of new mines and expansion of
existing mines
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Economic growth of major consuming nations such as China, Japan, Germany, etc.
Growth and demand in the construction, packaging, and transportation industry.
6} NICKEL:
o Nickel is the main alloying metal used in producing certain types of stainless steel.
o The strength and durability of products built with stainless steel is vastly superior to
similar products built with non stainless steel.
Applications:
Among base metals, nickel is the most volatile owing to its strong demand and light supply.
Nickel demand is derived based on the growth of different industrial sectors and thus exhibits
high volatility. Nickel’s primary use (65%) is in the manufacturing of stainless steel, 20% in
other steel and nonferrous alloys, 9% in electroplating, and about 6% used in coins and nickel
chemicals. Demand foe stainless steel took off in the mid-1980, especially in the chemical
engineering, paper and food processing industries, where stainless steel’s high melting point,
high resistance to corrosion and oxidation, and strength, made It invaluable as it could withstand
the heat, chemical, acid, and pressure that these industrial processes require. Stainless steel is
also used in construction and household items such as kitchen sinks, pots, pans, utensils, and
work surfaces. Nickel is also used to produce super-alloys which are used extensively in the
aerospace industries. Mobile phones, computers, digital cameras, etc., all need small,
lightweight, high-capacity power sources. Nickel cadmium and other nickel alloys have been
used to produce some of these batteries
Demand and supply:
Nickel, or more to the point stainless steel, Is a relatively new metal; its use has grown
significantly as Asia and China have built up their infrastructure. Growth in nickel demand is
expected to come primarily from further growth in stainless steel. In recent times, high nickel
prices resulted in rise in the number of stainless steel producers switching from producing high
nickel based stainless steel (austenitic stainless steels or 300 series) to low nickel based stainless
steel (200 series).World nickel market is characterized by rising demand and constrained supply.
More than 54% of the world’s total supply comes from only five companies. Global nickel
consumption is growing at a rate of 3.1% a year. Nickel occurs as oxides, sulphides, and
silicates. Nickel ores are mined in about 20 countries and smelters (or refined) in about 25
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countries. Primary nickel is produced and used in the form of Ferro-nickel, nickel oxides, and
other chemicals as more or less pure nickel metal. Nickel is also readily recycled in many of its
applications. A large amount of secondary or “scrap” nickel is used to supplement newly mined
metal. For a long time, about 1.4 MT nickel production has been in the hands of a few large
producers; the largest producer’s base is in Russia. The combination of a small producer base
and the lack of transparency show that the nickel supply has at times been volatile. A strike at a
producer can quickly tighten its supply. Likewise, unclear and secretive production and shipping
production and shipping schedules, combined with ever changing export and tax legislation in
Russia, can have a big impact on the market sentiment. Although nickel is concentrated in the
hands of a few producers, its geographical production base is quite evenly spread. About 29%
nickel is produced in the former eastern bloc, 21% in the Americas, 16% in Europe, 15% in
Australia, 14% in Asia, and 5% in Africa. The aggregate worldwide production is estimated to be
1.30 MT.
Indian Scenario:
Nickel market in India is totally dependent on import. India imports around 30000 tonnes of
nickel. With a growth in the stainless steel sector, the nickel import demand is expected to
increase in the coming years. Steel scrap has emerged as a good substitute for the primary metal.
Factors Influencing the Market:
Above ground supply from scrap
New mines discovery
Nickel demand is a derived demand thus is the situation in various industries
Growth in consumption of stainless steel.
7} LEAD:
Lead is a very corrosion-resistant, dense, ductile, and malleable blue-gray metal that has been
used for at least 5,000 years. Early uses of lead included building materials, pigments for glazing
ceramics, and pipes for transporting water. Today's major use of lead is in lead-acid storage
batteries. The electrical systems of vehicles, ships, and aircraft depend on such batteries for
startup, and, in some cases, batteries provide the actual motive power. It is also for
soundproofing in office buildings, schools, and hotels. It is widely used in hospitals to block X-
ray and gamma radiation and is employed to shield against nuclear radiation both in permanent
installations and when nuclear material is being transported. .
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Supply & Demand Scenario:

Domestic Scenario
 Lead production equalled approximately 82,000 tonnes in 2004, mostly from secondary
sources.
 The main constraint in lead production in the country is the lack of lead ore reserves,
which necessitates large-scale imports and recycling.
 Lead demand in India was estimated at 150,000 tonnes for 2004. Due to huge gap in
demand-supply, India imported nearly about 50% of its domestic demand.
 The major suppliers for the imports were China, the Republic of Korea and Australia:
54%, 15% and 10% respectively.
World Scenario:
o USA, Japan, China, EU and India are the major consumers of Lead
o Supply is controlled by Australia and China.
o Lead in the global market is traded as soft lead, animated lead, lead alloys and copper-
base scrap.
Factor influencing demand and supply:
o Changes in inventory level at LME warehouses
o Economic growth rate of major consuming countries
o Global growth and demand in major consuming industries
o Prices of the alternative metal(s)
o Participation of funds
B} ENERGY:
1} BRENT CRUDE OIL:
Brent crude oil is a light sweet crude oil from North Sea.
It has API (American Petroleum Institute) gravity between 38-39 and has higher sulphur
content than the other well-known benchmark, WTI crude oil.
Brent crude oil is a global benchmark for other grades and is widely used to determine crude
oil prices in Europe and in other parts of the world.
Page 22
Brent is typically refined in Northwest Europe, but a major portion is been exported to the
US Gulf and East Coasts, and also to parts of Mediterranean.
It is more expensive than the Organization of Petroleum Exporting Countries (OPEC) basket,
but lesser than West Texas Intermediate (WTI) because of higher sulphur content than the
WTI crude.
Crude Oil Units (average gravity)
1 US barrel = 42 US gallons.
1 US barrel = 158.98 litres.
1 tonne = 7.33 barrels.
1 short ton = 6.65 barrels.
Note: barrels per tonne vary from origin to origin.
Global Scenario
 Oil accounts for 40 per cent of the world's total energy demand.
 The world consumes about 76 million bbl/day of oil.
 United States (20 million bbl/d), followed by China (5.6 million bbl/d) and Japan (5.4
million bbl/d) are the top oil consuming countries.
 Balance recoverable reserve was estimated at about 142.7 billion tons (in 2002), of
which OPEC was 112 billion tons.
Indian Scenario:
 India ranks among the top 10 largest oil-consuming countries.
 Oil accounts for about 30 per cent of India's total energy consumption. The country's total
oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its
total oil consumption and it makes no exports.
 India faces a large supply deficit, as domestic oil production is unlikely to keep pace with
demand. India's rough production was only 0.8 million barrels per day.
 The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai
High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins.
 Balance recoverable reserve was about 733 million tons (in 2003) of which offshore was
394 million tones and on shore was 339 million tons.
 India had a total of 2.1 million barrels per day in refining capacity.
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 Government has permitted foreign participation in oil exploration, an activity restricted

