Commodity Presentation -Group 8 B | Commodity Markets | Futures Contract

Commodity Markets

Commodities are everywhere .Commodities ± in Real Life Wheat in your bread Petrol in your vehicle Coffee on your table Sugar in your sweets Chana in your chhole Gold in your necklace ««« and so on ««.

Base Metals Copper Zinc Aluminum Nickel Tin .Classification of Commodities Bullion Gold Silver Palladium etc Agriculture Grains Pulses Edible oils/seeds Spices etc Commodities Energy Crude oil Heating oil Natural gas Furnace oil Etc.

Commodity ± Indian Structure FMC ± The Regulator Commodity Exchanges National Exchanges Regional Exchanges NCDEX NMCE MCX NBOT 20 Other Regional Exchanges Leadership position with >90% share .

6 56.9 15.7 Energy 0.4 6.2 55.4 0.3 8.5 Other than bullion metals 23.3 Others 0.2 Agriculture 68.3 35.0 Source:FMC * 2008-09 other segment includes energy& other metals NCDEX Leader in Agri .7 40.Indian Growth so far Significant rise in volume since launch of exchanges in 2003 Volume Growth in Indian Exchanges 700 600 500 400 300 200 MCX Leader in Metals & Energy 100 0 2004 2005 2006 MCX 2007 2008 NCDEX TOTAL 2009 2010 > 65% CAGR Growth Segment wise % Share of Commodities 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Bullion and other metals 36.1 11.8 31.3 20.9 64.3 12.1 0.0 31.8 23.1 57.0 0.0 0.

Indian Growth during 2004-09 hang wi o odit Vo u MCX NCDEX MCX NCDEX  ©©  2  ¨ © 2 ¤ £¥ § ¦ ¥¥ ¢ £¤ £ ¢ ¡  hang wi o odit Vo u ¤£¥ § ¦ ¥ ¥ ¢ £¤ £ ¢¡  in 2004 in 2009 .

Base metals. re-listing also has happened Bullion.Way2Wealth Research    Almost 45 commodities are available for trading in both NCDEX & MCX Though few have been de-listed during high inflation times. energy & Agri are the major contributors in terms of volumes Turmeric Crude oil entha Oil Copper Soy Oil Pepper Jeera Gold Silver Lead Zinc .Returns in Indian commodities Re tu r n s cr o s s ar io u s o m m o d itie s in Yr s Guar Gum Guar Seed Aluminium Soybean Source:Bloomberg.

Why Invest in Commodities  Commodity provides true diversification in financial portfolio Commodity act as hedge against risks involved in business Rising income will ensure Inflation which in turn will ensure secure bull market in commodities Lower Margins ± High Leverage for Traders    .

o Gold ² Safe  Speculators: High Volatility Higher Leverage o Retail investors. thus µlocking¶ his sale price and in the process hedging against any adverse price risks. Corporate & proprietary traders  Arbitrageurs : Safe Opportunist o Spot future arbitrage o Intra and inter market arbitrage  Investors: Portfolio diversifier o Individuals.Who Can Invest  Hedgers : Risk Management o For the people associated with commodities. the Futures market can provide an effective hedging mechanism against price movements. Commodity spot trader o Institutional. Pension & Mutual Funds o Corporate bodies . For example an oil-seed farmer may go short in oil-seed futures.

Attracting new participants € Farmers y Offering them pre & post harvest risk mitigation platform y Ease of trade through aggregators € Banks y Role of aggregators y Proprietary trade € € Mutual Funds y Attracting retail trade to the commodity exchanges FIIs € FDIs 10 .

Risk Mitigation: Pre-harvest Small Farmers Small Farmers Large Farmers Aggregators Future price ensured Liquidity enhanced Banks Insurance NCDEX NCMSL Weather derivatives /Crop Insurance Bank lending 11 .

Risk Mitigation: Post-harvest Small Farmers Large Farmers Sell forward Banks NCDEX NCMSL Storage facility Assaying & grading Commodity backed bank finance (WR) 12 .

Large number of Physical Deliveries taking place on NCDEX Platform Globally less than 2% volumes result in deliveries € Physical deliveries are incidental € Exchanges not delivery platform € However. NCDEX has seen an average delivery of 40-50.128 37.000 MT per month € Period Q4' FY05 Q1 µFY06 Q2 FY06 Q3 FY06 Q4 FY06 Q1 FY07 Q2 FY07 Q3 FY07 Jan-Feb FY07 Deliveries (MT) 43214 109562 83081 77160 134260 103.136 Exchange¶s are a platform for better prices discovery 13 .989 94.444 125.

.Idea will be to forge closer links with global commodities 14 .New Products Market would move towards trading more exotic products € Index based products y Commodity Indices y Rainfall & other weather indices Spread Trading € Electricity € Real Estate € Emission Credits € .

Address Proof. Photo etc ‡ ‡ To get familiar with this asset class. Networth. profit & loss etc . start reading research reports and monitor advisory and execution Acquire full knowledge of risk involved in futures      Mark to Market Daily Pay-in & pay-out Margin requirements Contract expiry & rollover Leverage. Cancelled cheque (MICR).How to Invest Procedure for Trading in Commodities ‡ Open Demat & Trading A/C  Filling KYC (Know Your Customer)  Documents required : Pan Card.

Ways of Research Methodology .Analysis  Fundamental ‡ Supply-n-demand. logistics. physical market linkages. specifications. Relative analysis with other markets etc  Statistical ‡ Arima modelling. Seasonality. Ratio study etc. climatic changes. Cartel move. crop survey. delivery stocks. . Deviation. Contract duration. Correlation & regression study. rollover. etc  Technical ‡ Chart patterns. indicators etc  Derivative ‡ Volume and Open Interest Change. Time series. policies.

Thank you .

Sign up to vote on this title
UsefulNot useful