Awareness of commodity market with reference Derivative investors

Awareness of commodity market with reference Derivative investors
A PROJECT REPORT ON
“Awareness of commodity market with reference Derivative investors”
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1
Awareness of commodity market with reference Derivative investors
CONTENTS
SL.NO PARTI!LARS
1. Executive Summary
2. Research Methodology
3. Company profile
4. ntroduction to the topic
!. "nalysis and interpretation
#. $indings
%. Suggestions
&. Conclusion
'. (i)liography
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 2
Awareness of commodity market with reference Derivative investors
"#"!TI$" S!%%AR&
" pro*ect report containing the +“Awareness of commodity market with
reference to Derivative investors ” a case study of (elgaum city "t ,"R-. $inapolis
(elgaum for fulfillment of re/uirement of M(" -th semester in nstitute of
Management Education and research. t 0as an opportunity to learn the practical aspects
of the firm
O'(ectives of the st)dy
1. 1o 2no0 the perception of derivative investors to0ards commodity future mar2et
2. 1o find the a0areness level of commodity mar2et in (elgaum city
3. 1o understand the commodity mar2et and its 0or2ing mechanism.
4. 1o 2no0 0hich commodity they prefer to invest.
!. 1o find the potential customer for commodity mar2et
1he pro*ect 0as underta2en at ,"R-. $inapolis (elgaum the first part of the study
is done )y collected information through net3 *ournals3 text)oo2s. "nd second part of the
study is conducted through survey of the derivative investors.
Sco*e of the st)dy
1his study is limited to only (elgaum City the study is carried out to 2no0 the
a0areness level of derivative investors to0ards Commodity $utures mar2et. 1his study
also helps to 2no0 a)out trading mechanism of Commodity Mar2et 4 the future trading
level.
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Awareness of commodity market with reference Derivative investors
R"S"AR+ %"T+ODOLO,&
Tit-e of the Pro(ect
“Awareness of commodity market with reference to Derivative investors”

Sam*-e Si.e
1he sample si5e is consist of traders in derivative mar2et of (elgaum city.166
random sample 0as ta2en to identify the a0areness level of the derivative investors
to0ards Commodity $uture Mar2et
Sam*-e Ty*e / Simple random sampling 0as adopted to select respondents.
Sam*-e Area / (elgaum city
D)ration of Pro(ect/

st 7hase 8 9ecem)er
nd 7hase 8 :anuary to "pril ;0ee2ly t0o days<
TOOLS !S"D 0OR ANAL&SIS/
1. =raphical Representation of "nalysis through S7SS. >
a. 7ie charts
DATA OLL"TION APPROA+/
7rimary data has )een used to carry out the research successfully. 1he secondary
data has )een collected from ?9E@ and MC@. $or the purpose of gathering primary data
a structure and /uestionnaire 0as designed to collect data from the derivative investors.

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Awareness of commodity market with reference Derivative investors
%ethod of omm)nication>
n order to minimi5e the )ias in data collection3 the method of personal intervie0 0as
adopted.
T+" SO!R"S O0 T+" DATA OLL"TION AR" AS 0OLLO1S
1he study relies to a great extent on primary data and to some extent on secondary data>
Primary Data/
• Auestionnaire
• B)servation and intervie0 techni/ue
Secondary Data/
• nformation is collected through internet
• $rom various text )oo2s urnals and maga5ines

LI%ITATION O0 T+" ST!D&/
? Since the study is )ased on the convenient sampling it may not depict the accurate
outcome
? Cevel of accuracy of results of research is restricted to the accuracy level 0ith
0hich the customers have given ans0ers and the accuracy level of the ans0er
cannot )e predicted
? 1he findings are )ased solely on the information provided )y the respondents and
there is a possi)ility of )iased results
? 1he study of pro*ect is limited to only (elgaum
BABASAB PATIL MBA FINANCE PROJECT REPORT Page !
Awareness of commodity market with reference Derivative investors
0INDIN,S
• More than !6D of the 1raders in are a0are a)out the commodity future
Mar2et

• Eardly 36D traders are invested in the commodity future mar2et
• Most of the investors are not ready to invest in commodity future mar2et they feel it
involve high ris2.
• Returns and the Ris2 of the commodity are the most critical factors3 0hich
1raders 0ill consider 0hile investing in any commodity
• Most of the investors are ready to invest in commodity future mar2et if proper
information is provided
• "s commodity future mar2et is ne0 and emerging 3many investors and farmers are
not fully a0are of this mar2et .as the mar2et helps to trade transparently 0ithout
middlemen and agents
• Fhile finding the reasons 0hy most of the people are not trading in commodity
mar2et found that many respondents are not interested at all in this trade this is
)ecause of unana0areness 4 mythical perception a)out commodity mar2et.
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Awareness of commodity market with reference Derivative investors
S!,,"STION
• 1here is need to create a0areness a)out commodity $uture Mar2et. "0areness
program has to )e conducted )y ,arvy consultants3 )ecause since this 0as ne0 to the
mar2et .so it can )e done through )y giving advertisements in local channels3
?e0spapers3 )y sending E8mail to present customers etc
• $rom survey it is found that most of the potential customers are concerned a)out the
(ro2erage charges so ,arvy can loo2 upon this. f it can charge moderate )ro2erage
it 0ill help to attract more and more customers.
• More agents and mar2eting executives should )e appointed to educate the customers
)ecause the customers having many myths in there mind
• "nd also create the a0areness of electronic commodity trading
• $irm should approach people 0ho are already into the )usiness of commodities
.special campaigns G investors meets should )e conducted for these people since they
are a0are of rate fluctuation 3mar2et trends etc . 1hey have got mar2et idea that
)enefits them in price prediction. 1hey 0ill )e in high spirits 0hen price ris2 of them
0ill )e managed.

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Awareness of commodity market with reference Derivative investors