earlier to state owned entities.
2} NATURAL GAS:
 Natural gas is a colorless, odorless, environment-friendly energy source, which is
cleanest of all the fuels that are traditionally being used in India.
 Natural gas is a highly flammable hydrocarbon gas chiefly consisting of methane (CH4).
It may also include other gases such as oxygen, hydrogen, nitrogen, ethane, ethylene,
propane, and even some helium.
 In India’s energy mix, natural gas is fastest growing energy source. Its consumption in
India is expected to grow by 10% during 2005-2010. This can be met by liquefied natural
gas (LNG) imports as well as domestic gas discoveries.
 Natural gas is used mainly in industrial, commercial, transportation, and domestic
sectors. The power and fertilizers sectors are the largest consumers of natural’s gas.
 Natural gas, converted into a liquid state by cooling it to -161’c, is termed as LNG. LNG
is more compact than natural gas and occupies 1/600th of its gaseous volume.
 Natural gas, when compressed at a pressure of 250 bars, is termed as compressed natural
gas (CNG).
Applications:
 Electricity generation by utilities: fuel for base power plants and cycle/cogeneration
power plants.
 Public and commercial: A natural gas is a clean fuel for use in household use of piped
natural gas (PNG) is expected to increase in future.
 Industrial: Natural gas s used as a fuel for all the utilities like boilers, furnaces, banking
ovens, air conditioning, etc.It is also used as a feedstock by fertilizer companies.
 Alternative motor fuel: Used in compressed (or CNG) form.
 Petrochemicals: A variety of chemical products (for example, methanol) can be derived
from natural gas.
Demand and supply:
Page 24
 Natural gas supply is expected to increase by 143% over the next five years, because
many gas discoveries are starting their production and various LNG projects are being
commissioned or expanded.
 Transactional gas being planned and pursued with great vigor by companies like GAIL,
Reliance, etc. This will result in a better flow of gas to the deficit regions in the country.
 As per India Hydrocarbon Vision 2025, the natural gas demand is expected to be 313
million standard cubic meter per day (MMSCMD) by 2011-2012.
 New sources of gaseous fuel, like coal bed methane, underground coal gasification, etc.,
will be opened up.
 The latent demand of gas is estimated to be twice its supply.
 OPEC output and supply.
 Geopolitics.
 Dollar fluctuations.
 US natural gas inventory data.
 Weather conditions.
3} CRUDE OILS:
 Crude oil is a mixture of hydrocarbons that exists in a liquid phase in natural
underground reservoirs. Oil and gas account for about 60 per cent of the total world's
primary energy consumption.
 Almost all industries including agriculture are dependent on oil in one way or other. Oil
& lubricants, transportation, petrochemicals, pesticides and insecticides, paints, perfumes,
etc. are largely and directly affected by the oil prices.
 Aviation gasoline, motor gasoline, naphtha, kerosene, jet fuel, distillate fuel oil, residual
fuel oil, liquefied petroleum gas, lubricants, paraffin wax, petroleum coke, asphalt and
other products are obtained from the processing of crude and other hydrocarbon
compounds.
 The prices of crude are highly volatile. High oil prices lead to inflation that in turn
increases input costs; reduces non-oil demand and lower investment in net oil importing
countries.
Crude Oil Units (average gravity)
Page 25
1 US barrel = 42 US gallons.
1 US barrel = 158.98 litres.
1 tonne = 7.33 barrels.
1 short ton = 6.65 barrels.
Note: barrels per tonne vary from origin to origin.
Global Scenario:
Oil accounts for 40 per cent of the world's total energy demand.
The world consumes about 76 million bbl/day of oil.
United States (20 million bbl/d), followed by China (5.6 million bbl/d) and Japan (5.4
million bbl/d) are the top oil consuming countries.
Balance recoverable reserve was estimated at about 142.7 billion tones (in 2002), of
which OPEC was 112 billion tones.
Indian Scenario:
 India ranks among the top 10 largest oil-consuming countries.
 Oil accounts for about 30 per cent of India's total energy consumption. The country's total
oil consumption is about 2.2 million barrels per day. India imports about 70 per cent of its
total oil consumption and it makes no exports.
 India faces a large supply deficit, as domestic oil production is unlikely to keep pace with
demand. India's rough production was only 0.8 million barrels per day.
 The oil reserves of the country (about 5.4 billion barrels) are located primarily in Mumbai
High, Upper Assam, Cambay, Krishna-Godavari and Cauvery basins.
 India had a total of 2.1 million barrels per day in refining capacity.
C} OIL & OILS SEEDS:

1} CASTOR OIL:
Castor oil is used as a raw material in the manufacture of a number of chemicals used in the
manufacture of surfactants, specialty soaps, surface coatings, cosmetics and personal care
products, pharmaceuticals, perfumes, plasticisers, greases and lubricants, and specialty rubber
etc.
Indian Scenario:
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 India is the world leader in castor seed and oil production and dominates the international
castor oil trade.
 The Indian variety of castor has 48 % oil content of which 42% can be extracted, while
the cake retains the rest.
 India's castor oil production fluctuates between 2.5-3.5 lakh tons a year. In 2003-04,
India's estimated castor oil production was 2.8 lakh tons.
 Gujarat accounts for 86% of India's castor seed production followed by Andhra Pradesh
and Rajasthan. Castor is mainly grown in Mehsana, Banaskantha and Saurashtra/Kutch
regions of Gujarat and Nalgonda and Mahboobnagar districts of Andhra Pradesh.
 Castor is a Kharif crop. The sowing season of castor is from July to October and the
harvesting season is from October to April.
 The annual domestic consumption of castor oil in India is only about 80,000-1,00,000
tons. Of this, the soap industry consumes about 25,000 tons, the paint and allied
industries 35,000 tons and the lubricant and derivatives industry 20,000 tons.
 India annually exports around 2.0 - 2.4 lakh tons of commercial castor oil. From India
castor oil is exported in two forms - First Special Grade and Castor Oil Commercial
through mainly Kandla port.
World Scenario:
India is the leading producer of castor oil in the world, followed by China and Brazil with 0.8
and 0.4 lakh tons respectively. The present annual world trade in castor oil is estimated at about
2.0 - 2.50 lakh tons. The major importers of castor oil in the world market are European Union,
US and Japan. The world demand for castor oil is estimated to be growing at the rate of about 3
to 5 % per annum. Both Brazil and China have experienced a steady increase in their domestic
castor oil consumption in the recent years and thus utilize almost their entire production. India
consumes only a quarter of its castor oil production and exports the rest.
Market Influencing Factors:
 Variations in castor seed domestic acreage based on yield and price realization.
 Crop development based on monsoon progress in key growing regions.
 Chinese and Brazilian crop size.
 Comparative price with other vegetable oils in the domestic market.
Page 27
 Upcountry demand of castor oil from the major cities, Export demand of castor oil from
US, Europe and Japan.
 The castor seed price tends to firm up during the planting period and eases down during
the harvesting period. Prices tend to show inter-seasonal variation of almost Rs 200 - Rs
350 per quintal.
 Castor seed growers and crushers hoard the commodity before selling in expectation of
better prices. Castor oil too can be kept in containers without spoilage for long period.
2} REFINED SOYA OILS:
 Soybeans on crushing and solvent extraction yield soy oil at 18% recovery and soymeal.
About 85% is crushed worldwide.
 Soybean and soyoil production of 170-185 and 25-31 million tons account for 55-58%
and 25-30% of global oilseed and oil production respectively.
 US, Brazil, Argentina, China, India are the major producers in order of production. In
US, India, China crop starts arriving from Aug-Sept, while it starts from Jan-Feb in S.
America.
 In the world 55-60, 8-10 and 42-45 million tons of beans, oil and meal are traded
annually.
 USA (20-30 million tons), Brazil (12-18 million tons), Argentina (5-10 million tons) are
the exporters of beans, while China (18-20 million tons) and EU (15-18 million tons) are
the major importers.
 Argentina (3-5 million tons) and Brazil (2-3 million tons) are the major exporters of oil.
China (1.5-2.5 million tons) and India (1-2 million tons) are the major importers of oil.
Indian Scenario:
 India produces 5-7 million tons of beans, 1 million ton of oil and 3-5 million tons of
soymeal in a normal year.
 With imports, the total oil availability in the country is around 2.5 million tons.
 Madhya Pradesh (3.5-4.5 million tons), Maharashtra, Rajasthan are the major producers
of soybean in India.
 The production is highly dependent on the monsoon and fluctuates between years.
 Soy is a Kharif crop, sown in June-July and harvested by September-October. Peak
arrivals are from October-November.
Page 28
Market Influencing Factors:

 Weather at all the producing centers, domestic and international. The pod bearing period,
being the most crucial.
 The area planted, determined by the price of soybean against that of competitive crops,
viz., maize, jowar, bajra.
 International price movement, the futures market at CBOT being the major international
reference market.
 Pests and diseases.
 The supply-demand and price scenario of competitive oils, viz., palmoil.
D} CEREALS:
MAIZE:
Maize (Corn), is of American origin, and after wheat and rice, it is the most important cereal
grain in the world.
It provides nutrition to both humans (33.3%) and animals (66.6 %).
Serves as basic raw material for the production of starch, oil and protein, alcoholic
beverages, food sweeteners and more recently fuel.
Special crops grown primarily for food include sweet corn and popcorn, although dent,
starchy or floury and flint maize are also widely used as food. Flint maize is also used as
feed. Immature ordinary corn on the cob either boiled or roasted is widely consumed.
Global Scenario:
World corn production in the year 2003 was 614.3 million tons while in year 2004 total
world corn production is expected to be 642.6 million tons.
Major producing countries are United States, China, EU-25, Brazil, Mexico, Argentina and
India. These countries accounts for around 80 % of total world corn production. Major
consuming nations of corn are China and USA.
Page 29
There has been continuous increase in the consumption demand of corn mainly owing to
increase in the demand from meat and starch sector. There is growing requirement of maize
from poultry sector, which uses corn as feed.
Major importing nations of maize are Japan, Korea, Taiwan, Mexico, Egypt, Malaysia, EU
and Colombia.
Indian Scenario:
 India's maize production fluctuates between 10-14 million tons, with 80-90% of the
production being in the kharif season.
 Major states that contribute in Maize productions are Karnataka, Andhra Pradesh, Bihar,
Punjab, Uttar Pradesh and Madhya Pradesh.
 Around 6.5 million tons (roughly 50 % of total consumption) goes for feed use,
primarily for poultry feed. Another 1 million tons of corn is used by the starch industry.
 India is traditionally a maize importer, and Govt. permits a fixed quantity (determined
each year) to be imported at 15%. Extra has to be imported at 50%.
Factors that Affects Rice/Wheat/Maize Prices:
Role of weather in crop production is immense.. Further, natural calamities like typhoon,
floods, droughts and earthquake can also affect crops.
Changes in the minimum support prices (MSP) by the government also have immense
impact on the prices of the commodity.
Breakthrough in the technology may increase the productivity and would lead to more
supply. This may bring some softness in the price.
Breakthrough in the technology may increase the productivity and would lead to more
supply. This may bring some softness in the price.
Page 30
CHAPTER II
Research Methodology
DESIGN OF THE SURVEY

