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A project report on a Brokerage company Sharekhan Ltd.
Being submitted in partial fulfillment of the
BACHELOR OF MANAGEMENT STUDIES (2008-2011)
Submitted to:Ms. Priyanka mam
Submitted by:Ravi Suthar
Chapter No 1 2 3 4 5 6 7 8 Topic Introduction Company profile Mission and vision Objective SWOT analysis Competitors Product and service Introduction to Commodity Market 9 History of Commodity Market in India 10 Commodity exchanges in India Page No.
NCDEX MCX NMCX
Analysis International Commodity Exchanges Quantitative Analysis How Commodity market works?
How to invest in a Commodity Market? Current Scenario in Indian Commodity Market
17 18 19 20
regulations and laws. analysts. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. The functions performed by a financial system are: THE SAVINGS FUNCTION: LIQUIDITY FUNCTION: PAYMENT FUNCTION: RISK FUNCTION: POLICY FUNCTION: COMPANY PROFILE SHAREKHAN LIMITED 4 . markets. The phenomenon of imbalance in the distribution of capital or funds existed in every economic system. There are areas or people with surplus funds and there are those with a deficit. A financial system is a composition of various institutions. practices.FINANCIAL SYSTEM The financial is one of the most important inventions of the modern society. transactions and claims and liabilities. money managers.
Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. customer commitment and superior technology. depository.500 companies for in-depth information. continues to remain the largest shareholder.was also launched on Feb 8. Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services 5 . SSKI which is established in 1930 is the parent company of Sharekhan ltd. etc.com.Sharekhan. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE. One can surf across 5. details about more than 1. telephone and retail outlets.www. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. the SSKI group ventured into institutional broking and corporate finance over a decade ago. Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family. investor friendly language and high quality research. With their research expertise.). With a legacy of more than 80 years in the stock markets. Known for its jargon-free. Commodities. Share khan has one of the best states of art web portal providing fundamental and statistical information across equity. derivatives. The Company's online trading and investment site . NSE. One can also access other market related details such as board meetings. the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. The company provides equity based products (research. Depository services. Investment advice. Sharekhan Ltd. margin funding. buying/selling by mutual funds and much more. and Derivatives. FII transactions. This site gives access to superior content and transaction facility to retail customers across the country. 2000. They provide trade execution services through multiple channels . It is first brokerage Company to go online. It is the retail broking arm of the Mumbaibased SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. etc.sharekhan. they provide investors with end-to-end solutions in investments. mutual funds and IPOs.an Internet platform. result announcements. It has one of the largest networks in the country with 704 share shops in 280 cities and India’s premier online trading portal www. online trading. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote.com . equities. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI.500 mutual fund schemes and IPO data.
an Indian financial services power house. with strong presence in Retail equities Institutional equities Investment banking. Derivatives. SSKI. Share khan Services: Share khan is one of India's leading financial services company.products in India through investments in research. Mutual 6 . If we experience their language. Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group. Commodities. The team has completed over US$5 billion worth of deals in the last 5 years making it among the most significant players raising equity in the Indian market. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse. The common thread of empowerment is what Sharekhan's all about! "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora. IPO. Director . it is something that is spoken with years of focused learning and experience in the’ stock markets. we'll find a common thread. a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. It provides a complete life cycle of investment solution in Equities." SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. presentation style. pan-Indian branch network and an outstanding technology platform. Sharekhan's expertise lies in stocks and that's what he talks about with authority. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. one that helps us make informed decisions and simplifies investing in stocks. Further. We look forward to providing strategic counsel to Sharekhan's management as they continue their expansion for the benefit of all shareholders. content or for that matter the online trading facility. Sharekhan does not claim expertise in too many things.Sharekhan Limited. Sharekhan is also about focus.
Share khan also offer personalized wealth management services for High Net worth individuals. Depository services. Portfolio Management Services and Insurance. it reaches out to more than 800. 7 .Funds. and an online presence through Sharekhan. With a physical presence in over 300 cities of India through more than 800 "Share Shops". efficiency and integrity.com. India's premier online destination. Mission & Vision Mission: To create long term value by empowering individual investors through superior financial services supported by culture based on highest level of teamwork.000 trading customers.
To know various reasons for market fluctuations. To learn to manage time.guided by values driven approach to growth. To have a practical experience of working in a reputed organization. To learn the online terminal used for trading. To know how to handle various types of customers. SWOT ANALYSIS OF SHAREKHAN 8 . OBJECTIVES: • To project Sharekhan as an authority in the retail stock trading business.Vision: To provide the most useful and ethical Investment Solutions . To know how to open and close the calls. • • • • • • • • • To study the various products of the company. To know the various policies of the company. To gain practical knowledge of the market. client service and employee development. • To execute business for the company by selling demat accounts and mutual funds.
• • • Recommendations from clients. • • Volatility of the share market.STRENGTHS WEAKNESSES • • • • • • year) First brokerage firm to go online. Competitors. Clients (average of 15. Competitors: 9 . Products PMS Services. Low annual maintenance charge OPPORTUNITIES THREATS • Huge market. Research reports. Free Demat a/c opening.000 accounts per • High brokerage charges but now they have overcome this by a new prepaid scheme in which brokerage is reduced to half. Technology Online fund transfer.
RELIANCE MONEY 6. INDIA BULLS 5. Mutual Funds and IPO’s also. Our clients have the opportunity to get personalized services depending on their investment profiles. We work with clients to meet their overall investment objectives and achieve their financial goals. The main competitors of Share khan are: 1.Share khan is one of the major player in on line Trading. as we understand the need of transactions to be executed with high speed and reduced time. General Insurance. MOTILAL OSWAL 8. Key product offerings are as follows:- 10 . Angel Trade 11. At the same time. Religare Enterprises 2. HDFC 10. ICICI DIRECT 4. Kotak Securities 7. Our personalized approach enables clients to achieve their Total Investment Objectives. Standard Chartered Product & services:Share khan customers have the advantage of trading in all the market segments together in the same window. they have the advantage of having all Advisory Services for Life Insurance. 5 Paisa 9. India Info line 3. Sharekhan is a customer focused financial services organization providing a range of investment solutions to our customers.
Back Office 8. Insurance 5. Commodity 3. Fixed Income 6. Distribution (a). Online services (b).Equity 2. Mutual Fund (d). Depository 4.1. Properties Introduction to Commodity Market 11 . IPO (c). NRI Services 7.