Company
Bvervie0
"nd
nformation
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Awareness of commodity market with reference Derivative investors
O%PAN& PRO0IL"
1he )irth of ,arvy 0as on a modest scale in 1'&1. t )egan 0ith the vision and
enterprise of a small group of practicing Chartered "ccountants 0ho founded the flagship
company H,arvy Consultants Cimited. Fe started 0ith consulting and financial
accounting automation3 and carved inroads into the field of registry and share accounting
)y 1'&!. Since then3 0e have utili5ed our experience and superlative expertise to go from
strength to strengthHto )etter our services3 to provide ne0 ones3 to innovate3 diversify
and in the process3 evolved ,arvy as one of ndiaIs premier integrated financial service
enterprise.
1hus over the last 26 years ,arvy has traveled the success route3 to0ards )uilding
a reputation as an integrated financial services provider3 offering a 0ide spectrum of
services. "nd 0e have made this *ourney )y ta2ing the route of /uality service3 path
)rea2ing innovations in service3 versatility in service and finally totality in services.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page '
Awareness of commodity market with reference Derivative investors
Bur highly /ualified manpo0er3 cutting8edge technology3 comprehensive
infrastructure and total customer8focus has secured for us the position of an emerging
financial services giant en*oying the confidence and support of an envia)le clientele
across diverse fields in the financial 0orld.
Bur values and vision of attaining total competence in our servicing has served as
the )uilding )loc2 for creating a great financial enterprise3 0hich stands solid on our
fortresses of financial strength 8 our various companies.
Fith the experience of years of holistic financial servicing )ehind us and years of
complete expertise in the industry to loo2 for0ard to3 0e have no0 emerged as a premier
integrated financial services provider.
"nd today3 0e can loo2 0ith pride at the fruits of our mastery and experience
comprehensive financial services that are competently segregated to service and manage
a diverse range of customer re/uirements.
O$"R$I"1/
,"R-.3 is a premier integrated financial services provider3 and ran2ed among
the top five in the country in all its )usiness segments3 services over 1# million individual
investors in various capacities3 and provides investor services to over 366 corporate3
comprising the 0ho is 0ho of Corporate ndia. ,"R-. covers the entire spectrum of
financial services such as Stoc2 )ro2ing3 9epository 7articipants3 9istri)ution of
financial products 8 mutual funds3 )onds3 fixed deposit3 e/uities3 nsurance (ro2ing3
Commodities (ro2ing3 7ersonal $inance "dvisory Services3 Merchant (an2ing 4
Corporate $inance3 placement of e/uity3 7Bs3 among others. ,arvy has a professional
management team and ran2s among the )est in technology3 operations and research of
various industrial segments.
$a-)e and $ision of 2arvy Stock 3rokin4 Ltd/
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Awareness of commodity market with reference Derivative investors
+Bur values and vision of attaining total competence in our servicing has served
as the )uilding )loc2 for creating a great financial enterprise3 0hich stands solid on our
fortress of financial strength J our various companiesK.
The 2arvy redo/
O)r -ients O)r 0oc)s
Clients are the reason for our )eing. 7ersonali5ed service3 professional careL pro8
activeness are the values that help us nurture enduring relationships 0ith our clients.
Res*ect for the Individ)a-
Each and every individual is an essential )uilding )loc2 of our organi5ation.
Fe are the 2iln that hones individuals to perfection. (e they our employees3 shareholders
or investors. Fe do so )y upholding their dignity 4 pride3 inculcating trust and achieving
a sensitive )alance of their professional and personal lives.
Teamwork
?one of us is more important than all of us.Each team mem)er is the face of
,arvy. 1ogether 0e offer diverse services 0ith speed3 accuracy and /uality to deliver
only one product> excellence. 1ransparency3 co8operation3 invalua)le individual
contri)utions for a collective goal3 and respecting individual uni/ueness 0ithin a
corporate 0hole3 is ho0 0e deliver again and again.
Res*onsi'-e iti.enshi*
" social )alance sheet is as re0arding as a )usiness one. "s a responsi)le corporate
citi5en3 our duty is to foster a )etter environment in the society 0here 0e live and 0or2.
")iding )y its norms3 and )ehaving responsi)ly to0ards the environment3 is some of our
gro0ing initiatives to0ards reali5ing it.
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Awareness of commodity market with reference Derivative investors
Inte4rity
Everything else is secondary
7rofessional and personal ethics are our )edroc2. Fe ta2e pride in an environment that
encourages honesty and the opportunity to learn from failures than camouflage them. Fe
insist on consistency )et0een 0or2s and action
A'o)t 2AR$& ,ro)*/
A'o)t 2AR$& ,ro)*
,arvy has traveled the success route3 to0ards )uilding a reputation as an
integrated financial services provider3 offering a 0ide spectrum of services for over 26
years.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 12
Awareness of commodity market with reference Derivative investors
,arvy3 a name long committed to service at its )est. " fame ac/uired through the
range of corporate and retail services including mutual funds3 fixed income3 e/uity
investments3 insurance HHH to name a fe0. Bur values and vision of attaining total
competence in our servicing has served as a )uilding )loc2 for creating a great financial
enterprise.
1he )irth of ,arvy 0as on a modest scale in the year 1'&2. t )egan 0ith the
vision and enterprise of a small group of practicing Chartered "ccountants )ased in
Eydera)ad3 0ho founded ,arvy. Fe started 0ith consulting and financial accounting
automation3 and then carved inroads into the field of Registry and Share 1ransfers.
Since then3 0e have utili5ed our /uality experience and superlative expertise to go
from strength to strength to provide )etter and ne0 services to the investors. "nd today3
0e can loo2 0ith pride at the fruits of our experience into comprehensive financial
services provider in the Country.
2AR$& ,ro)* om*anies are/
2arvy ons)-tants Limited
1he first securities registry to receive SB '662 certification in ndia. Registered 0ith
SE( as Category Registrar3 is ?um)er 1 Registrar in the Country. 1he a0ard of )eing
MMost "dmiredI Registrar is one among many of the ac2no0ledgements 0e received for
our customer friendly and competent services.
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Awareness of commodity market with reference Derivative investors
2arvy Stock 3rokin4 Limited
1he company3 Mem)er of ?ational Stoc2 Exchange ;?SE<3 offers a comprehensive range
of services in the stoc2 mar2et through the )enefits of in8depth research on crucial mar2et
dynamics3 done )y /ualified team of experts. "part from stoc2 )ro2ing activities3 the
company also provides 9epository 7articipant Services to its corporate and retail
customers.
2arvy Investor Services Limited
Registered 0ith SE( as a Category Merchant (an2er and ran2ed among the top 16
merchant )an2ers in the country3 the company has )uilt a reputation as a professional
advisor in structuring 7BIs ta2e over assignments and )uy )ac2 exercises.
2arvy om*)tershare Private Limited
2arvy ,-o'a- Services Limited
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Awareness of commodity market with reference Derivative investors
,arvy =lo)al Services is the glo)al services arm of the ,arvy =roup of Companies
engaged in the )usiness of offshore )usiness process outsourcing in the areas of human
resource outsourcing3 finance and accounting operations outsourcing3 research and
analytics and )ac2 office processing operations.
2arvy omtrade Limited
1he company provides investment3 advisory and )ro2erage services in ndian
Commodities Mar2ets. "nd most importantly3 0e offer a 0ide reach through our )ranch
net0or2 of over 22! )ranches located across 1&6 cities.
2arvy Ins)rance 3rokin4 Private Limited
2arvy %)t)a- 0)nd Services
2arvy Sec)rities Limited
1he company is into distri)ution of $inancial 7roducts. t distri)utes a 0ide range of
financial products and services from insurance to credit cards and loans. 1he company
provides sound advisory services to suit the different investment needs of customers.
Stock 3rokin4 Services/
t is an undisputed fact that the stoc2 mar2et is unpredicta)le and yet en*oys a
high success rate as a 0ealth management and 0ealth accumulation option. 1he
difference )et0een unpredicta)ility and a safety anchor in the mar2et is provided )y in8
depth 2no0ledge of mar2et functioning and changing trends3 planning 0ith foresight and
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1!
Awareness of commodity market with reference Derivative investors
choosing one 4 rescueIs options 0ith care. 1his is 0hat 0e provide in our Stoc2 (ro2ing