For the purpose of the study 100 customers were picked up at random and their views solicited
on different parameters. The methodology adopted includes
Criteria question
Questionnaire
Random sample survey of customers
Discussions with the concerned
The criteria question was that whether the individual was already investing in either equity or
commodities market. Personal interviews and informal discussions were held with only the
positive respondents. Further applying simple statistical techniques, the collected data are
processed.
SAMPLING PLAN
Population: (infinite) Any investors located in West Bengal.
Sampling size: A sample of hundred was chosen for the purpose of the study. Sample consisted
of both small and large investors
Sampling Methods: Probability sampling requires complete knowledge about all sampling units
in the universe. Due to time constraint non-probability sampling was chosen for the study.
Sampling procedure: From large number of investors, sample lot was randomly picked up by
me.
Field Study: Directly approached respondents (businessmen, small shopkeepers,
physical commodities traders and service class people).
COLLECTION OF DATA THROUGH QUESTIONNAIRES

The data collected for the study purpose is through questionnaires. One hundred investors were
selected randomly for the study purpose and then the information revealed from the customers is
analyzed and interpreted in the study.
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LIMITATION OF STUDY
Since sample size is only 100, this is not a true representation of the population as a whole.
Level of accuracy of the results of research is restricted to the accuracy level with which the
customers have given their answers and the accuracy level of the answers cannot be predicted.
STATISTICAL TOOLS AND TECHNIQUES USED
The processing, categorization, tabulation, psychoanalysis and understanding of data are done
with the help of Frequency distribution Analysis and Pie diagram. The following statistical tools
and mathematical techniques have been applied on the data collected from the respondents.
Frequency distribution analysis; Frequency distribution analysis is applied to analyze the

descriptive study of Debit Cards and credit cards that is Plastic Money.
Pie Charts; A Pie chart (or a circle chart) is a circular statistical graphic, which illustrate
numerical proportion. In a pie chart, the arc length of each slice (and consequently its central
angle and area), is proportional to the quantity it represents. While it is named for its
resemblance to a pie which has been sliced, there are variations on the way it can be presented.
1. Bar Chart; A bar chart or bar graph is a chart that presents grouped

data with rectangular bars with lengths proportional to the values that they represent. The
bars can be plotted vertically or horizontally. A vertical bar chart is sometimes called a Line
graph. A bar graph is a chart that use either horizontal or vertical bars to show comparisons
among categories. One axis of the chart shows the specific categories being compared, and
the other axis represents a discrete value. Some bar graphs present bars clustered in groups
of more than one.
OBJECTIVES
1. To know the awareness of the Derivative Market.
2. To know which one is beneficial for the investor.
3. To find what proportion of the population are investing in such derivatives along with
their investment pattern and product preferences.
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CHAPTER III
3.1 Literature Review
A literature review surveys scholarly articles, books, dissertations, conference proceedings and
other resources which are relevant to a particular issue, area of research, or theory and provides
context for a dissertation by identifying past research. Research tells a story and the existing
literature helps us identify where we are in the story currently. It is up to those writing a
dissertation to continue that story with new research and new perspectives but they must first be
familiar with the story before they can move forward.
3.2 Purpose of a Literature Review
 Identifies gaps in current knowledge
 Helps you to avoid reinventing the wheel by discovering the research already conducted
on a topic
 Sets the background on what has been explored on a topic so far
 Increases your breadth of knowledge in your area of research
 Helps you identify seminal works in your area
 Allows you to provide the intellectual context for your work and position your research
with other, related research
 Provides you with opposing viewpoints
 Helps you to discover research methods which may be applicable to your work
Barua et al (1994) undertakes a comprehensive assessment of the private corporate

debt market, the public sector bond market, the govt. securities market, the housing
finance and other debt markets in India. This provides a diagnostic study of the state of
the Indian debt market, recommending necessary measures for the development of the
secondary market for debt. It highlights the need to integrate the regulated debt market
with the free debt market, the necessity for market making for financing and hedging
options and interest rate derivatives, and tax reforms.
Cho (1998) points out the reasons for which reforms were made in Indian capital
market stating the after reform developments. Shah (1999) describes the financial sector
reforms in India as an attempt at developing financial markets as an alternative vehicle
Page 33
determining the allocation of capital in the economy.
Shah and Thomas (2003) review the changes which took place on India’s equity and
debt markets in the decade of the 1990s. This has focused on the importance of crises
as a mechanism for obtaining reforms.
Mohan (2004) provides the rationale of financial sector reforms in India, policy
reforms in the financial sector, and the outcomes of the financial sector reform process
in some detail.
Shirai (2004) examines the impact of financial and capital market reforms on corporate
finance in India. India’s financial and capital market reforms since the early 1990s have
had a positive impact on both the banking sector and capital markets. Nevertheless, the
capital markets remain shallow, particularly when it comes to differentiating high-
quality firms from low-quality ones (and thus lowering capital costs for the former
compared with the latter). While some high-quality firms (e.g., large firms) have
substituted bond finance for bank loans, this has not occurred to any significant degree
for many other types of firms (e.g., old, export-oriented and commercial paper-issuing
ones). This reflects the fact that most bonds are privately placed, exempting issuers
from the stringent accounting and disclosure requirements necessary for public issues.
As a result, banks remain major financiers for both high- and low-quality firms. The
paper argues that India should build an infrastructure that will foster sound capital
markets and strengthen banks’ incentives for better risk management.
Chakrabarti and Mohanty (2005) discuss how capital market in India is evolved in
the reform period. Thomas (2005) explains the financial sector reforms in India with
stories of success as well as failure.
Bajpai (2006) concludes that the capital market in India has gone through various
stages of liberalization, bringing about fundamental and structural changes in the market
design and operation, resulting in broader investment choices, drastic reduction in
transaction costs, and efficiency, transparency and safety as also increased integration
with the global markets. The opening up of the economy for investment and trade, the
dismantling of administered interest and exchange rates regimes and setting up of sound
regulatory institutions have enabled time.
Page 34
Gurumurthy (2006) arrives at the conclusion that the achievements in the financial
sector indicate that the financial sector could become competitive without involving
unhealthy competition, within the constraints imposed by the macro- economic policy
stance.
Mohan (2007) reviews India’s approach to financial sector reforms that set in process
since early 1990s. Allen, Chakrabarti, and De (2007) concludes that with recent
growth rates among large countries second only to China’s, India has experienced
nothing short of an economic transformation since the liberalisation process began in
the early 1990s.
Chhaochharia (2008) arrives at the conclusion that India has a more modern financial
and banking system than China that allocates capital in a more efficient manner.
However, the study is skeptical about who would emerge with the stronger capital
market, as both the country is facing challenges regarding their capital markets.
Prasad and Rajan (2008) argues that the time has come to make a more concerted
push toward the next generation of financial reforms. The study advocates that a
growing and increasingly complex market-oriented economy and its greater integration
with global trade and finance will require deeper, more efficient, and well- regulated
financial markets. The survey and review of literature about the financial sector reforms
in India reveals that the reforms have been pursued vigorously and the results of the
reforms have brought about improved efficiency and transparency in the financial
sector. The reforms also brought into inter-linkage of financial markets across the globe
leading to new product development and sophisticated risk management tools.
Derivatives in general perform as an instrument to hedge the risk arising from
movement in prices not only in commodity markets but also in securities market.
Bose, Suchismita conducted research on (2006) found that Derivatives products