Mutual Funds and IPO’s also. but which is supplied without qualitative differentiation across a market.meant variously "appropriate". they have the advantage of having all Advisory Services for Life Insurance. At the same time. General Insurance.What is “Commodity”? The word commodity came into use in English in the 15th century. Going further back. to benefit or profit. We work with clients to meet their overall investment objectives and achieve their financial goals. such as petroleum. sugar. crude oil.". In other words. It is a product that is the same no matter who produces it. notebook paper. One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Generally. copper is copper. the French word derived from the Latin commoditize Stereos. Sharekhan customers have the advantage of trading in all the market segments together in the same window. adaptation. Our clients have the opportunity to get personalized services depending on their investment profiles. these are basic resources and agricultural products such as iron ore. Well-established physical commodities have actively traded spot and derivative markets. "proper measure. it came from the French. and fluctuates daily based on global supply and demand. or milk. have many levels of quality. to benefit or profit. "commodité". The Latin root commod.. on the other hand. salt. ethanol. the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness. Going further back. time or condition" and advantage. coal. Sharekhan is a customer focused financial services organization providing a range of investment solutions to our customers. A commodity is something for which there is demand. Key product offerings are as follows The word commodity came into use in English in the 15th century. 12 . as we understand the need of transactions to be executed with high speed and reduced time. The price of copper is universal. Our personalized approach enables clients to achieve their Total Investment Objectives. "commodities". it came from the French. or benefit.
soybeans. One focus of this article is the relationship between simple commodity money and the more complex instruments offered in the commodity markets. were widely traded using standard instruments in the 19th century in the United States. goods that formerly carried premium margins for market participants have become commodities. nor investment. aluminum. gold and silver. As such. metals. While wheat and corn. bond markets and currency markets cover those concerns separately and in more depth. electricity) markets but not the ways that services.coffee beans. cattle and pigs. These raw commodities are traded on regulated commodities exchanges. such as generic pharmaceuticals and silicon chips COMMODITY MARKET:Commodity markets are markets where raw or primary products are exchanged. nor debt. often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. can be seen as a commodity. For a commodity market to be established. rice. It covers physical product (food. Articles on reinsurance markets. Commoditization occurs as a goods or services market loses differentiation across its supply base. Through the 19th century "the exchanges became effective 13 . History of Evolution of Commodity Markets:The modern commodity markets have their roots in the trading of agricultural products. wheat. This article focuses on the history and current debates regarding global commodity markets. including those of governments. in which they are bought and sold in standardized contracts. there must be very broad consensus on the variations in the product that make it acceptable for one purpose or another. other basic foodstuffs such as soybeans were only added quite recently in most markets. stock markets. The economic impact of the development of commodity markets is hard to overestimate.
In this way producer was aware of what price he would fetch for his produce and dealer would know about his cost involved. improvements in transportation. These were known as “rice tickets”. Latter on by making some modifications these contracts transformed in to an instrument to protect involved parties against adverse factors such as unexpected price movements and unfavorable climatic factors. in 1848. This kind of agreement proved beneficial to both of them. Latter on rules came in to being. But one can trace its roots in Japan. and innovators of. he could sell his contract to someone who needs the same. to standardize the trading in rice tickets. in advance. warehousing.spokesmen for. The concept of organized trading in commodities evolved in Chicago. In Japan merchants used to store Rice in warehouses for future use. which had no intentions 14 . absence of uniform weighing & grading mechanisms producers often confined to the mercy of dealers discretion. These situations lead to need of establishing a common meeting place for farmers and dealers to transact in spot grain to deliver wheat and receive cash in return. Eventually." Early history of commodity markets Commodities future trading was evolved from need of assured continuous supply of seasonal agricultural crops. and financing. This promoted traders entry in futures market. To raise cash warehouse holders sold receipts against the stored rice. The price of such contract would dependent on the price movements in the wheat market. In 19th century Chicago in United States had emerged as a major commercial hub. Whereby the producer would agree to sell his produce to the buyer at a future delivery date at an agreed upon price. So that wheat producers from Mid-west attracted here to sell their produce to dealers & distributors. Gradually sellers & buyers started making commitments to exchange the produce for cash in future and thus contract for “futures trading” evolved. As if dealer is not interested in taking delivery of the produce. Due to lack of organized storage facilities. these rice tickets become accepted as a kind of commercial currency. Similarly producer who not intended to deliver his produce to dealer could pass on the same responsibility to someone else. which paved the way to expanded interstate and international trade.
The commodities markets have seen an upturn in the volume of trading in recent years. That’s why Chicago Board of Trade (CBOT) was established in 1848. The Chicago Mercantile Exchange. India. the National Raw Silk Exchange. the Commodity Exchange. the New York Mercantile Exchange.The notional value outstanding of banks’ OTC commodities’ derivatives contracts increased 27% 15 . sugar and cocoa Exchange. and transfer of agricultural products. In the five years up to 2007.to buy or sell wheat but would purely speculate on price movements in market to earn profit. the New York Commodity Exchange and New York Coffee. In 1872. the Rubber Exchange of New York. pricing. Size of the market The trading of commodities consists of direct physical trading and derivatives trading. In 1933. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. any commodity can be traded. Australia and New Zealand. England. This created a platform for establishment of a body to regulate and supervise these contracts. was established in New York through the merger of four small exchanges – the National Metal Exchange. and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade. Japan. Worldwide there are major futures trading exchanges in over twenty countries including Canada. a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage. Inc. Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers. during the Great Depression. France. In 1870 and 1880s the New York Coffee. Singapore. the value of global physical exports of commodities increased by 17% while the notional value outstanding of commodity OTC derivatives increased more than 500% and commodity derivative trading on exchanges more than 200%.
Global physical and derivative trading of commodities on exchanges increased more than a third in 2007 to reach 1. energy 29% and industrial metals by 30%. Over 40% of commodities trading on exchanges was conducted on US exchanges and a quarter in China. precious metals accounted for 8% of OTC commodities derivatives trading in 2007. down from their 55% share a decade earlier as trading in energy derivatives rose. or with a minimum lag between the trade and delivery due to technical constraints. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers.0 trillion. farmers are expected to face a sharp drop in crop prices. with higher volume in New York being partially offset by declining volume in Tokyo. Returns It is generally agreed that commodities have an expected return of 5% in real terms which is based on the risk premium for 116 different commodities weighted equally since 1888 (Source Report 219171-Wharton Business School).for everything from coal to corn – was fueled by heated demand from the likes of China and India. such as steel. Other commodities. Agricultural contracts trading grew by 32% in 2007. As a result. are also expected to tumble due to lower demand.684 million contracts. Precious metals trading grew by 3%. Investment professionals often too mistakenly claim there is no risk premium in commodites. after years of record revenue.in 2007 to $9. plus unbridled speculation in forward markets. That bubble popped in the closing months of 2008 across the board. Overall. OTC trading accounts for the majority of trading in gold and silver. Spot trading normally involves visual inspection of the commodity or a sample 16 . Recent Trends in Commodities The 2008 global boom in commodity prices . Spot trading Spot trading is any transaction where delivery either takes place immediately.
of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.