services.
Fe offer services that are )eyond *ust a medium for )uying and selling stoc2s and
shares. nstead 0e provide services3 0hich are multi dimensional and multi8focused in
their scope. 1here are several advantages in utili5ing our Stoc2 (ro2ing services3 0hich
are the reasons 0hy it is one of the )est in the country.
Fe offer trading on a vast platformL ?ational Stoc2 Exchange3 (om)ay Stoc2
Exchange and Eydera)ad Stoc2 Exchange. More importantly3 0e ma2e trading safe to
the maximum possi)le extent3 )y accounting for several ris2 factors and planning
accordingly. Fe are assisted in this tas2 )y our in8depth research3 constant feed)ac2 and
sound advisory facilities. Bur highly s2illed research team3 comprising of technical
analysts as 0ell as fundamental specialists3 secure result8oriented information on mar2et
trends3 mar2et analysis and mar2et predictions. 1his crucial information is given as a
constant feed)ac2 to our customers3 through daily reports delivered thrice daily L 1he 7re8
session Report3 0here mar2et scenario for the day is predicted3 1he Mid8session Report3
timed to arrive during lunch )rea2 3 0here the mar2et forecast for the rest of the day is
given and 1he 7ost8session Report3 the final report for the day3 0here the mar2et and the
report itself is revie0ed. 1o add to this repository of information3 0e pu)lish a monthly
maga5ine. 1he $inapolis3 0hich analy5es the latest stoc2 mar2et trends and ta2es a close
loo2 at the various investment options3 and products availa)le in the mar2et3 0hile a
0ee2ly report3 called ,arvy (a5aar (aatein 2eeps you more informed on the immediate
trends in the stoc2 mar2et. n addition3 our specific industry reports give comprehensive
information on various industries. (esides this3 0e also offer special portfolio analysis
pac2ages that provide daily technical advice on scripts for successful portfolio
management and provide customi5ed advisory services to help you ma2e the right
financial moves that are specifically suited to your portfolio.
Bur Stoc2 (ro2ing services are 0idely net0or2ed across ndia3 0ith the num)er
of our trading terminals providing retail stoc2 )ro2ing facilities. Bur services have
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1#
Awareness of commodity market with reference Derivative investors
increasingly offered customer oriented convenience3 0hich 0e provide to a spectrum of
investors3 high8net 0orth or other0ise3 0ith e/ual dedication and competence.
2arvy ommodities 3rokin4 Limited
"t ,arvy Commodities3 0e are focused on ta2ing commodities trading to ne0
dimensions of relia)ility and profita)ility. Fe have made commodities trading3 an
essentially age8old practice3 into a sophisticated and scientific investment option.
Eere 0e ena)le trade in all goods and products of agricultural and mineral origin that
include lucrative commodities li2e gold and silver and popular items li2e oil3 pulses and
cotton through a 0ell8systemati5ed trading platform.
Bur technological and infrastructural strengths and especially our street8smart s2ills ma2e
us an ideal )ro2er. Bur service matrix is holistic 0ith a gamut of advantages3 the first and
foremost )eing our legacy of human resources3 technology and infrastructure that comes
from )eing part of the ,arvy =roup.
5)a-ity Po-icy/
1o achieve and retain leadership3 ,arvy shall aim for complete customer
satisfaction3 )y com)ining its human and technological resources3 to provide superior
/uality financial services. n the process3 ,arvy 0ill strive to exceed CustomerNs
expectations.
A'o)t 2arvy omodities 3rokin4 Limited/
Commodities mar2et3 contrary to the )eliefs of many people3 has )een in existence in
ndia through the ages. Eo0ever the recent attempt )y the =overnment to permit Multi8
commodity ?ational levels exchanges has indeed given it3 a shot in the arm. "s a result
t0o exchanges Multi Commodity Exchange ;MC@< and ?ational Commodity and
derivatives Exchange ;?C9E@< have come into )eing. 1hese exchanges3 )y virtue of
their high profile promoters and sta2eholders3 )undle in themselves3 online trading
facilities3 ro)ust surveillance measures and a hassle8free settlement system.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1%
Awareness of commodity market with reference Derivative investors
1he futures contracts availa)le on a 0ide spectrum of commodities li2e =old3 Silver3
Cotton3 Steel3 Soya oil3 Soya )eans3 Fheat3 Sugar3 Channa etc.3 provide excellent
opportunities for hedging the ris2s of the farmers3 importers3 exporters3 traders and large
scale consumers. 1hey also ma2e open an avenue for /uality investments in precious
metals. 1he commodities mar2et3 as the movements of the stoc2 mar2et or de)t mar2et
do not affect it provides tremendous opportunities for )etter diversification of ris2.
Reali5ing this fact3 even mutual funds are contemplating of entering into this mar2et.
,arvy Commodities (ro2ing Cimited is another venture of the prestigious ,arvy
group. Fith our 0ell esta)lished presence in the multifarious facets of the modern
$inancial services industry from stoc2 )ro2ing to registry services3 it is indeed a pleasure
for us to ma2e foray into the commodities derivatives mar2et 0hich opens yet another
door for us to deliver our service to our )eloved customers and the investor pu)lic at
large.
Fith the high /uality infrastructure already in place and a committed =overnment
providing continuous impetus3 it is the responsi)ility of us3 the intermediaries to deliver
these )enefits at the doorsteps of our esteemed customers. Fith our expertise in financial
services3 existence across the lengths and )readths of the country and an envia)le
technological edge3 0e are all set to )ring to you3 the pleasure of investing in this
)urgeoning mar2et3 0hich can touch upon the lives of a vast ma*ority of the population
from the farmer to the corporate ali2e. Fe are confident that the commodity futures can
)e a good value addition to your portfolio.
1he company provides investment3 advisory and )ro2erage services in ndian
Commodities Mar2ets. "nd most importantly3 0e offer a 0ide reach through our )ranch
net0or2 of over 22! )ranches located across 1&6 cities.
2AR$& Advanta4e/
1rade from any0here in ndia ,arvy3 0ith its net0or2 of )ranches across the length and
)readth of the country3 is al0ays 0ithin your reach3 no matter 0here you are. 1his gives
you the facility to trade from any0here in ndia.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1&
Awareness of commodity market with reference Derivative investors
Re-ia'-e research
,arvy has a dedicated team of research analysts 0ho 0or2 round the cloc2 to
provide the )est research ne0sletters and advices. Fe reach your des2 daily3 0ee2ly and
monthly.
Persona-i.ed Services
,arvy3 0ith its 0ide array of personali5ed services from registry to stoc2 )ro2ing
ta2es the pleasure of adding one more service3 commodities )ro2ing 0ith the same
personal touch
.
State of Infrastr)ct)re
1he strong 1 )ac2)one of ,arvy helps us to provide customi5ed direct services
through our )ac2 office system3 nation80ide connectivity and 0e)site.
Ro)nd the c-ock o*erations in commodities tradin4
ndian commodities mar2et3 unli2e stoc2 mar2et 2eeps a0a2e till 11 in the night and
,arvy is all poised to offer round the cloc2 services through its dedicated team of
professionals.
1he account opening forms are availa)le at our )ranch offices and 0ith our )usiness
associates. .ou are re/uested to 2indly contact a )ranch near)y your area and complete
the account opening formalities for commodities trading at the )ranches.
"lso you can ta2e a print out and fill out a simple account opening form from our
0e)site and complete the necessary documentation as per the chec2list enclosed in the
form. 1he form after duly filled up may )e deposited at the nearest ,arvy (ranch or
"ssociate along 0ith a che/ueG99 favouring +,arvy Commodities (ro2ing 7rivate
CimitedK paya)le at Eydera)ad to0ards initial margin.7lease remem)er the Mem)er8
Client agreement has to )e executed on a non8*udicial stamp paper3 as per the applica)le
)y the MStamp 9uty "ctI of the relevant state.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 1'
Awareness of commodity market with reference Derivative investors
De*ositInitia-%ar4in/
.ou need to deposit an initial upfront margin as specified )y the exchange ;usually
)et0een !816D of the contract value<.1he che/ueG99 should )e in favour of +,arvy
Commodities (ro2ing 7rivate CimitedK
%ark to %arket %ar4in/
n addition to initial margin3 you also need to 2eep a mar2 to mar2et margin for
ta2ing care of the adverse price movements3 if any.
Achievements
• "mong the top ! stoc2 )ro2ers in ndia ;4D of ?SE volumes<
• ndiaNs ?o. 1 Registrar 4 Securities 1ransfer "gents
• "mong the to top 3 9epository 7articipants
• Cargest ?et0or2 of (ranches 4 (usiness "ssociates
• SB '662 certified operations )y 9?-
• "mong top 16 nvestment )an2ers
• Cargest 9istri)utor of $inancial 7roducts
• "d*udged as one of the top !6 1 uses in ndia )y MS "sia
• $ull $ledged 1 driven operations