provide certain important economic benefits such as risk management or redistribution
of risk away from risk-averse investors towards those more willing and able to bear
risk. Derivatives also help price discovery, i.e. the process of determining the price
level for any asset based on supply and demand. These functions of derivatives help in
efficient capital allocation in the economy. At the same time their misuse also poses
Page 35
threat to the stability of the financial sector and the overall economy.
Routledge, Bryan and Zin, Stanley E of Carnegie Mellon University conducted

research on “Model Uncertainty and Liquidity” in year 2001. Extreme market
outcomes are often followed by a lack of liquidity and a lack of trade. This market
collapse seems particularly acute for markets where traders rely heavily on a specific
empirical model such as in derivative markets.
Sen Shankar Som and Ghosh Santanu Kumar (2006) studied the relationship
between stock market liquidity and volatility and risk. The paper also deals with time
series data by applying “Cochrane Orchutt two step procedures”. An effort has been
made to establish a relation between liquidity and volatility in their paper. It has been
found that there is a statistically significant negative relationship between risk and
stock market liquidity. Finally it is concluded that there is no significant relationship
between liquidity and trading activity in terms of turnover.
Shenbagraman (2004) reviewed the role of some non-price variables such as open
interests, trading volume and other factors, in the stock option market for determining
the price of underlying shares in cash market. The study covered stock option contracts
for four months from Nov. 2002 to Feb. 2003 consisting 77 trading days. The study
concluded that net open interest of stock option is one of the significant variables in
determining future spot price of underlying share. The results clearly indicated that
open interest based predictors are statistically more significant than volume based
predictors in Indian context.
All the existing studies found that the Equity return has a significant and positive
impact on the FII (Agarwal, 1997; Chakrabarti, 2001; and Trivedi & Nair, 2003).
But given the huge volume of investments, foreign investors could play a role of
market makers and book their profits i.e., they can buy financial assets when the prices
are declining thereby jacking-up the asset prices and sell when the asset prices are
increasing (Gordon & Gupta, 2003). Hence, there is a possibility of bi-directional
relationship between FII and the equity returns.
Masih AM, Masih R, (2007), had studied “Global Stock Futures: A Diagstinoc
Analysis of a Selected Emerging and Developed Markets with Special Reference to
Page 36
India”, by using tools correlation coefficients , granger’s causality test, augmented