A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.
Futures contracts:A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility.
Benefits of Commodity Futures Markets:The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly.
Price Discovery:- Based on inputs regarding specific market
information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal.
Price Risk Management: - Hedging is the most common method
of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc.
Import- Export competitiveness: - The exporters can hedge
their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to
buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions.
Predictable Pricing: - The demand for certain commodities is
highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments.
Benefits for farmers/Agriculturalists: - Price instability has a
direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions.
Credit accessibility: - The absence of proper risk management
tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance
The act 20 . Under the act only those associations/exchanges. This posses a huge obstacle in the smooth functioning and competition of commodities market. Improved product quality: . derivatives trading started in oilseed in Bombay (1900). including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade. However many feared that derivatives fuelled unnecessary speculation and were detrimental to the healthy functioning of the market for the underlying commodities. It ensures uniform standardization of commodity trade. 7. 1952. the interest rate is likely to be high and terms and conditions very stringent.among banks to fund commodity traders.The existence of warehouses for facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. which regulated contracts in Commodities all over the India. which are granted reorganization from the Government. The act prohibited options trading in Goods along with cash settlement of forward trades. Over the time datives market developed in several commodities in India. Following Cotton. which is possible through futures markets. If in case they do. especially those who do not manage price risks. would cut down the discount rate in commodity lending. resulting in to banning of commodity options trading and cash settlement of commodities futures after independence in 1952. History of Commodity Market in India The history of organized commodity derivatives in India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875. Hedging. The parliament passed the Forward Contracts (Regulation) Act. raw jute and jute goods in Calcutta (1912). rendering a crushing blow to the commodity derivatives market. about a decade after they started in Chicago. are allowed to organize forward trading in regulated commodities. Wheat in Hapur (1913) and Bullion in Bombay (1920).
where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. number of commodities allowed for derivatives trading as well as the value of futures 21 . commodity exchanges are purely speculative in nature. and even the retail investors. in a complete change in a policy. By Exchange rules and by law. started actively encouraging commodity market. The Government accepted most of these recommendations and futures’ trading was permitted in all recommended commodities. (iii) The Central Government. at a grassroots level. the Government set up a committee (1993) to examine the role of futures trading. Before discovering the price. Earlier only the buyer of produce and its seller in the market judged upon the prices. (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Government.envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis. Kabra) recommended allowing futures trading in 17 commodity groups. The Committee (headed by Prof. That keeps the market as efficient as possible. It brings a price transparency and risk management in the vital market. they reach to the producers. Ministry of Consumer Affairs.N. in an organized way. Others never had a say. the commodities future market in India has experienced an unexpected boom in terms of modern exchanges. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government. Today. Commodity exchange in India plays an important role where the prices of any commodity are not fixed. Food and Public Distributionis the ultimate regulatory authority. A big difference between a typical auction.Department of Consumer Affairs. After Liberalization and Globalization in 1990. It also recommended strengthening Forward Markets Commission. Since 2002. particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. and no one can offer to sell higher than someone else’s lower offer. end-users. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. K. and certain amendments to Forward Contracts (Regulation) Act 1952. no one can bid under a higher bid.
Commission consists of minimum two and maximum four members appointed by Central Govt. which comes under the Ministry of Consumer Affairs Food and Public Distribution Forward Markets Commission (FMC):It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act. The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX) Mumbai. 1952 and the Rules framed there under. Legal framework for regulating commodity futures in India:The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.existent. except some negligible activities on OTC basis. After a gap of almost three decades. There are other regional commodity exchanges situated in different parts of India. The regulator for the commodities trading is the Forward Markets Commission. situated at Mumbai. of which there are three national level multi-commodity exchanges. Out of these members there is one nominated chairman. 22 .trading in commodities. In India there are 25 recognized future exchanges. 1952. Government of India has allowed forward transactions in commodities through Online Commodity Exchanges. a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commodity datives market was virtually non. Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad.
The East India Cotton Association. The Bombay Commodity Exchange Ltd. Ahmedabad Commodity Exchange 8. Bhatinda Om & Oil Exchange Ltd. Kanpur 5.. 7.Commodity exchanges in India What is a commodity exchange? A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority. The Meerut Agro Commodities Exchange Co. The Rajkot Seeds oil & Bullion Merchants` Association Ltd 4. Vijay Beopar Chamber Ltd. National Board of Trade. The Spices and Oilseeds Exchange Ltd.. Indore 12. Ltd. The Kanpur Commodity Exchange Ltd.. Rajdhani Oils and Oilseeds Exchange Ltd. Meerut 6.. Batinda. India Pepper & Spice Trade Association.. Delhi 11. Mumbai 3. List of Exchanges in India:- 1. Hapur 13. Kochi 10. Muzaffarnagar 9. 2. Mumbai 23 . The Chamber Of Commerce..
The Central India Commercial Exchange Ltd. Surendranagar Cotton oil & Oilseeds Association Ltd 22. The Coffee Futures Exchange India Ltd. Hissar 25. NCDEX and NMCEIL are the major Commodity Exchanges.. Kochi 17. Multi Commodity Exchange of India Ltd 23. 16. Bikaner 18.. Gwalior 15. National Multi Commodity Exchange of India Limited 21. Esugarindia Limited 20. Bikaner Commodity Exchange Ltd. Bangalore 19.14. The East India Jute & Hessian Exchange Ltd. National Commodity & Derivatives Exchange Ltd 24.. e-Commodities Ltd Of these 25 commodities exchanges the MCX. Haryana Commodities Ltd. First Commodity Exchange of India Ltd. 24 .
NCDEX currently facilitates trading of 57 commodities. NCDEX is regulated by Forward Markets Commission (FMC). Punjab National Bank (PNB). Contracts Act. professionalism and transparency.NCDEX (National Commodities & Derivatives Exchange Limited) National Commodities & Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank). Credit Ratting Information Service of India Limited (CRISIL). Forward Contracts Regulation Act and various other legislations. 25 . Stamp Act. NCDEX is a national level technology driven on line Commodity Exchange with an independent Board of Directors and professionals not having any vested interest in Commodity Markets. NCDEX is also subjected to the various laws of land like the Companies Act. NCDEX is a public limited company incorporated on 23 April 2003. Life Insurance Corporation of India (LIC). Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices. Indian Farmers Fertilizer Cooperative Limited (IFFCO).