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Awareness of commodity market with reference Derivative investors
OR,ANISATION +ART

%ana4in4 Director

hief %ana4in4 Director
$ice6President $ice6President $ice6President $ice6President

2arvy 2arvy 2arvy 2arvy

Sec)rities Ltd. Stock 3rokin4 Ltd ons)-tants Ltd. Investors Services Ltd.

.
De*)ty De*)ty De*)ty De*)ty
,enera- ,enera- ,enera- ,enera-
%ana4er %ana4er %ana4er %ana4er

Senior%ana4er Senior %ana4er Senior %ana4er Senoir%ana4er


3ranch %ana4er
N)m'er of Team Leaders

N)m'er of "7ec)tives
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 21
Awareness of commodity market with reference Derivative investors

ntroduction to the topic
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Awareness of commodity market with reference Derivative investors
Introduction to derivatives
1he origin of derivatives can )e traced )ac2 to the need of farmers to protect
themselves against $luctuations in the price of their crop. $rom the time it 0as so0n to
the time it 0as ready for harvest3 farmers 0ould face price uncertainty. 1hrough the use
of simple derivative products3 it 0as possi)le for the farmer to partially or fully transfer
price ris2s )y loc2ing8in asset prices. 1hese 0ere simple contracts developed to meet the
needs of farmers and 0ere )asically a means of reducing ris2.
" farmer 0ho so0ed his crop in :une faced uncertainty over the price he 0ould
receive for his harvest in Septem)er. n years of scarcity3 he 0ould pro)a)ly o)tain
attractive prices. Eo0ever3 during times of oversupply3 he 0ould have to dispose off his
harvest at a very lo0 price. Clearly this meant that the farmer and his family 0ere
exposed to a high ris2 of price uncertainty.
Bn the other hand3 a merchant 0ith an ongoing re/uirement of grains too 0ould
face a price ris2 O that of having to pay exor)itant prices during dearth3 although
favora)le prices could )e o)tained during periods of oversupply. Pnder such
circumstances3 it clearly made sense for the farmer and the merchant to come together
and enter into a contract 0here)y the price of the grain to )e delivered in Septem)er
could )e decided earlier. Fhat they 0ould then negotiate happened to )e a futures8type
contract3 0hich 0ould ena)le )oth parties to eliminate the price ris2. n 1&4&3 the
Chicago (oard of 1rade3 or C(B13 0as esta)lished to )ring farmers and merchants
together. " group of traders got together and created the Qto arriveI contract that permitted
farmers to loc2 in to price upfront and deliver the grain later. 1hese to8arrive contracts
proved useful as a device for hedging and speculation on price changes. 1hese 0ere
eventually standardi5ed3 and in 1'2! the $irst futures clearing house came into existence.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 23
Awareness of commodity market with reference Derivative investors
1oday3 derivative contracts exist on a variety of commodities such as corn3 pepper3
cotton3 0heat3 silver3 etc. (esides commodities3 derivatives contracts also exist on a lot of
$inancial underlying li2e stoc2s3 interest rate3 exchange rate3 etc.