Dicky Fuller test (ADF), Elliott, Rothenberg and Stock point optimal test. The
Authors, through this paper, have tried to find out what kind of relationship exists
between emerging and developed futures markets of selected countries.
Kumar, R. and Chandra, A. (2000), had studied that Individuals often invest in
securities based on approximate rule of thumb, not strictly in tune with market
conditions. Their emotions drive their trading behavior, which in turn drives asset
(stock) prices. Investors fall prey to their own mistakes and sometimes other’s
mistakes, referred to as herd behavior. Markets are efficient, increasingly proving a
theoretical concept as in practice they hardly move efficiently. The purely rational
approach is being subsumed by a broader approach based upon the trading sentiments
of investors. The present paper documents the role of emotional biases towards
investment (or disinvestment) decisions of individuals, which in turn force stock
prices to move.
Srivastava, S., Yadav, S. S., Jain, P. K. (2008), had conducted a survey of brokers in
the recently introduced derivatives markets in India to examine the brokers’ assessment
of market activity and their perception of benefits and costs of derivative trading.
The need for such a study was felt as previous studies relating to the impact of
derivatives securities on Indian Stock market do not cover the perception of market
participants who form an integral part of the functioning of derivatives markets. The
issues covered in the survey included: perception of brokers about the attractiveness of
different derivative securities for clients; profile of clients dealing in derivative
securities; popularity of a particular derivative security out of the total set; different
purposes for which the clients are using these securities in order of preference; issues
concerning derivatives trading; reasons for non usage of derivatives by some
investors. The investors are using derivative securities for different purposes after its
penetration into the Indian Capital market. They use these securities not only for risk
management and profit enhancement but also for speculation and arbitrage. High net
worth individuals and proprietary traders account for a large proportion of broker
turnover. Interestingly, some retail participation was also witnessed despite the fact
that these securities are beyond the reach of retail investors (because of complexity
Page 37
and high initial cost).
Naresh, G., (2006), studied the dynamic growth of the Derivatives market, particularly
Futures & Options and the perceived risks to the financial sector continue to stimulate
debate on the proper regulation of these instruments. Even though this market was
initially fuelled by various expert teams survey, regulatory framework,
recommendations byelaws and rules there is still a debate on the existing regulations
such as why is regulation needed? When and where regulation needed? What are
reasonable and attainable goals of these regulations? Therefore this article critically
examines the views of market participants on the existing regulatory issues in trading
Derivative securities in Indian capital market conditions. The emergence and growth of
the market for derivative instruments is because of the willingness of risk-averse
economic agents to guard themselves against uncertainties arising out of fluctuations in
asset prices. By providing investors and issuers with a wider array of tools for managing
risks and raising capital, derivatives improve the allocation of credit and the sharing of
risk in the global economy, lowering the cost of capital formation and stimulating
economic growth. Now that world markets for trade and finance have become more
integrated, derivatives have strengthened these important linkages between global
markets, increasing market liquidity and efficiency, and have facilitated the flow of
trade and finance. Following the growing instability in the financial markets, the
financial derivatives gained prominence after 1970. In recent years, the market for
financial derivatives has grown in terms of the variety of instruments available, as well
as their complexity and turnover. Financial derivatives have changed the world of
finance through the creation of innovative ways to comprehend, measure, and manage
risks. India started as a controlled economy and gradually moved towards a world
where prices fluctuate every day. Derivatives in this context will provide wide range of
benefits to the investors, as a risk management instruments. Thus allowing derivative
trading is required to attract more investments not only from domestic sources but also
from off shores. In this respect the liberalization process has resulted into
development of derivatives market in India.
Nonetheless, the history of the efficient market hypothesis had begun earlier.
Bachelier (1900) laid the theoretical groundwork for the efficient market
Page 38
hypothesis, which was postulated half a century later by Maurice Kendall. Kendall
(1953) found that stock prices evolved randomly and that his data offered no way to
predict future price movements. The explanation for this phenomenon, the efficient
market hypothesis, initially seemed counterintuitive to the academic community.
However, after the first shock had passed, scholars quickly embraced the theory and
began to document its validity in real-world markets by studying empirical data.
Granger et al., (1998), Covrig and Melvin (2001), Anderson et al., (2002) and Yan
and Zivot (2004) examined the price discovery efficiency of currency futures market in
various economies like Hong Kong, Indonesia, Japan, South Korea, Malaysia,
Philippines, Singapore, Thailand, Taiwan, USA respectively and found that futures
market is efficient for underlying currencies.
Chan (1992), Hasbrouck (1995), Jong and Donders (1998), Booth (1999),
Turkington and Walsh (1999), Menkveld (2003), Chuang (2003), Raju and Karande
(2003), Barclay and Hendershott (2004), Sharma and Gupta (2005), So and Tse (2005)
and Gupta and Singh (2006) evaluated the prices discovery efficiency of equity futures
in different countries namely USA, Netherlands, Germany, Australia, Taiwan, India,
Hong Kong respectively and observed significant evidence of efficient price discovery
through equity futures market.
Yang (2001) applied different econometric methods in order to find the optimal
variance ratio in the Australian Futures Market during the period 1 January 1988 to 12
December 2000. Specifically, he used the OLS Regression, the Bi-variate Vector
Autoregressive model (BVAR), the Error Correction model (ECM) and the
multivariate diagonal VEC GARCH model. It was generally found that GARCH time
varying hedge ratios provide the greater portfolio risk reduction but they do not
produce the greater profit return. So, it is obvious that is a matter of investor to decide
in which product to invest, the less risky or the more profitable.
Chuang (2003) examined the price discovery efficiency of TAISEX (Taiwan Stock
Exchange Capitalisation Weighted Index Futures) and MSCI (Morgan Stanley Capital
International Taiwan Index Futures) during 1998-99 and found strong statistical
evidence of market efficiency in its weak form.
Page 39
Hoque, Kim and Pyun, (2006) tested the market efficiency of eight different Asian
emerging markets (Hong Kong, Indonesia, Malaysia, Korea, Singapore, Philippines,
Taiwan and Thailand). They took weekly closing prices from April 1990 to February
2004. They used variance ratio test to find out whether these eight markets prove to be
mean reverting or not. The basic findings were that five markets (Indonesia, Malaysia,
Philippines, Singapore and Thailand), show specific mean- reverting and predictive
behavior of stock prices while two markets (Taiwan and Korea) show some mean-
reverting and unpredictable patterns in the time series.
Gupta and Singh (2006) also made an attempt to investigate the price discovery
efficiency of the Nifty futures by considering lengthy time frame and their results
showed the evidences that futures market has been an efficient price discovery
vehicle.
Floros and Vougas (2008) examine efficiency of the Greek stock index futures market
from 1999 to 2001. The results show that the Greek Futures markets are informationally
more efficient than underlying stock markets.
Zhang et al (2010) tests the random walk hypothesis and weak form market efficiency
in the VIX futures market using a variety of tests. A unit root in the aggregated market
price series suggests that the VIX futures market is efficient. For the individual VIX
futures price series, 51 of 54 futures contracts meet the sufficient condition for an
efficient market: the prices are found to follow a random walk either because there is a
unit root or because the increments are not correlated. Overall, the market for VIX
futures has been efficient since the first day of trading. Thus, it is observed that the
study of efficiency of the futures market is very important from the point of view of an
emerging market like India. But the literature is relatively thin in this direction.
On the other side, Edwards (1988a, b), Grossman (1988), and Bechetti and Roberts
(1990) find that S&P 500 index futures have an insignificant impact on cash market
volatility. Schwert (1990) maintains that the growth in stock index futures and options
trading has not caused increases in volatility. Similar conclusions are reached by
Becketti and Roberts (1990), Kamara, Miller and Siegel (1992), Pericli and Koutmos
(1997), Galloway and Miller (1997), and Darat, Rahman and Zhong (2002), who
Page 40
document that introduction of stock index futures has either decreased or not
significantly increased the volatility in spot markets, confirming the stabilization
theory.
Hodgson et al (1991) study the impact of All Ordinaries Share Index (AOI) futures on
the Associated Australian Stock Exchanges over the All Ordinaries Share Index. The
study spans for a period of six years from 1981 to 1987. Standard deviation of daily
and weekly returns is estimated to measure the change in volatilities of the underlying
index. The results indicate that the introduction of futures and options trading has not
affected the long-term volatility, which reinforces the findings of the previous U.S.
studies. However, there was a problem of confounding variables such as floating of
Australian dollar in late 1983, deregulation of stock exchanges, foreign bank ownership
and mutual fund investment rules during 1984.
Chan et al (1991) estimate the intraday relationship between returns and returns
volatility in the stock index and stock index futures. The study covers both S&P500
and Major Market Index futures. Results indicate a strong inter market dependence in
the volatility of the cash and futures returns. It is also shown that the intraday
volatility patterns that originate either in stock or futures market demonstrate
predictability in the other market.
3.3 GAP ANALYSIS:

A lot of research has been conducted by various researchers on the topic why Commodity Market
prefer to invest in stock market but hardly any research has been conducted in the area of
Ulhasnagar. Therefore, the following research has been conducted.
Page 41
CHAPTER IV
Finding & Analysis
Q1) Do you invest in market?
a) Yes
b) No
Invest in Market
40%
Yes
No
60%
Explanation:-
From The above pie graph,
 40% of Respondent Investing in Commodity Market.
 60% of Respondent not Investing in Commodity Market.
Page 42
Q2) According to you which is best price avenue for Investment?
a. Equity
b. Commodity
c. Mutual Fund
Investment Prefer
20%
Equity
Commodity
Mutual Fund
60% 20%
Explanation:-
 20% of Respondent Investing in Equity Market.
 20% of Respondent Investing in commodity.
 60% of Respondent Investing in Mutual Fund Market.
Page 43
Q3) In which sector do you invest?
a) Equity
b) Mutual fund
c) Commodity.
Investing in Sector
20%
40%
Equity
Mutual Fund
Commdity
40%
Explanation:-
 40% of Respondent Investing in Equity Market.
 40% of Respondent Investing in Mutual Fund.
 20% of Respondent Investing in Commodity
Page 44
Q4) How often do you trade?
a) Regularly
b) Not so Often
Doing Trade
20%
Daily
Monthly
80%
Explanation:-
 20% of Respondent trading in market regularly basis.
 80% of Respondent trading in market not so often Basis.
Page 45
Q5) If not investing in the Commodity Market, what is the reason?

a) Not aware of stock market
b) High Risk
c) Already faced a loss
Reason for Investing in Market

20%
Not awar of Stock Market

High Risk
Already faced aloss
20% 60%
Explanation:-
 60% of Respondent are not awar while Investing in Market.
 20% of Respondent are having High Risk while investing in Market.
 20% of Respondent are Already faced a loss in Market
Page 46
Q6) How people get information about stock market ?
a) News Paper
b) TV
c) Internet
Information about Market

20%
10%
News Paper
TV
Internet
70%
Explanation:-
 20% of Respondent getting information about market from Newspaper.
 70% of Respondent getting information about market form TV.
 10% of Respondent getting information about market from Internet
Page 47
Q7) If not investing in the Commodity Market, what is the reason?

a) Not aware of stock market
b) High Risk
c) Already faced a loss
Investing in Commodity Market
10% 20%
Not awar ofStock Market

High Risk
Already faced a loss
70%
Explanation:-
 20% of Respondent are not aware about commodity market while investing.
 70% of Respondent are aware of high risk in commodity market.
 10% of Respondent are already faced a loss
Page 48
Q8) what are the Factors behind choosing a Broking House?

A) Brand Name.
B) Broking Rate
C) Better research
Choosing Broking House

20%
40%
Brand
Broking Rate
Better Research
40%
Explanation:-
 20% of Respondent looking Brand while investing.
 40% of Respondent watching broking rate while investing.
 40% of Respondent taking better research while investing.
Page 49
Q9) among the commodities where do you invest?
Metals
a) Energy Product
b) Agro based commodity
Commodities do invest
10% 20%
Metals
Energy Products
Agro Based Commodity
70%
Explanation:-
 20% of Respondent Investing in Metals.
 70% of Respondent Investing in Energy Products.
 10% of Respondent Investing in Agro Based Commodity
Page 50
Q10) Are you satisfied with returns?
a) Yes
b) No
Satisfied with Returns
40% Yes
No
60%
Explanation:-
 60% of Respondent are satisfied with returns after investing in market.
 40% of Respondent are not satisfied with returns after investing in market.
Page 51
4.2 Suggestion
 Investment in the stock market mostly done by the business man.
 Investors are inclined towards the equity market and few are interested about
investing in the commodities market.
 The most popular source of information about the market among the investors is
television and newspaper followed by internet and business magazines.
 In commodity market maximum people are interested to invest in precious metal
(gold, silver etc.) and energy product (crude oil).
 The level of awareness among the investors about commodity market is low.
 Most of the investor prefer MCX than NCDEX .
 In commodity market at a time investment rate is much higher(most of the investors
invest in the range of Rs.1,00,000 to).
 Awareness level about Nirmal Bang Securities Pvt. Ltd. is low among the investor.
 The investors provided valuable suggestions about better service of a broking firm.
The most popular suggestions are:-
Page 52
4.3 RECOMMENDATIONS:
 Improve the brand awareness of Nirmal Bang by increasing advertisements and