Yellow peas.Commodities Traded:Commodities Traded at NCDEX:• Bullion:Gold KG. Chana. Groundnut expeller Oil. Mustard seeds. Oil cake. Mustard seeds. Masoor. Oil cake. Turmeric. Mentha oil. Aluminum Ingot. Groundnut expeller Oil. Rape seeds. RBD Pamolein seed oil cake. Groundnut (in shell). Tur. Zinc Metal Ingot. Meal • Pulses:Urad. Yellow Electrolytic Copper Cathode. Barley. Pepper 26 . Aluminum Ingot. Mentha oil. Mild steel Ingots • Oil and Oil seeds:Cotton seed. Brent • Minerals:Electrolytic Copper Cathode. Cathode. Silver. Crude Palm Oil. Indian parboiled Rice (IR36/IR-64). Nickel Cathode. Refined soya oil. Indian Pusa Basmati Rice. Crude Palm Oil. Rape seeds. Indian raw Rice (ParmalPR-106). Refined soya oil. Groundnut (in shell). • Grain:\Wheat. Caster seed. Zinc Metal Ingot. Cotton. Yellow red maize • Spices:Jeera. Yellow .soybean. Caster seed. RBD Pamolein seed oil cake. Mild steel Ingots Cotton seed. Cotton.
Mulberry. Chipotles are dry. dried ground chili peppers. . V-797 Kapas. Potato. . Indian cooking has multiple uses for chilis. Indian 31mm cotton. but with small amounts of cayenne added for heat. Medium Staple.• Plantation:Cashew. Guar seeds. Lemon. cumin. Raw Jute. In the United States. Green Cottons. from simple snacks like bhaji where the chilis are dipped in batter and fried. Chilis are dried. It is called "mirapa" (మరప)in telugu. "odanam" rice in Sanskrit) or Thayir sadam (curd rice) or Daal Rice (rice with lentils). Guar. Furnace oil (NCDEX currently facilitates trading of 57 commodities) Agro-based major commodities:– Chilli:Chili is sold worldwide fresh. garlic and oregano is often known as chili powder. Sugar. Jute sacking bags. Chilli LCA334 • Energy:Crude Oil. dried and powdered. Indian 28 mm cotton. The soaked and dried chillies are a seasoning ingredient in recipes such as kootu. it is often made from the Mexican chile ancho variety. roasted and salted as a side dish for rice varieties such as dadhyodanam ("dadhi" curd. 27 . Grain Bold. In the Southwest United States. Coffee Robusta • Fibers and other:Guar Gum. to wonderfully complex curries. Mulberry raw Silk. Coffee Arabica. smoked red (ripe) jalapeños.
which forces its way underground to mature. Ethiopia. no terminal leaflet). and Iran. astringent. Afghanistan. the fruit develops into a legume 3 to 7 cm (1 to 2 in) long. which has lighter coloured. larger seeds and a smoother coat. China and the Americas.5 ft) tall. North Africa. pinnate with four leaflets (two opposite pairs. especially India. It is a widely used spice in India.  It is an annual herbaceous plant growing to 30 to 50 cm (1 to 1. is a species in the legume family (Fabaceae) native to South America. Now it is grown mainly in hot countries. and may relieve flatulence and colic. Mexico and Central America. darker seeds and a rough coat. Jeera:Cuminseed (Jeera) is a native of the Levant and Upper Egypt. Groundnut (in shell):The peanut. After pollination. each leaflet 1 to 7 cm (⅜ to 2¾ in) long and 1 to 3 cm (⅜ to 1 inch) broad. mainly Indian subcontinent. cultivated mostly in the Kabuli. diuretic. Cumin is stomachic. stimulant. and Chile. emmenagogic and antispasmodic. or groundnut (Arachis hypogaea). yellow with reddish veining. containing 1 to 4 seeds. carminative. Northern Africa. The leaves are opposite. 2 to 4 cm (¾ to 1½ in) across. 28 . It is valuable in dyspepsia. • grown in Southern Europe. diarrhoea and hoarseness. also introduced during the 18th century to the Indian subcontinent. Mexico. The flowers are a typical peaflower in shape.Chana:There are two main kinds of chana:• Desi. which has small.
Indian 28 mm Cotton:Cotton is a soft. a shrub native to tropical and subtropical regions around the world. including the Americas. an agricultural commodity index. called FUTEXAGRI. indexes and index futures are not allowed to be traded under the current regulatory structure. which is the most widely used natural-fiber cloth in clothing today. these are only available for information. However. breathable textile. This is a composite index. Hence. NCDEX also offers as an information product. staple fiber that grows in a form known as a boll around the seeds of the cotton plant. MCX 29 . India and Africa. that if futures on the index could be traded. Facilities offered:NCDEX also offers as an information product. called NCDEXAGRI that convers 20 commodities currently being offered for trading by NCDEX. then the current FUTEXAGRI value should be the no-arbitrage value for the index futures. the index futures. It indicates. This is a spot-price based index. The fiber most often is spun into yarn or thread and used to make a soft. This is essentially a what-if index. as of now.
It is now regulated by forward market commission. 1 in silver. 3 in crude oil and The crude volume touched 23. 30 .42 MCX has 10 strategic alliances with leading commodity exchange across the The average daily turnover of MCX is about US$ 2. Ferrous & Nonferrous metals.(Multi Commodity Exchange) Multi Commodity Exchange (MCX) is an independent commodity exchange based in India. 2 in natural gas. MCX ranks no. Spices and other soft commodities. Energy. It was established in 2003 and is based in Mumbai.000 trading terminals • index .84 trillion)  • Ltd () • gold in futures trading () • • Trillion ($29 Billion). The turnover of the exchange for the period Apr-Dec 2008 was INR 32 Trillion . Oils & Oilseeds. MCX offers futures trading in Agricultural Commodities. MCX has also setup in joint venture the National Spot Exchange a purely agricultural commodity exchange and National Bulk Handling Corporation (NBHC) which provides bulk storage and handling of agricultural products. 1 commodity exchange with 84% Market share in The exchange's competitor is National Commodity & Derivatives Exchange Globally. • globe • • 10. no. Bullion. Plantations.49 Miliion barrels  on January 3. Pulses. no. 2009 The highest traded item is gold with an average monthly turnover of Rs 1.4 billion  MCX now reaches out to about 500 cities in India with the help of about MCX COMDEX is India's first and only composite commodity futures price 2008($0. • MCX is India's No.