Commodity $utures are contracts to )uy specific /uantity of a particular
commodity at a future date. t is similar to the index futures and stoc2 futures )ut the
underlying happens to )e commodities instead of stoc2s and indices. Commodity futures
mar2et has )een in existence in ndia for centuries.
1he =overnment of ndia )anned futures trading in certain commodities in
%6s.Eo0ever trading in commodity futures has )anned permitted again )y the
government in order to help the commodity products 3traders3 and investors. Forld0ide3
commodity exchanges originated )efore the other financial exRchanges. n fact most of
the derivatives instruments had their )irth in commodity exchanges. Commodity mar2ets
are mar2ets 0here ra0 or primary products are exchanged.
1hese ra0 commodities are traded on regulated exchanges3 in 0hich they are )ought and
sold in standardi5ed Contracts. Commodity $uture is a 9erivative instrument 0here the
underlying asset is a commodity. Commodity future are exchanges traded contracts to sell
or )uy standardi5ed futures contract.
Some common-y )sed derivatives
0orwards> "s 0e discussed3 a for0ard contract is an agreement )et0een t0o entities to
)uy or sell the underlying asset at a future date3 at todayNs pre8agreed price.
0)t)res> " futures contract is an agreement )et0een t0o parties to )uy or sell the
underlying asset at a future date at todayNs future price. $utures contracts differ from
for0ard contracts in the sense that they are standardi5ed and exchange traded.
O*tions> 1here are t0o types of options 8 calls and puts. Calls give the )uyer the right
)ut not the o)ligation to )uy a given /uantity of the underlying asset3 at a given price on
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 24
Awareness of commodity market with reference Derivative investors
or )efore a given future date. 7uts give the )uyer the right3 )ut not the o)ligation to sell a
given /uantity of the underlying asset at a given price on or )efore a given date.
1arrants> Bptions generally have lives of upto one year3 the ma*ority of options traded
on options exchanges having a maximum maturity of nine months. Conger dated options
are called 0arrants and are generally traded over the counter.
3askets> (as2et options are options on portfolios of underlying assets. 1he underlying
asset is usually a 0eighted average of a )as2et of assets. E/uity index options are a form
of )as2et options.
Swa*s> S0aps are private agreements )et0een t0o parties to exchange cash flo0s in the
future according to a prearranged formula. 1hey can )e regarded as portfolios of for0ard
contracts. 1he t0o commonly used s0aps are >
Interest rate swa*s> 1hese entail s0apping only the interest related cash flo0s )et0een
the parties in the same currency
)rrency swa*s> 1hese entail s0apping )oth principal and interest )et0een the parties3
0ith the cash flo0s in one direction )eing in a different currency than those in the
opposite direction.
"7chan4e traded vers)s OT derivatives
9erivatives have pro)a)ly )een around for as long as people have )een trading 0ith one
another. $or0ard contracting dates )ac2 at least to the 12th century3 and may 0ell have
)een around )efore then. 1hese contracts 0ere typically B1C 2ind of contracts. Bver the
counter ;B1C< derivatives are privately negotiated contracts. Merchants entered into
contracts 0ith one another for future delivery of specified amount of commodities at
specified price. " primary motivation for pre8 arranging a )uyer or seller for a stoc2 of
commodities in early for0ard contracts 0as to lessen the possi)ility those large s0ings
0ould inhi)it mar2eting the commodity after a harvest Cater many of these contracts
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 2!
Awareness of commodity market with reference Derivative investors
0ere standardi5ed in terms of /uantity and delivery dates and )egan to trade on an
exchange.
The OT derivatives markets have the fo--owin4 feat)res com*ared to e7chan4e6
traded derivatives>
1. 1he management of counter8party ;credit< ris2 is decentrali5ed and located 0ithin
individual nstitutions.
2. 1here are no formal centrali5ed limits on individual positions3 leverage3 or margining.
3. 1here are no formal rules for ris2 and )urden sharing.
4. 1here are no formal rules or mechanisms for ensuring mar2et sta)ility and integrity3
and for
Safeguarding the collective interests of mar2et participants.
!. 1he B1C contracts are generally not regulated )y a regulatory authority and the
exchangeNs self8regulatory organi5ation3 although they are affected indirectly )y national
legal systems3 )an2ing supervision and mar2et surveillance.
1he B1C derivatives mar2ets have 0itnessed rather sharp gro0th over the last fe0 years3
0hich has accompanied the moderni5ation of commercial and investment )an2ing and
glo)ali5ation of financial activities. 1he recent developments in information technology
have contri)uted to a great extent to these developments. Fhile )oth exchange8traded and
B1C derivative Contracts offer many )enefits3 the former have rigid structures compared
to the latter. 1he largest B1C derivative mar2et is the inter)an2 foreign exchange mar2et.
Commodity derivatives the 0orld over are typically exchange traded and not B1C in
nature.
"7chan4e traded vers)s OT derivatives
9erivatives have pro)a)ly )een around for as long as people have )een trading 0ith one
another. $or0ard contracting dates )ac2 at least to the 12th century3 and may 0ell have
)een around )efore then. 1hese contracts 0ere typically B1C 2ind of contracts. Bver the
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 2#
Awareness of commodity market with reference Derivative investors
counter ;B1C< derivatives are privately negotiated contracts. Merchants entered into
contracts 0ith one another for future delivery of specified amount of commodities at
specified price. " primary motivation for pre8 arranging a )uyer or seller for a stoc2 of
commodities in early for0ard contracts 0as to lessen the possi)ility those large s0ings
0ould inhi)it mar2eting the commodity after a harvest Cater many of these contracts
0ere standardi5ed in terms of /uantity and delivery dates and )egan to trade on an
exchange.
The OT derivatives markets have the fo--owin4 feat)res com*ared to e7chan4e6
traded derivatives>
1. 1he management of counter8party ;credit< ris2 is decentrali5ed and located 0ithin
individual nstitutions.
2. 1here are no formal centrali5ed limits on individual positions3 leverage3 or margining.
3. 1here are no formal rules for ris2 and )urden sharing.
4. 1here are no formal rules or mechanisms for ensuring mar2et sta)ility and integrity3
and for
Safeguarding the collective interests of mar2et participants.
!. 1he B1C contracts are generally not regulated )y a regulatory authority and the
exchangeNs self8regulatory organi5ation3 although they are affected indirectly )y national
legal systems3 )an2ing supervision and mar2et surveillance.
1he B1C derivatives mar2ets have 0itnessed rather sharp gro0th over the last
fe0 years3 0hich has accompanied the moderni5ation of commercial and investment
)an2ing and glo)ali5ation of financial activities. 1he recent developments in information
technology have contri)uted to a great extent to these developments. Fhile )oth
exchange8traded and B1C derivative Contracts offer many )enefits3 the former have rigid
structures compared to the latter. 1he largest B1C derivative mar2et is the inter)an2
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 2%
Awareness of commodity market with reference Derivative investors
foreign exchange mar2et. Commodity derivatives the 0orld over are typically exchange
traded and not B1C in nature.
ommodities tradin4
Bver the modern age of investing3 commodity trading has emerged as an important player
in the 0ay that people invest in and speculate. t 0as developed as a reaction to the 0ay
that )usiness is conducted3 and it continues today in the form of commodities trading
online. Many different people turn their )usiness 2no0 ho0 into a profita)le venture3 and
it is commodities and futures trading that helps them get there. Simply put3 commodities
are items li2e3 0heat3 corn3 gold and silver3 and cattle and por2 )ellies3 and crude oil.
Fhen farmers ta2e their crop to Smar2etS3 they are selling commodities. 1rading
commodities is the 0orldNs one perfect )usiness. 1he upside potential is unlimited and
you can control the do0nside. .ou can trade commodities on a part time )asis or a full8
time )asis. .ou can spend as little as an and earn a full time income
Commodities exchanges usually trade futures contracts on commodities3 such as trading
contracts to receive something3 say corn3 in a certain month. " farmer raising corn can
sell a future contract on his corn3 0hich 0ill not )e harvested for several months3 and
guarantee the price he 0ill )e paid 0hen he deliversL a )rea2fast cereal producer )uys the
contract no0 and guarantees the price 0ill not go up 0hen it is delivered. 1his protects
the farmer from price drops and the )uyer from price rises.
Speculators and investors also )uy and sell the futures contracts to ma2e a profit and
provide li/uidity to the system
7eople have started 0ith a small account and in a short period of time )uilt their account
up to the point that they have )een a)le to /uit their *o)s and trade commodities full8time
providing themselves 0ith a very comforta)le living.
Commodities are ra0 materials used to create the products consumers )uy3 from food to
furniture to gasoline. Commodities include agricultural products such as 0heat and cattle3
energy products such as oil and gasoline3 and metals such as gold3 silver and aluminum.
1here are also soft commodities3 or those that cannot )e stored for long periods of time.
Soft commodities are sugar3 cotton3 cocoa and coffee.
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Awareness of commodity market with reference Derivative investors
1he commodity mar2et has evolved significantly from the days 0hen farmers hauled
)ushels of 0heat and corn to the local mar2et. n the 1&66Is3 demand for standardi5ed
contracts for trading agricultural products led to the development of commodity futures
exchanges. 1oday3 futures and options contracts on a huge array of agricultural products3
metals3 energy products and soft commodities can )e traded on exchanges all over the
0orld.
Commodities have also evolved as an asset class 0ith the development of commodity
futures indexes and3 more recently3 the introduction of investment vehicles that trac2
commodity indexes.
Commodity prices have )een driven higher )y a num)er of factors3 including increased
demand from China3 ndia and other emerging countries that need oil3 steel and other
commodities to support manufacturing and infrastructure development. 1he commodity
supply chain has also suffered from a lac2 of investment3 creating )ottlenec2s and adding
an insurance premium andGor a convenience yield to the returns of many commodity
futures. Bver the long term3 these economic factors are li2ely to support continued gains
in commodity index returns.
1he potential for attractive returns is pro)a)ly the most o)vious reason for increased
investor interest in commodities3 )ut it isnNt the only factor. Commodities may offer
investors other significant )enefits3 including portfolio diversification and a hedge against
inflation and ris2.
Commodities are real assets3 unli2e stoc2s and )onds3 0hich are financial assets.
Commodities3 therefore3 tend to react to changing economic conditions in different 0ays
than traditional financial assets. $or example3 commodities are one of the fe0 asset
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 2'
Awareness of commodity market with reference Derivative investors
classes that tend to )enefit from rising inflation. "s demand for goods and services
increases3 the price of those goods and services usually goes up as 0ell3 as do the prices
of the
commodities used to produce those goods and services. (ecause commodity prices
usually rise 0hen inflation is accelerating3 investing in commodities may provide
portfolios 0ith a hedge against inflation.
1hy invest in commoditiesT
Ceverage is very important to the commodities mar2ets. Pnli2e the stoc2 mar2et3 0here
you might have to invest 163666 dollars to leverage 163666 dollars. " commodities trader
can leverage tens of thousands of dollars 0orth of a commodity for pennies on the dollar.
"lso unli2e stoc2s3 commodities have intrinsic value and 0ill not go )an2rupt.
1he futures mar2ets are so crucial to the 0ell )eing of our nation3 that the government
esta)lished the Commodity $utures 1rading Commission ;C$1C< to oversee the industry.
1here is also a self8regulatory )ody3 the ?ational $utures "ssociation ;?$"<3 0ho
monitor the activities of all futures mar2et professionals to ensure the integrity of the
futures mar2ets.
Commodities also give the investor the a)ility to participate in virtually all sectors of the
0orld economy and have the potential to produce returns that tend to )e independent of
other mar2ets. n fact portfolios that add commodity investments can actually lo0er the
