Jinal Patel -72

Krishna Parab- 70

BAN THE FUTURES Rutuja Rane-90

Sanket Sanvatsaekar-
AshanaShirodkar-103
Mayank Tyagi -
  A futures contract  is a type of standardized derivative contract that
derives its value from the underlying asset. It is a contract between
two parties to buy or sell an asset at a predetermined price and
quantity or amount on a specified future date.
• A commodity futures contract is a standardized contract that
obliges the buyer to purchase some underlying commodity (or
Introduction the seller to sell it) at a predetermined future price and date.

to Future • Commodity futures can be used to hedge or protect a position in

commodities.
Trading • A futures contract also allows one to speculate on the direction of
a commodity, taking either a long or short position, using
leverage.
• The high degree of leverage used with commodity futures can
amplify gains, as well as losses.
  Futures are beneficial to seasoned investors and
companies as they use them to speculate or hedge in the
market. The ability to set asset prices in advance allows
them to profit or mitigate risks, irrespective of current
market condition. Let us see how futures trading works
Uses For for speculation and hedging:
Futures • Speculation: Speculative investors trade derivative
instruments to predict the underlying asset price
movement and profit from it later.
• Hedging: Investors trade derivative instruments to
reduce the risk of losses against unfavorable changes in
the underlying asset price.
What are the other ways in which a price spiral in commodities can be
checked?

A price spiral in commodities refers to a situation where prices of goods or services continue
to rise in a self-perpetuating cycle due to various factors such as supply shortages, high
demand, speculation, or market manipulation. Some ways in which a price spiral in
commodities can be checked are:
1. Increase Supply: The most straightforward solution to rising prices is to increase the
supply of the commodity
2. Reduce Demand: Another way to control prices is to reduce demand for the commodity.
3. Price Controls: Governments can impose price controls on commodities by setting a
maximum price that can be charged for the commodity.
4. Futures Markets: Futures markets allow buyers and sellers to lock in prices for future
delivery of the commodity, which can help to stabilize prices and reduce uncertainty.5.
Market Transparency: Improving transparency in the market can help to prevent price
manipulation and ensure that prices are determined by supply and demand.
From the facts provided in this case, do you think banning wheat futures was
a good decision by the government ?

Wheat futures are contracts that allows traders to buy and sell wheat at future date and
at predetermined prices.
These contracts helps farmers by locking the prices for their crops, however people jump
into future trading to earn profits from price fluctuations.
In some cases, future trading can lead to increase in volatility in commodities prices , and
the ban on future trading could help stabilize the market.
February 2007 Government announced ban on future trading in order to control inflation
brought by the steep rise in price of agro- commodities.
Though according to Abhijit Sen Committee’s repot there was conclusive evidence to
prove future trading’s impact on inflation, banning futures helped reduce international
pressure on domestic wheat prices and also there was marginal increase in average WPI .
Hence, it was a good decision by the government to ban futures.