Copper. Maize Mentha Oil. Guar Seed. Zinc FIBER ENERGY Gold. Gurchaku. Coconut Cake. Tin. Natural Gas. Soy Bean. Steel Long (Govindgarh). Silver. Soymeal. Mustard Seed (Sirsa). Rice Bran Refined Oil. Yellow Peas OIL & OIL SEEDS Arecanut. Mustard Seed (Jaipur). Jeera. Sugar M30. Nickel. Cashew Kernel. Crude Palm Oil. Carbon Credit PLANTATIONS Cardamom.METAL BULLION Aluminium. Electricity. Pepper. E. Sponge Iron. Masur. M. Soy Seeds CEREALS OTHERS Guargum. Crude Oil. Gold HNI. Groundnut Oil. PVC Castor Oil. Silver M Cotton L Staple. Cotton Seed. Mustard Oil. RBD Palmolein. Kapas SPICES Brent Crude Oil. Steel Long (Bhavnagar). Potato (Tarkeshwar). Rice Bran DOC. Cotton Yarn. Polypropylene(PP). Sugar S-30 31 . Kapasia Khalli. Steel Flat. Cotton S Staple. Sesame Seed. Cotton M Staple. Furnace Oil. Castor Seeds. i-gold. Sour Crude Oil. Potato (Agra). Refined Sunflower Oil. Refined Soy Oil. Coffee (Robusta). Rubber PETROCHEMICALS HDPE. Gold M. Red Chilli PULSES Chana. Lead. Silver HNI. Coconut Oil. ATF.
Therefore. it is a timely subject for several reasons. To fully appreciate why 8.000 years of experience say " gold is forever"." 32 . It is the opinion of the more objective market experts that the traditional investment vehicles of stocks and bonds are in the areas of their all-time highs and may be due for a severe correction. cynically called the "barbarous relic. John Maynard Keynes.(MCX deals wit about 100 commodities.) Major commodities traded:- Gold:Gold is the oldest precious metal known to man. we should review why the world reveres what England's most famous economist.
second and fourth largest producing countries. despite it being classed as a precious metal. photography and Jewellery & silverware accounting for 342. Due to large stocks of Gold as against its demand. industrial uses. it is argued that the core driver of the real price of gold is stock equilibrium rather than flow equilibrium.Demand for silver is built on three main pillars.Just over half of mined silver comes from Mexico. Gold is primarily a monetary asset and partly a commodity.South Africa is the world's largest gold producer with 394 tons in 2001. The third largest is 33 . respectively. 205 and 259 million ounces respectively in 2002. other major institutions and retail Jewellery keep coming back to the market.Less than one third of gold's total accumulated holdings is as a 'commodity' for Jewellery in Western markets and usage in industry. However. Peru and United States.Why gold is "good as gold" is an intriguing question. private players and high-carat Jewellery. Silver:- Silver's unique properties make it a very useful 'Industrial Commodity'.The Gold market is highly liquid and gold held by central banks. the first. More than two thirds of gold's total accumulated holdings account as 'value for investment' with central bank reserves. we think that the more pragmatic ancient Egyptians were perhaps more accurate in observing that gold's value was a function of its pleasing physical characteristics and its scarcity. India is the world's largest gold consumer with an annual demand of 800 tons. followed by US and Australia.
The price of silver is not only a function of its primary output but more a function of the price of other metals also. It then locates and matches the best counter-offers/bids by maintaining anonymity of the counter-parties.Primary mines produce about 27 percent of world silver. while around 73 percent comes as a by-product of gold. NMCX (National Multi-Commodity Exchange of India Limited) The first De-Mutualised Electronic Multi-Commodity Exchange of India granted the National status on a permanent basis by the Government of India and operational since 26th November 2002. the server at NMCE scans through the orders posted on it from all its trading terminals. When an order is placed on the exchange.Australia.NMCE facilitates electronic derivatives trading through robust and tested trading platform. 34 . Derivative Trading Settlement System (DTSS). lead. as world mine production is more a function of the prices of other metals. copper. and zinc mining. provided by CMC.Often a faster growth in demand against supply leads to drop in stocks with government and investors.
Chana . Castor Seed.Sacking . oil & oil cake . NMCE was the first to initiate process of dematerialization and electronic transfer of warehoused commodity stocks. an imperative in the commodity trading business. through Virtual Private Network (VPN). leading to guaranteed clearing and settlement. In the event of high volatility in the prices. Isabgul Seed . The system of upfront margining based on Value at Risk is followed to ensure financial security of the market.Menthol Crystal .Lin Seed . The contracts are marked to market on daily basis. Oil & Oil cake . Coconut Oil & Coconut Oil cake .Salient features of Oil .Sugar . Oil & Oilcake .Raw Jute.Turmeric Wheat Major commodity traded:Coffee:- 35 .Copra.Gold Study . Oil & Oil cake .Pepper .Cuminseed . special intra-day clearing and settlement is held. thereby protecting the efficiency of price-discovery at the Exchange.Soy Seed. The unique strength of NMCE is its settlements via a Delivery Backed System. Rubber . NMCE follows best international risk management practices. List of Commodity traded:Cardamom . Guar SeedS.Safflower seed .Sunflower seed . Well-capitalized in-house clearinghouse assumes counter-party risk of settlement.Groundnut seed.Sesame Seed Silver Study .Pulses . NMCE was the first commodity exchange to provide trading facility through internet.Rape/Mustard Seed. These deliveries are executed through a sound and reliable Warehouse Receipt System.Anonymity helps is eliminating formation of cartels and other unfair practices. NMCE has also set up a Trade Guarantee Fund.Coffee .
Australia. Japan. then to the rest of Europe. Coffee was first consumed in the ninth century. Due to its caffeine content. Commodities traded: . coffee spread to Italy. 36 . commonly called coffee beans. which deals in energy and platinum and the COMEX division. and northern Africa. Electricity Propane. RBOB Gasoline. Silver. Copper. Singapore are homes to leading commodity futures exchanges in the world. Brazil. and by the 15th century. Platinum. The United States. The New York Mercantile Exchange (NYMEX):The New York Mercantile Exchange is the world’s biggest exchange for trading in physical commodity futures. Turkey. From there. it spread to Egypt and Yemen. which trades in all the other metals. of the coffee plant. Gasoline. Palladium.Light sweet crude oil. Gold.Coffee is a brewed beverage prepared from roasted seeds. Aluminum. INTERNATIONAL COMMODITY EXCHANGES Futures’ trading is a result of solution to a problem related to the maintenance of a year round supply of commodities/ products that are seasonal as is the case of agricultural produce. Natural Gas. United Kingdom. to Indonesia. From the Muslim world. Heating Oil. Persia. the NYMEX division. and to the Americas. etc. The exchange is in existence since last 132 years and performs trades trough two divisions. coffee has a stimulating effect in humans. when it was discovered in the highlands of Ethiopia. had reached Armenia. It is a primary trading forum for energy products and precious metals. Today. coffee is one of the most popular beverages worldwide.