overall portfolio ris2 )y diversification.
Fhat is the difference )et0een hedging and speculatingT
:ust a)out every product that you consume 0ould li2ely cost dramatically more 0ithout
the commodities futures mar2ets. (ecause of the intrinsic ris2s associated to )eing in
)usiness3 lac2ing the a)ility to shift ris23 a manufacturerGproducer of goods or services
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 36
Awareness of commodity market with reference Derivative investors
0ould )e forced to charge higher prices3 and the consumer 0ould have to pay those
higher prices. 1his shifting of ris2 to someone 0illing to accept it is called hedging.
Manufacturers could effectively loc2 in a sales price )y going short an e/uivalent amount
of goods 0ith futures contracts. f a mining company 2ne0 that they 0ere going to sell
1666 ounces of gold in several months3 they could protect themselves for a future price
decline )y going short 16 gold futures contracts today. f the price of gold fell )y U36 in
the follo0ing months3 they 0ould receive that much less in the cash mar2etplace for their
gold3 )ut earn that much )ac2 0hen they offset their short gold futures position. 1he
futures price 0ill eventually )ecome the cash price. " user or )uyer of goods can use the
futures mar2et in the same manner. 1hey 0ould need to protect themselves from a future
price increase3 and therefore go long futures contracts.
1he person 0illingly accepting a ris2 does so )ecause of the opportunity to profit from
price movements3 this is 2no0n as speculating. 1he cotton in your shirt3 the orange *uice3
cereal and coffee you had for )rea2fast3 the lum)er3 copper and mortgage for your home3
the gas or ethanol that you put in your car all 0ould )e priced many times higher 0ithout
the participation of speculators in the futures mar2ets. 1hrough supply and demand
mar2et forces3 e/uili)rium prices are reached in an orderly and e/uita)le manner 0ithin
the exchanges3 and 0orld economies3 and you3 )enefit tremendously from futures trading.
Fhat commodity futures mar2ets doT
" 0ell8developed and effective commodity futures mar2et3 unli2e physical mar2et3
facilitates off setting the transactions 0ithout impacting on physical goods until the
expiry of a contract. $utures mar2et attracts
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Awareness of commodity market with reference Derivative investors
hedgers 0ho minimi5e their ris2s3 and encourages competition from other traders
0ho possess mar2et information and price *udgment. Fhile hedgers have long8term
perspective of the mar2et3 the traders3 or ar)itragers as they are often called3 hold an
immediate vie0 of the mar2et. " large num)er of different mar2et players
participate in )uying and selling activities in the mar2et )ased on diverse domestic
and glo)al information3 such as price3 demand and supply3 climatic conditions and
other mar2et related information. "ll these factors put together result in efficient
price discovery as a result of large num)er of )uyers and sellers 1ransacting in the
futures mar2et. $utures mar2et3 as o)served from the cross8country experience of
active commodity futures mar2ets3 helps in efficient price discovery of the
respective commodities and does not impair the long8run e/uili)rium 7rice of
commodities. "t times3 ho0ever3 price )ehavior of a commodity in the futures
mar2et might sho0 Some a)errations reacting to the element of speculation and
M)and0agon effectI inherent in any mar2et3 )ut
it /uic2ly reverts to long8run e/uili)rium price3 as information flo0s in3 reflecting
fundamentals of the respective commodity.
n futures mar2et3 speculators play a role in providing li/uidity to the mar2ets and
may sometimes )enefit from price movements3 )ut do not have a systematic causal
influence on prices. "n effective architecture for regulation of trading and for
ensuring transparency as 0ell as timely flo0 of information to the mar2et
participants 0ould enhance the utility of commodity exchanges in efficient price
discovery and minimi5e price shoc2s triggered )y unanticipated supply demand
mismatches.
Partici*ants of ommodity %arket/
1he participants 0ho trade in the commodity derivatives mar2ets can )e classified as
follo0sL
+ed4ers/ Eedgers are participants 0ho use commodity derivative instruments to hedge G
eliminate the price ris2 associated 0ith the underlying commodity asset held them.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 32
Awareness of commodity market with reference Derivative investors
Eedgers are those 0ho protect themselves from the ris2 associated 0ith the price of an
asset )y using derivatives. " person 2eeps a close 0atch upon the prices discovered in
trading and 0hen the comforta)le price is reflected according to his 0ants3 he sells
futures contracts. n this 0ay he gets an assured fixed price of his produce.
n general3 hedgers use futures for protection against adverse future price movements in
the underlying cash commodity. Eedgers are often )usinesses3 or individuals3 0ho at one
point or another deal in the underlying cash commodity.
1a2e an example> " Eedger pay more to the farmer or dealer of a produce if its prices go
up. $or protection against higher prices of the produce3 he hedges the ris2 exposure )y
)uying enough future contracts of the produce to cover the amount of produce he expects
to )uy. Since cash and futures prices do tend to move in tandem3 the futures position 0ill
profit if the price of the produce rise enough to offset cash loss on the produce.
S*ec)-ators/ Speculators are participants 0ho )et on future movements in the price of
an asset i.e. commodity to ma2e short term gain from the price movements.
Commodity future s gives theme the leverage so to ta2e ris2s on nominal margin
payments and there)y increasing for )igger gains or losses. Speculators are some 0hat
li2e a middle man. 1hey are never interested in actual o0ing the commodity. 1hey 0ill
*ust )uy from one end and sell it to the other in anticipation of future price movements.
1hey actually )et on the future movement in the price of an asset.
1hey are the second ma*or group of futures players. 1hese participants include
independent floor traders and investors. 1hey handle trades for their personal clients or
)ro2erage firms.
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Awareness of commodity market with reference Derivative investors
(uying a futures contract in anticipation of price increases is 2no0n as Mgoing longI.
Selling a futures contract in anticipation of a price decrease is 2no0n as Mgoing shortI.
Speculative participation in futures trading has increased 0ith the availa)ility of
alternative methods of participation.
S*ec)-ators have certain advanta4es over other investments they are as fo--ows/
f the traderIs *udgment is good3 he can ma2e more money in the futures mar2et faster
)ecause prices tend3 on average3 to change more /uic2ly than real estate or stoc2 prices.
$utures are highly leveraged investments. 1he trader puts up a small fraction of the value
of the underlying contract as margin3 yet he can ride on the full value of the contract as it
moves up and do0n. 1he money he puts up is not a do0n payment on the underlying
contract3 )ut a performance )ond. 1he actual value of the contract is only exchanged on
those rare occasions 0hen delivery ta2es place.
Ar'itra4e)rs/ "r)itrageurs 0or2 at ma2ing profits )y ta2ing advantaged of existence of
difference in prices of the same product across different mar2ets ;MC@ and ?C9E@<.
Investors/ nvestors are participants having a a longer term vie0 as compared to
speculators 0hen they enter into trade in the commodes mar2et. E.g. $armers3 7roducers3
consumers3 etc.
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Awareness of commodity market with reference Derivative investors
%a(or ommodity "7chan4es/
1he =overnment of ndia permitted esta)lishment of ?ational8level Multi8 Commodity
exchanges in the year 2662 and accordingly three exchanges have come into picture.
? Multi8Commodity Exchange of ndia Ctd3 Mum)ai.;MC@<.
? ?ational Commodity and 9erivative Exchange of ndia3 Mum)ai ;?C9E@<.
? ?ational Multi Commodity Exchange3 "hemda)ad ;?MCE<.
Eo0ever there is regional commodity exchanges functioning all over the country.
,arvy commodities (ro2ing 7vt.Ctd has got mem)ership of )oth the premier
commodity exchanges i.e. MC@ and ?C9E@.
1he t0o exchanges ;?CE9@4MC@< have seen tremendous gro0th in less than t0o
years . the daily average on these t0o exchanges put together has no0 gro0n to a
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Awareness of commodity market with reference Derivative investors
healthy Rs.%&66 Crores. t has )een )elieved )y experts that the volumes on these
exchanges 0ould the stoc2 mar2et in the days to come. Commodity exchanges are
regulated )y $or0ards Mar2et mission ;$MC<L $or0ards Mar2et Commission 0or2s
under the purvie0 of the ministry of $ood 3"griculture and 7u)lic 9istri)ution.
"t ?C9E@ the contracts expire on 26
th
day of each month .if 26
th
happens to )e a holiday
the expiry day 0ill )e the previous 0or2ing day.
"t MCE the expiry day is 1!
th
of every month .if 1!
th
happens to )e a holiday the expiry
day 0ill )e the previous day. 1he expiry day differs for different commodities in )oth the
exchanges.
=enerally commodity futures re/uire an initial margin )et0een !816D of the contract
value. 1he exchanges levy higher additional margin in case of excess volatility. 1he
margin amount varies )et0een exchanges and commodities. 1herefore they provide great
)enefits of leverage in comparison to the stoc2 and index futures trade on the stoc2
exchanges. 1he exchange also re/uires the daily profits and losses to )e paid inGout on
open positions ;mar2 to Mar2et or M1M< so that the )uyers and sellers do not carry a ris2
of not more than one day.
0)nctions of an "7chan4e
? 7roduct Conceptuali5ation and 9esign
? 7rice 9iscovery 4 9issemination
? Ro)ust 1rading 4 Settlement systems
? Management of Counter party Credit
Ris2
? Self Regulation to ensure
? Bvervie0 of 1rading and Surveillance
? "udit and revie0 of Mem)ers
? Enforcement of Exchange rules
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Awareness of commodity market with reference Derivative investors
ommodities se-ected in Phase I
3)--ion
? =old
? Silver
A4ri commodities
? Soya )ean
? Soya oil
? RapeseedGMustard
? Seed RapeseedG
? Mustard Seed Bil
? Crude 7alm oil
? R(9 7almolein
46 ommodities introd)ced in Phase II
? Ru))er
• :ute
• 7epper
• Chana ;=ram<
• =uar
• Fheat
Commodities exchanges across the world
Main commodity exchanges 0orld0ide>
Americas
"7chan4e A''reviation Location Prod)ct Ty*es
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 3%
Awareness of commodity market with reference Derivative investors
(ra5ilian Mercantile and
$utures Exchange
(M$ (ra5il
"gricultural3 (iofuels3 7recious
Metals
%" ,ro)* CME Chicago
"gricultural3 (iofuels3 7recious
Metals
Chicago Climate Exchange CC@ Chicago Emissions
EedgeStreet Exchange California Energy3 industrial Metals
ntercontinental Exchange CE Energy3 Emissions
,ansas City (oard of 1rade ,C(1 ,ansas City "gricultural
Memphis Cotton Exchange Memphis "gricultural
Mercado a 1ermino de
(uenos "ires
M"1)a "rgentina "gricultural
Minneapolis =rain
Exchange
M=E@ Minneapolis "gricultural
New &ork 3oard of Trade ?.(B1 ?e0 .or2 "gricultural3 (iofuels
New &ork %ercanti-e
"7chan4e
?.ME@ ?e0 .or2
Energy3 "gricultural3 ndustrial
Metals3 7recious Metals
P.S. $utures Exchange PS$E Chicago Energy
Finnipeg Commodity
Exchange
FCE Finnipeg "gricultural
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Awareness of commodity market with reference Derivative investors
Asia
"7chan4e A''reviation Location Prod)ct Ty*es
(ursa Malaysia M9E@ Malaysia (iofuels
Central :apan Commodity
Exchange
?agoya Energy3 ndustrial Metals3 Ru))er
Da-ian ommodity
"7chan4e
9CE China "gricultural3 7lastics
9u)ai Mercantile Exchange 9ME 9u)ai Energy
9u)ai =old 4 Commodities
Exchange
9=C@ 9u)ai 7recious Metals
,ansai Commodities
Exchange
,"?E@ Bsa2a "gricultural
Multi Commodity Exchange MC@ ndia
Energy3 7recious Metals3 Metals3
"gricultural
?ational Commodity
Exchange Cimited
,arachi 7recious Metals3 "gricultural
?ational Commodity and
9erivatives Exchange
?C9E@ Mum)ai "ll
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 3'
Awareness of commodity market with reference Derivative investors
Singapore Commodity
Exchange
SCBM Singapore "gricultural3 Ru))er
1o2yo Commodity Exchange 1BCBM 1o2yo
Energy3 7recious Metals3
ndustrial Metals3 "gricultural
1o2yo =rain Exchange 1=E 1o2yo "gricultural
Vhen Vhou Commodity
Exchange
CVCE China "gricultural
")ro*e
"7chan4e A''reviation Location Prod)ct Ty*es
-ime7 CCME@ "msterdam Emissions
N&S" ")ro ne7t Europe "gricultural
European Climate Exchange EC@ Europe Emissions
London %eta- "7chan4e CME Condon ndustrial Metals3 7lastics
Ris2 Management Exchange RM@ Eanover "gricultural
Oceania
"7chan4e A''reviation Location Prod)ct Ty*es
"ustralian Securities Exchange "S@ Sydney "gricultural
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 46
Awareness of commodity market with reference Derivative investors