promotional activities like performing campaigning programs. This will improve the
brand of Nirmal Bang which will help to attract more clients.
 Introduce some programs which will help to attract more of office going clients. Most of
the investors are businessmen, and very few of the office goers invest in these markets.
Thus there is still a huge number of client base in the corporate sector which can be
attracted towards these markets by educating them about these markets.
 The investors do not have much knowledge about the commodities market and the
various concepts like hedging and arbitration present in these markets. The first priority
should be to educate the investors about the market and the various techniques to invest
in these markets which will enable the investors to extract better return from these
markets.
 The investors mainly follow the television and the newspapers to update themselves
about the market. So it will be beneficial for Nirmal Bang if they come out with weekly
article in the leading newspapers regarding market research and present market condition.
 Providing the clients better guidance to diversify their portfolio to minimize the risk
involved.
 The service of the company can be improved keeping in mind the suggestions provided
by the investors.
 More franchisee‘s & branch‘s must be opened at key location‘s, so as to attract more
investors.
 Once in Every month, the client must be invited for feedback and suggestion‘s.
Page 53
Conclusion
This decade is termed as Decade of Commodities. Prices of all commodities are heading
northwards due to rapid increase in demand for commodities. Developing countries like China
are voraciously consuming the commodities. That’s why globally commodity market is bigger
than the stock market.
India is one of the top producers of large number of commodities and also has a long history of
trading in commodities and related derivatives. The Commodities Derivatives market has seen
ups and downs, but seems to have finally arrived now. The market has made enormous progress
in terms of Technology, transparency and trading activity. Interestingly, this has happened only
after the Government protection was removed from a number of Commodities, and market force
was allowed to play their role. This should act as a major lesson for policy makers in developing
countries, that pricing and price risk management should be left to the market forces rather than
trying to achieve these through administered price mechanisms. The management of price risk is
going to assume even greater importance in future with the promotion of free trade and removal
of trade barriers in the world.
As majority of Indian investors are not aware of organized commodity market; their perception
about is of risky to very risky investment. Many of them have wrong impression about
commodity market in their minds. It makes them specious towards commodity market.
Concerned authorities have to take initiative to make commodity trading process easy and
simple. Along with Government efforts NGO’s should come forward to educate the people about
commodity markets and to encourage them to invest in to it. There is no doubt that in near future
commodity market will become Hot spot for Indian farmers rather than spot market. And
producers, traders as well as consumers will be benefited from it. But for this to happen one has
to take initiative to standardize and popularize the Commodity Market.
Page 54
BIBLIOGRAPHY
 Trading Commodities and Financial Futures: A Step by Step guide to Mastering the
Market, 3rd Edition by George Kleinman
 Options, Futures and Other Derivatives by Johan C. Hull
 http://commodities.in
 http://finance.indiamart.com/markets/commodity/
 http://www.commoditiescontrol.com
 http://www.mcxindia.com
 http://www.ncdex.com
 MCX Certified Commodity Professional Reference Material
 Business World (15th September 2003)
 Business World (4th December 2006)
 http://investmentz.co.in
 http://trade.indiainfoline.com
 http://www.finance.indiamart.com
Page 55
ANNEXURE
Q1) Do you invest in market?
a) Yes
b) No
Q2) What type of investment do you prefer?
a. Equity
b. Commodity
c. Mutual Fund
Q3) According to you which is Best Avenue for investment?

a) Equity
b) Mutual fund
c) Commodity.
Q4) How often do you trade?

a) Regularly
b) Not so often
Q5) In which broking firm you have opened you Demat Account?
a) India Infoline
b) India Bulls
c) Share Khan
d) Motilal Oswal
Q6) How people get information about stock market ?
a) News Paper
b) TV
c) Internet
Page 56
Q7 If not investing in the Commodity Market, what is the reason?

d) Not aware of stock market
e) High Risk
f) Already faced a loss
Q8) What are the Factors behind choosing a Broking House?
A) Brand Name.
B) Broking Rate
C) Better research
Q9 ) Among the commodities where do you invest?
a) Metals
b) Energy Product
c) Agro based commodity
Q10 ) Are you satisfied with the return?
a) Yes
b) No
Page 57

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Project on Commodity Market

1.2 Commodity Markets - To or Not to Invest?

1.3 Investing in Commodities

Helps to Fix Price Easily

1.4 Why do retail investors lose in commodity markets?

1.5 Why Invest in Commodities? Diversification and Inflation

Don’t you think stock market is simpler than commodity market?

1.6 Commodity Investment Strategies

1.7 Why Trade In Commodities?

1.8 Different types of commodities

Demand and supply:

2005 2006 Change%

Net producer -14 62 -

Official sector sales 85 59 -31

Old gold scrap 211 192 -9

Total supply 940 824 -12

Jewelry 659 664 1

Industrial & dental 108 114 5

Sub total of above 768 778 1

Bar & coin retail 93 100 7

Total demand 890 889 0

Factors influencing the market:

1.9 Demand and supply:

Supply & Demand Scenario:

 Government has permitted foreign participation in oil exploration, an activity restricted

C} OIL & OILS SEEDS:

Market Influencing Factors:

DESIGN OF THE SURVEY

COLLECTION OF DATA THROUGH QUESTIONNAIRES

Frequency distribution analysis; Frequency distribution analysis is applied to analyze the

1. Bar Chart; A bar chart or bar graph is a chart that presents grouped

3.1 Literature Review

Barua et al (1994) undertakes a comprehensive assessment of the private corporate

determining the allocation of capital in the economy.

Bose, Suchismita conducted research on (2006) found that Derivatives products

Routledge, Bryan and Zin, Stanley E of Carnegie Mellon University conducted

India”, by using tools correlation coefficients , granger’s causality test, augmented

and high initial cost).

3.3 GAP ANALYSIS:

Q1) Do you invest in market?

Q2) According to you which is best price avenue for Investment?

Q3) In which sector do you invest?

 20% of Respondent Investing in Commodity

Q4) How often do you trade?

Q5) If not investing in the Commodity Market, what is the reason?

Reason for Investing in Market

Not awar of Stock Market

 20% of Respondent are Already faced a loss in Market

Q6) How people get information about stock market ?

Information about Market

Q7) If not investing in the Commodity Market, what is the reason?

Investing in Commodity Market

Not awar ofStock Market

Q8) what are the Factors behind choosing a Broking House?

Choosing Broking House

 40% of Respondent taking better research while investing.

Q9) among the commodities where do you invest?

Q10) Are you satisfied with returns?

Satisfied with Returns

 Improve the brand awareness of Nirmal Bang by increasing advertisements and

 Options, Futures and Other Derivatives by Johan C. Hull

 MCX Certified Commodity Professional Reference Material

 Business World (15th September 2003)

 Business World (4th December 2006)