Aluminum. Copper. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. non storable agricultural commodities and non-agricultural products like gold and silver. wheat. Soybean meal. Zinc. Oil. etc. The primary focus of LME is in providing a market for participants from nonferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. Gold. Wheat. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. Nickel. Oats. the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. Commodities traded:. 37 . Commodities Traded: . Rough Rice. Linear Low Density Polyethylene. CBOT initially dealt only in Agricultural commodities like corn. Presently. Polypropylene. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor. with highly liquid contracts.Corn. Soybean. Ethanol. Aluminum Alloy. Lead. Silver etc. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century.London Metal Exchange:The London Metal Exchange (LME) is the world’s premier non-ferrous market. The Chicago Board of Trade:The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. North American Special Aluminum Alloy (NASAAC). Tin.
Rubber. TOCOM launched options on gold futures. good X in a ware house and gets a warehouse receipt. in which one pays cash and carries away the goods.S. It trades in to metals and energy contracts. Aluminum. in a major overhaul of its computerized trading system. The underpinning for futures is the warehouse receipt. Platinum. TOCOM’s recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U. A person can buy or sale a commodity future on an exchange based on his expectation of where the price will go. that drives NYMEX is different from demand-supply situation in Asia. by when the buyer or seller either closes (square off) his account or give/take delivery of the commodity. It has made rapid advancement in commodity trading globally since its inception 20 years back. Commodities traded: . etc How Commodity market works? There are two kinds of trades in commodities. the first option contract in Japanese market. TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. But some one trading in commodity futures need not necessarily posses such a receipt to strike a deal. Silver. The first is the spot trade. Futures have something called an expiry date. in May 2004. In Jan 2003. A person deposits certain amount of say. Which allows him to ask for physical delivery of the good from the warehouse. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. The second is futures trade. Crude Oil. Gold.Gasoline.Tokyo Commodity Exchange (TOCOM):The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. Kerosene. The broker 38 .
Clearing: .This stage has following system in place.maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded.Matching . The commodity trading system consists of certain prescribed steps or stages as follows: I. Following diagram gives a fair idea about working of the Commodity market. For commodity futures to work.Position limits II. Squiring off is done by taking an opposite contract so that the net outstanding is nil.Matching 39 .Surveillance . the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Traders need not visit a commodity market to speculate.At this stage the following is the system implemented.Reporting . Today Commodity trading system is fully computerized. With online commodity trading they could sit in the confines of their home or office and call the shots. Trading: .Price limits . The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt.Order receiving .Execution .
. What is Identity Proof? When investor approaches Clearing Member.Receipts and payments . How to invest in a Commodity Market? With whom investor can transact a business? An investor can transact a business with the approved clearing member of previously mentioned Commodity Exchanges.Price limits .Clearing .This stage has following system followed as follows.Marking to market .Registration .Reporting . Settlement: .Clearing limits .Notation .Clearing house. the member will ask for identity proof. The investor can ask for the details from the Commodity Exchanges about the list of approved members.Delivery upon expiration or maturity. III.Margining .Position limits . For which Xerox copy of any one of the following can be given a) b) c) d) PAN card Number Driving License Vote ID Passport 40 .
These factors include • • • • • • • • Net worth of the broker of brokerage firm. The research team. . Otherwise the Bank Statement containing details can be given.back office functioning being most Credit facility. The references. 41 important. The clientele. The number of franchises/branches. What aspects should be considered while selecting a commodity broker? While selecting a commodity broker investor should ideally keep certain aspects in mind to ensure that they are not being missed in any which way. What are the other forms to be signed by the investor? The clearing member will ask the client to sign a) b) Know your client form Risk Discloser Document The above things are only procedure in character and the risk involved and only after understanding the business. What are the particulars to be given for address proof? In order to ascertain the address of investor.What statements should be given for Bank Proof? The front page of Bank Pass Book and a canceled cheque of a concerned bank. The market credibility. The kind of service provided. he wants to transact business. the clearing member will insist on Xerox copy of Ration card or the Pass Book/ Bank Statement where the address of investor is given.
1. He has not been debarred from trading in Commodities by statutory/regulatory authority. Broker:The Broker is essentially a person of firm that liaisons between individual traders and the commodity exchange. 4. 2. This sum has been determined by Multi Commodity Exchange. A broker of Commodities is also required to meet certain obligations to gain such a membership in exchange. He should be Citizen of India. To become a member of Commodity Exchange the broker of brokerage firm should have net worth amounting to Rs. He should have completed 21 years of his age. which is stated by a unit of Government that lays down the laws and acts with regards to commodity trading. 5. In other words the Commodity Broker is the member of Commodity Exchange. How to become a Member of Commodity Exchange? To become member of Commodity Exchange the person should comply with the following Eligibility Criteria. He is also known as the authorized dealer. He should be Graduate or having equivalent qualification. How to become a Commodity Trader/Broker of Commodity Exchange? To become a commodity trader one needs to complete certain legal and binding obligations. 50 Lakh. There is routine process followed. 42 . 3. having direct connection with the exchange to carry out all trades legally.These are amongst the most important factors to calculate the credibility of commodity broker. He should not be bankrupt.
As per recent data the largely traded commodities are Gold. Energy and base Metals. Agriculture contributes about 22% GDP of Indian economy. It employees around 57% of the labor force on total of 163 million hectors of land Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives. 43 . only 3 or 4 commodities contribute for more than 80 percent of total trade volume. Trends in volume contribution on the three National Exchanges:Pattern on Multi Commodity Exchange (MCX):MCX is currently largest commodity exchange in the country in terms of trade volumes. Incidentally the futures’ trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence. the price signals largely reflect international scenario. Silver. Coming to trade pattern. though there are about 100 commodities traded on MCX.Current Scenario in Indian Commodity Market Need of Commodity Derivatives for India:India is among top 5 producers of most of the Commodities. in addition to being a major consumer of bullion and energy products. further it has even become the third largest in bullion and second largest in silver future trading in the world.