Indian Commodities Market
n ndia commodity mar2ets have )een in existence for decades. Eo0ever in 1'%!
the =overnment )anned for0ard contracts on commodities. Cater in 2663 the
=overnment of ndia again allo0ed for0ard contracts in commodities. 1here have )een
over 26 exchanges existing for commodities all over the country. Eo0ever these
exchanges are commodity specific and have a strong regional focus. 1he =overnment3 in
order to ma2e the commodities mar2et more transparent and efficient3 accorded approval
for setting up of national level multi commodity exchanges. "ccordingly three exchanges
are there 0hich deal in a 0ide variety of commodities and 0hich allo0 nation80ide
trading. 1hey are
• Multi Commodity Exchange ;MC@<
• ?ational Commodities 9erivatives Exchange ;?C9E@<
• ?ational Multi Commodity Exchange ;?MCE<
1he MC@ is Mum)ai8)ased and is promoted )y $inancial 1echnologies 7vt Ctd.
MC@ allo0s trading on a host of commodities ranging from )ullion to grains. 7lease
chec2 the MCommodities tradedI menuI. MC@ has )ecome the first exchange in the 0orld
to launch futures on steel. Recently on 11th "ugust 26643 MC@ crossed a pea2 daily
turnover of Rs.'!6 Crores.
?C9E@ is promoted )y an elite group of financial institutions including ?SE3
CC3 S(3 P( etc.3 ?C9E@ also allo0s trading of futures on a host of commodities.
?ational Commodities and 9erivatives Exchange3 ?C9E@ "t ,arvy Commodities3 0e
are focused on ta2ing commodities trading to ne0 dimensions of relia)ility and
BABASAB PATIL MBA FINANCE PROJECT REPORT Page 41
Awareness of commodity market with reference Derivative investors
profita)ility. Fe have made commodities trading3 an essentially age8old practice3 into a
sophisticated and scientific investment option.
Eere 0e ena)le trade in all goods and products of agricultural and mineral origin
that include lucrative commodities li2e gold and silver and popular items li2e oil3 pulses
and cotton through a 0ell8systemati5ed trading platform.
Bur technological and infrastructure strengths and especially our street8smart
s2ills ma2e us an ideal )ro2er. Bur service matrix is holistic 0ith a gamut of advantages3
the first and foremost )eing our legacy of human resources3 technology and infrastructure
that comes from )eing part of the ,arvy =roup.
Bur 0ide national net0or23 spanning the length and )readth of ndia3 further
supports these advantages. Regular trading 0or2shops and seminars are conducted to
hone trading strategies to perfection. Every move made is a calculated one3 )ased on
relia)le research that is converted into valua)le information through daily3 0ee2ly and
monthly ne0sletters3 calls and intraday alerts. $urther3 personali5ed service is provided
here )y a dedicated team committed to giving hassle8free service 0hile the )ro2erage
rates offered are extremely competitive.
Bur commitment to excel in this sector stems from the immense importance that
commodities )ro2ing has to a cross8section of investors farmers3 exporters3 importers3
manufacturers and the =overnment of ndia itself.
Commodities mar2et essentially represents another 2ind of organi5ed mar2et *ust
li2e the stoc2 mar2et and the de)t mar2et. Eo0ever3 commodities mar2et3 )ecause of its
uni/ue nature lends to the )enefits of a 0ide spectrum of people li2e investors3 importers3
exporters3 producers3 corporate etc.
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Awareness of commodity market with reference Derivative investors
O%%ODIT& %AR2"T IN INDIAN P"RSP"TI$".
ndia3 a commodity )ased economy 0here %!D of the one )illion populations
depend on agriculture3 surprisingly has an underdeveloped commodity mar2et. 1he
history of commodity mar2ets in ndia is more than a century old. 1he institution of
formal commodity mar2et in ndia is almost as old as the P, and the PS.
1he first organi5ed commodity mar2et in ndia 0as esta)lished in the late 1'th
century3 (om)ay Cotton "ssociation Ctd. 0as set up in 1&%! )y the (om)ay Cotton
Exchange ltd. n 1&'33 due to 0idespread discontent amongst leading cotton mill o0ners
and merchants over functioning of (om)ay Cotton 1rade "ssociation.
Commodities mar2ets offer immense potential to )ecome a separate asset class for
mar2et savvy investors3 ar)itrageurs and speculators. Commodities mar2ets are easy to
understand as far as the demand and supply fundamentals are concerned as these are t0o
things that guide these mar2ets. 1he investors 0ill have to understand the ris2s and the
advantages )efore *umping the )and 0agon. Commodities futures are less volatile as
compared to e/uity and )onds. Some of the other advantages lin2ed to commodity futures
are )etter ris2 ad*usted3 good hedge against do0nfall in e/uities or )onds as there is no or
very less correlation and also a very effective hedge against inflation.
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Awareness of commodity market with reference Derivative investors
1he futures mar2et in commodities offers )oth cash and delivery8)ased
settlement. nvestors can choose )et0een the t0o. f the )uyer chooses to ta2e delivery of
the commodity3 a transfera)le receipt from the 0arehouse 0here goods are stored is
issued in favor of the )uyer. Bn producing this receipt3 the )uyer can claim the
commodity from the 0arehouse. "ll open contracts not intended for delivery are cash8
settled. Fhile speculators and ar)itrageurs generally prefer cash settlement3 commodity
stoc2 lists and 0holesalers go for delivery. 1rading in any contract month 0ill open on
the t0enty first day of the month3 three months prior to the contract month. $or example3
the 9ecem)er 266! contracts open on 21 Septem)er 266! and the due date is the 268day
of the delivery month.
"ll contracts settling in cash 0ill )e settled on the follo0ing day after the
contract expiry date. Commodity trading follo0s a 1 W 1 settlement system3 0here the
settlement date is the next 0or2ing day after expiry. Eo0ever3 in case of delivery8)ased
traders3 settlement ta2es place five to seven days after expiry
Commodities li2e chana3 urad3 soya )ean oil3 guar gum3 sugar3 pepper3 0heat3
*eera3 gold3 silver and crude oil have found fancy 0ith ndian nvestors. Expecting the
turnover on the three online commodity exchanges to spurt to more than Rs.1!666 crores
per day3 )an2s are 2een to tap the commodity trade8financing front. Commercial )an2s
are chasing the commodity industry 0ith attractive lending rates )et0een &D and &.!D as
against the normal lending rate )et0een 11D and 14D.
Commodity exchanges in ndia 0ill contri)ute significantly to0ards the
development of ndian economy as a 0hole. Commodity mar2et is undergoing some
)rea2through changes li2e demat3 trading of commodities li2e crude oil and plastics3 also
=B is contemplating of implenting Bptions trading.
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Awareness of commodity market with reference Derivative investors
1oday commodity mar2et has provided investors 0ith an opportunity to invest in
an asset class 0hich yields high returns 0ith lo0 ris2. n next ! years time 0ill )e seeing
resurgence of the century old commodity mar2et
1he commodity market in India comprises of all palpa)le mar2ets that 0e come
across in our daily lives. Such markets are social institutions that facilitate exchange of
goods for money. 1he cost of goods is estimated in terms of domestic currency . India
ommodity %arket can )e su)divided into the follo0ing t0o categories>
• 1ho-esa-e %arket
• Retai- %arket
Cet us no0 ta2e a loo2 at 0hat the present scenario of each of the a)ove mar2ets is li2e.
1he traditional who-esa-e market in India dealt 0ith 0hole sellers 0ho )ought
goods from the farmers and manufacturers and then sold them to the retailers after
ma2ing a profit in the process. t 0as the retailers 0ho finally sold the goods to the
consumers. Fith the passage of time the importance of 0hole sellers )egan to fade out
for the follo0ing reasons>
• 1he 0hole sellers in most situations3 acted as mere parasites 0ho did not add any
value to the product )ut raised its price 0hich 0as eventually faced )y the
consumers.
• 1he improvement in transport facilities made the retailers directly interact 0ith
the producers and hence the need for 0hole sellers 0as not felt.
n recent years3 the extent of the retai- market oth organi5ed and unorgani5ed<
has evolved in leaps and )ounds. n fact3 the success stories of the commodity market of
ndia in recent years has mainly centered around the gro0th generated )y the Retai-
Sector. "lmost every commodity under the sun )oth agricultural and industrial is no0
)eing provided at 0ell distri)uted retail outlets throughout the country.
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Moreover3 the retail outlets )elong to )oth the organi5ed as 0ell as the
unorgani5ed sector. 1he )nor4ani.ed retai- o)t-ets of the yesteryears consist of small
shop o0ners 0ho are price ta2ers 0here consumers face a highly competitive price
structure. 1he or4ani.ed sector on the other hand is o0ned )y various )usiness houses
li2e 7antaloons3 Reliance3 1ata and others. Such mar2ets are usually sell a 0ide range of