But.Among Agricultural commodities major volume contributors include Gur.Majority of trade has been concentrated in few commodities that are 44 . Whose market sizes are considerably small making then vulnerable to manipulations. Major volume contributors: . the pattern has changed and slowly moved towards commodities with small market size or narrow commodities. About 60 percent trade on NCDEX comes from guar seed. Analysis of volume contributions on three major national commodity exchanges reveled the following pattern. Urad. However the major volume contributors on NCDEX are agricultural commodities. chana and Urad (narrow commodities as specified by FMC). Pattern on National Multi Commodity Exchange (NMCE):NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities. Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. Mentha Oil etc. most of them have common inherent problem of small market size. which is making them vulnerable to market manipulations and over speculation. Pattern on National Commodity & Derivatives Exchange (NCDEX):NCDEX is the second largest commodity exchange in the country after MCX. in subsequent period. But.
• • Non Agricultural Commodities (bullion. SENSEX fell tremendously from 21000 to 15000. Trade strategy:It appears that speculators or operators choose commodities or contracts where the market could be influenced and extreme speculations possible. When FMC brings restrictions on those commodities. the speculators are moving from one commodity to other (from methane to Urad to guar etc) where the market could be influenced either individually or with a group. Likewise. Mentha etc. After the Reliance IPO. So when we approach them they tell us how much they used to trade in shares and how much money they have lost in the share market. Urad. In view of extreme volatilities. the operators/speculators chose another commodity and start operating in a similar pattern. may be because they are really busy or may be not interested in the demat accounts and mutual funds. While telecalling sometimes the clients do not give positive response. metals and energy) Agricultural commodities with small market size (or narrow commodities) like guar. They even tell us that we are doing our training (SIP) at very wrong time. 45 . In this crash many people lost their money amounting from 2 Lakhs to 4-5 crore or even more. LIMITATIONS: Due to bad market conditions people are becoming more and more pessimistic about investing in the share market. Consequently. the FMC directs the exchanges to impose restrictions on positions and raise margins on those commodities. the operators once again move to the other commodities.
Sharekhan takes no charges for opening Demat accounts but there is a initial deposit of Rs. 23% 1. There are some negative rumors in the market about Sharekhan ltd. 46 27% Commodity Market . As soon as the account opens this money can be kept as it is in the demat account or it can be completely used for buying shares or it can be partially used and the rest of the amount can be withdrawn. It is just a margin money which has to be kept with Sharekhan till the account opens. Investor’s preferences: - 43% Share Market Bank F. While cold calling when we met the owners of big shops. Quantitative Analysis ANALYSIS (Sample size 30 peoples) Other Survey was conducted across Udaipur City to judge the awareness of peoples 7% regarding investment in Commodity Market. This may not be the fault of the company but of some of the marketing executives who don`t disclose all the details about charges and products and once the demat account has been opened they don`t pay any attention to their old clients and thus fail to give proper services to the clients. They don`t want to take risk. They said that if they had spare money they will invest it in their shops and not in the share market. some people have very bad experience with Sharekhan in terms of services and charges. They think that these are the charges they start suspecting it.10. So it’s very difficult to convince them to deposit that much amount and open a demat account. But clients fail to understand this.000/-.D.
Investment Prefrences specified in other category 3% 30% Real Estate Jwelary Not Specified 67% Analysis of data revels that majority of people prefer investment in Real Estate (28. People’s knowledge about Commodity Market: - 47 . 2.81% of total sample) which specified in other category investment and it is greater than share market investment preference.
Investor’s interested to invest in Commodity Market: - (Out of those. 3.13% Know Don’t Know 87% Very few people heard of commodity market. who know Commodity Market) Interested 50% 50% Not Interested Though some people heard of commodity market due to lack of complete knowledge about it half of then are not interested in investing in Commodity Market. 48 . Vast majority of people are unaware about Commodity Market.
Commodity Market Investors Preferences 13% 20% 37% Bullion Metals Agricultural Fossils/Energy 30% Above data revels that majority of commodity investors like to invest in Bullion (Gold & Silver). 6. feel that investment in commodity market is very risky. Opinion about Commodity Market Advertisements:49 . So efforts should be done to minimize the risk in commodity investment and make peoples about minimum risk in commodity investment.4. 5. Perception about Commodity Market:- 25% Less Risky Risky 50% 25% Very Risky Analysis of data shows that majority of people who are aware about commodity market.
A bid subject to immediate acceptance made on the floor of exchange . • Breaking: . storage and manufacture • At the Market: .(Expressed by those who know commodity market) No t Info rmative 100 There is no second opinion amongst commodity investors. Basis can be negative or positive depending on the prices prevailing in the cash and futures.Basis is the difference between the cash price of an asset and futures price of the underlying asset. . ANNEXURE Terms and Definitions related to Commodity Market: • Accruals:.A quick decline in price. that commodity market advertisements do not give all the necessary information.Commodities on hand ready for shipment.An order to buy or sell at the best price possible at the time an order reaches the trading pit. • Bear: • Bid: .A person who expects prices to go lower. 50 to buy a definite number of futures contracts at a specific price. • Basis: .
In which case open positions are marked to market on last day of contract based on cash market close. options and swaps.A concern that buys and sells actual commodities or designated by the exchange as the official close. .The tender and receipt of actual commodity. commodity. • Buy on Close: closing range.A notice for a clearing member’s intention to deliver a under the terms of futures contract.The price (or price range) recorded during the period . which derive their value from an underlying asset. futures. • Delivery month: .Specified month within which delivery may be made . .) Four types of derivatives are trades forward.A quick increase in price.These are financial contracts.• Bulging: • Bull: . . Derivatives can be traded either in an exchange or over the counter. (Underlying assets can be equity. Some contracts settle in cash (cash delivery). interest rates. • Buy on opening: • Call: within the opening range. • Commission house: • Delivery: futures contract for the accounts of customers.To buy at the end of trading session at the price within the . • Delivery notice: • Derivatives: stated quantity of commodity in settlement of a short futures position. warehouse receipts covering such commodity. • Close: . foreign exchange. 51 . in settlement of futures contract. • Closing price: .A person who expects prices to go higher. . or in case of agriculture commodities.The period at the end of trading session officially designated by exchange during which all transactions are considered made “at the close”. the call writer (seller) may be assigned a short position in the underlying futures if the buyer exercises the call. real estate or any other asset.An option that gives the buyer the right to a long position in the underlying futures at a specific price.To buy at the beginning of trading session at a price .
The prices in an exchange are determined in the form of a continuous auction by members who are acting on behalf of their clients. Here valuation of Mark-to-Mark position is calculated as per the official closing price on daily basis and MTM margin requirement exists. • Liquidation: . counter party risk is almost eliminated. • Futures Contract:.The maximum daily price change above or below the price close in a specific futures market. In futures contracts the clearing-house becomes the counter party to each transaction. Therefore. It is standardized in terms of quantity as specified by exchange. which is called novation. 52 .Central market place for buyers and sellers.Means taking a position in futures market that is opposite to position in the physical market with the objective of reducing or limiting risk associated with price. A regulatory authority and the exchange regulate futures contract. Futures contract is more liquid as it is traded on the exchange. • Margin: . Standardized contracts ensure that the prices mean the same to everyone in the market. Futures contract is generally cash settled but option of physical settlement is available. but more often used by the trade to mean a reduction or closing out of long position. Gold.It is an agreement between two parties to buy or sell a specified and standardized quantity and quality of an asset at certain time in the future at price agreed upon at the time of entering in to contract on the futures exchange.• Exchange: . It is entered on centralized trading platform of exchange. • Investment Commodities: . Trading limits may be changed during periods of unusually high market activity.An investment commodity is generally held for investment purpose.A transaction made in reducing or closing out a long or short position. Contract price of futures contract is transparent as it is available on centralized trading screen of the exchange. companies or themselves.Cash or equivalent posted as guarantee of fulfillment of a futures contract (not a down payment).g. • Hedging: . Silver • Limit: . e. Delivery tendered in case of futures contract should be of standard quantity and quality as specified by the exchange.
It gives right but not the obligation to the option owner. It refers to unliquidated purchases or sales and never to their combined total. • Open contracts: . the price of a call or put. set by the exchange for the purpose of setting margins accounts.The official daily closing price of futures contract. • Net position: . • Purchase and sales statement: .The amount by which a given futures contract’s price or commodity’s quality exceeds that of another contract or commodity (opposite of discount).Contracts which have been brought or sold without the transaction having been completed by subsequent sale. • Spot Markets:-Here commodities are physically brought or sold on a negotiated basis. • Offer: . • Spot price: . • Position: . to buy an underlying asset at specific price at specific time in the future.The maximum fluctuation in price of futures contract permitted during one trading session. In options.An offer indicating willingness to sell at a given price (opposite of bid). • Option: .An interest in the market in the form of open commodities. • Settlement price: . which the buyer initially pays to the option writer (seller).A statement sent by FMC to a customer when his futures option has been reduced or closed out (also called ‘P and S”) • Range: .The price at which the spot or cash commodity is selling on the cash or spot market. • Price limit: . • Open interest: . repurchase or actual delivery or receipt of commodity.The number of “open contracts”.Demand for additional funds or equivalent because of adverse price movement or some other contingency. 53 .• Margin call: .The difference between high and low price of the futures contract during a given period. as fixed by the rules of a contract market. • Premium: .The difference between the open contracts long and the open contracts short held in any commodity by any individual or group.
…………………………………………………… Phone No. c. YES Do you have any investment plan? b. NO (If no move to question no. :-………………………………………………. Share Market d. yes. Commodity Market . Bank F. 4) 2.. where you would like to invest/trade your money? b. 1.D.. a.. Address: ………………………………………………….Questionnaire COMMODITY MARKET (Questionnaire for Investors) Name:-……………………………………………………. Other (specify)………………. If. 54 a..
10) 7. a. Why you prefer specific investment? ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------4. Can’t Say 8. Other (specify)………………. If YES. which Commodity Exchange you will prefer for investment? b. 2 Commodity Market. a. Why you prefer specific Commodity Exchange for investment? (if answer to Q. why? ---------------------------------------------------------------------------------------------------------------------------------------------------(If no move to the Question no. 5. MCX If yes. skip this question) ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------55 . NCDEX c. Do you aware about Commodity Market? b. If NO.3. skip this question) a. NO Are you willing to invest in Commodity Market? (If no move to question no 12) (If in Q. Not aware about invest avenues c. If no. YES 6. f. why? --------------------------------------------------------------------------------------------------------------------------------------------------b. why? b.7 f. NMCE d. Other (specify)………………. Insufficient income a.
Private Job c. Female b.000/…………………………………………………………………………………… …………………………………………………………………………………… …………………………………………………………………………………… b. Age Group a.000 – 3. 21 years – 30 years d. Job b. Below 1. Gender a. Less Risky b. Other (specify) 15. What is your perception about Commodity Market? a.000/e.20. YES 12.000 – 2. Business d. 2. Below 21 Years c. What you think Commodity Market Advertisements (hoardings. Occupation a. 31 years – 40 years e. In which Commodities you will prefer to Invest? And why? b.20.60. prints etc) are explanatory enough to give needed useful information? a. Nil c. Fossils/Energy a. 1. 41 years – 50 years 56 . Metals d. Agricultural c. 60. Govt. Risky c.9.40. Very Risky 11.40.000/b. Bullion ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10. Male b. NO 13. Above 3.000/d. Above 50 years 14. Income Group (Per month) a.
This will further help deepen the market & would help in increasing the popularity of such exchanges. This may also control speculation to an extent. Apart for these more products like Commodity Options need to be introduced. There is also an urgent need for an independent regulator for these markets. Conclusions Commodity market in India is still in a nascent stage. transportation etc. This will finally lead to a wider investor base & lesser power in the hands of ruthless traders & speculators. professional agency like Forwards Market Commission (FMC) needs to be at the helm. It should be given a helping hand by the concerned authorities to increase its depth. The infrastructure facilities like warehouses.…………………………………………………………………………………… ………………………. should be improved so that the genuine buyers can take physical delivery of goods instead of settling transaction in cash. Instead of bureaucratic Ministry of Consumer Affairs & Food. 57 .
industrial policy. that this regime is far from perfect.many nations hedging on a global scale against each other's anticipated protectionism. accept IMF rules. were they to fail to join the WTO. has led to a global trade hegemony . China's entry into the WTO signalled the end of truly isolated nations entirely managing their own currency and affairs. 1.S. however. 58 . Good perspective for earnings. The need for stable currency and predictable clearing and rules-based handling of trade disputes. trade sanctions against Canadian softwood lumber (within NAFTA) and foreign steel (except for NAFTA partners Canada and Mexico) in 2002 signalled a shift in policy towards a tougher regime perhaps more driven by political concerns . there is a bright future ahead for the Futures Market.Taking these few but firm steps. U.jobs. and submit to a broad regime of reforms that amount to a hedge against being isolated. join the WTO. There are signs. I believe. Recommendations And Suggestions: Developing countries (democratic or not) have been moved to harden their currencies. even sustainable forestry and logging practices.
com • http://www. 3.indiamart.com • www.commoditiescontrol.sharekhan.2.com 59 .com/markets/commodity/ • http://www.in • http://finance. Training programme should be organized .ncdex.com • http://www. BIBLIOGRAPHY • http://commodities.mcxindia. This Should be promoted and awareness should be among public. 4. Having good Career Scope.
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