articles )oth agricultural and manufactured3 edi)le and inedi)le3 perisha)le and dura)le.
Modern mar2eting strategies and other techni/ues of sales promotion ena)le such
mar2ets to dra0 customers from every section of the society. Eo0ever the gro0th of such
mar2ets has still centered on the ur)an areas primarily due to infrastructural limitations.
Considering the present gro0th rate3 the total valuation of the Indian Retai-
%arket is estimated to cross Rs. 163666 )illion )y the year 2616. 9emand for
commodities is li2ely to )ecome four times )y 2616 than 0hat it presently is.
1hat can commodity market offer8
f you are an investor3 commodities futures represent a good form of investment
)ecause of the follo0ing reasons..
• +i4h Levera4e J 1he margins in the commodity futures mar2et are less than the
$4B section of the e/uity mar2et.
• Less %ani*)-ations 8 Commodities mar2ets3 as they are governed )y international
price movements are less prone to rigging or price manipulations.
• Diversification J 1he returns from commodities mar2et are free from the direct
influence of the e/uity and de)t mar2et3 0hich means that they are capa)le of )eing used
as effective hedging instruments providing )etter diversification.
f you are an importer or an exporter3 commodities futures can help you in the follo0ing
0aysH
• +ed4e a4ainst *rice f-)ct)ations J Fide fluctuations in the prices of import or
export products can directly affect your )ottom8line as the price at 0hich you
importGexport is fixed )efore8hand. Commodity futures help you to procure or sell the
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Awareness of commodity market with reference Derivative investors
commodities at a price decided months )efore the actual transaction3 there)y ironing out
any change in prices that happen su)se/uently.
f you are a producer of a commodity3 futures can help you as follo0s>
• Lock6in the *rice for yo)r *rod)ce J f you are a farmer3 there is every chance that
the price of your produce may come do0n drastically at the time of harvest. (y ta2ing
positions in commodity futures you can effectively loc28in the price at 0hich you 0ish to
sell your produce
• Ass)red demand J "ny glut in the mar2et can ma2e you 0ait unendingly for a
)uyer. Selling commodity futures contract can give you assured demand at the time of
harvest.
f you are a large scale consumer of a product3 here is ho0 this mar2et can help you>
• ontro- yo)r cost J f you are an industrialist3 the ra0 material cost dictates the final
price of your output. "ny sudden rise in the price of ra0 materials can compel you to pass
on the hi2e to your customers and ma2e your products unattractive in the mar2et. (y
)uying commodity futures3 you can fix the price of your ra0 material.
• "ns)re contin)o)s s)**-y J "ny shortfall in the supply of ra0 materials can stall
your production and ma2e you default on your sale o)ligations. .ou can avoid this ris2
)y )uying a commodity futures contract )y 0hich you are assured of supply of a fixed
/uantity of materials at a pre8decided price at the appointed time.
1he effective mechanism of settlement and delivery procedures adopted and
employed )y MC@ has once again undergone rigorous tests and have come out extremely
successful. 1his is signified 0ith the surging trading volume in )ullion contracts and high
open interest entering the settlement period resulting in healthy /uantities getting
physically delivered. 1his 0hole process underscores the efficacy 4 transparency of the
complete trading3 settlement and delivery process employed )y MC@.
1he complete delivery procedure right from getting the possession of the precious
metal from the sellers3 necessary /uality certifications3 consignment movement3 handing
over the precious metal to the )uyers3 etc 0as completed in flat ! days period. 1he
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complete process has )een 0or2ed out at a very optimal cost and on an average each
participant involved in the delivery process had incurred only Rs. 3!6G8 per transaction.
Fhen the MC@ =old Contract entered into settlement period the Bpen nterest in
=old 0as #%6 ,gs after reducing from over 4666 ,gs fe0 days ago. 1his open interest
resulted in 1!2 ,gs of gold getting delivered and the )alance gold3 0hich entered into the
delivery period3 0as s/uared up. 1he total volume in MC@ =old 9ecem)er futures
contract 0as 236233 ,gs valuing around Rs. 14!%% crores.
Bn the same pattern Bpen nterest in Silver 0as 1#3%46 ,gs after reducing from over
13#63666 ,gs fe0 days )ac2. Eo0ever3 the actual delivery in Silver 0as 123#'& 2gs and
the )alance Silver that entered into the delivery period 0as s/uared up. 1he total volume
in MC@ Silver 9ecem)er futures contract 0as 22'!6 M. 1ons valuing around Rs. 2!624
crores.
n all the previous settlements also MC@ platform has al0ays seen appropriate
percentage of open interest position resulting in physical delivery. =old has seen a
cumulative physical delivery of 24! ,gs and Silver 21'6 ,gs across all the settlements
completed )efore the current settlement.
=old 4 silver futures contracts are getting recogni5ed as the most relia)le 4
dependa)le investment options that are today availa)le to traders and investors 0ho are
loo2ing to 0iden their portfolio )eyond e/uity instruments. 1his is )ecause of the
credi)ility that these commodities have en*oyed glo)ally and the technical 4 fundamental
analysis that has gone in arriving at various trading strategies.
ndia is the largest importer for =old in the 0orld3 around &66 tons per year3 reali5ing this
potential of =old3 =overnment of ndia has set up a committee to examine the regulatory
structure of the gold industry to ma2e ndia a gold trading hu). 1his committee is
constituted under the Chairmanship of Secretary3 9epartment of Commerce3 and Ministry
of Commerce 4 ndustry. MC@ is a mem)er of the committee and loo2s for0ard to
contri)uting suggestions on the role that $utures mar2et can play in ma2ing ndia a glo)al
gold trading hu).
1he first meeting for the =old Committee is )eing held under the Chairmanship
of Commerce Secretary on 16th 9ecem)er 2664.
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Pro'-ems 0acin4 'y ommodity 0)t)re market
1. 1he spotGphysical mar2ets are fragmented. 1his may )e )ecause of the
restrictions on the free movement of commodities in the physical form under the
Essential Commodities "ct3 "7MC "ct3 Cicensing restrictions3 etc. Eence3 the
creation of an integrated and vi)rant domestic mar2et for physical trading in
commodities 0ith ade/uate infrastructure and transparent trading system is a pre8
re/uisite for )road )ased commodity derivatives mar2ets.
2. Cac2 of mechanism for standardi5ation of 0arehousing receipts. 1he a)sence of
the regulatory authority for accreditation of 0arehouses and for setting standards for
scientific grading3 pac2aging3 storage and preservation. "s a result3 though (an2s
grant credit against 0arehouse receipts no03 they are largely restricted to the ones
issued )y the Central Farehousing Corporation and those promoted )y the State
=overnments. Eo0ever3 this pro)lem is )eing sorted out )y the $ood Ministry3
0hich is in the process of drafting a Farehouse 9evelopment and Regulation "ct to
promote 0arehouse receipts8)ased lending and commodity derivative transactions.
3. 9emateriali5ed settlement system for commodities 0hich has the standardi5ation
of 0arehouse receipts as a pre8re/uisite. " system of physical delivery of
commodities )ac2ed )y 0arehouse receipt system can help eliminate the /uality ris2
and price ris2. t 0ill facilitate seamless nation 0ide spot mar2et for commodities.
4. Creation of depository system for electronically facilitating transfer and delivery
of commodities in demateriali5ed form.
!. ?eed to ma2e 0arehouse receipts transfera)le. Fe understand that a )ill to
amend the $or0ard Contracts ;Regulation< "ct3 1'!2 is slated to )e ta2en up during
the current )udget session of the 7arliament3 0hich proposes to permit the
transfera)ility of 0arehouse receipts )y scrapping Section 1&;2< of the "ct. 1his 0ill
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Awareness of commodity market with reference Derivative investors
also easy access to finance from )an2s and financial institutions against produce
stored in 0arehouses.
#. Most of the commodity exchanges function as speciali5ed product )ourses. 1his
is even true of the national multi commodity exchanges )ecause of lac2 of volumes
in many commodities in spite the trading )eing allo0ed in many formally. Fhile
?C9E@ technically trades in 3! commodities3 a)out '6 per cent of its volume comes
from *ust & products. n case of MC@3 gold and silver account for a ma*or share in
the trading volume3 though it trades in 41 commodities. 7epper3 cardamom3 ru))er3
coffee and *ute products are the five products that are prominently traded in ?MCE
even though a)out !' commodities are traded here. 1his may )e attri)uted to the fact
that there are different players for different commodities.
%. 1here are no uniform contract specifications for the same commodity traded on
various exchanges. "s a result3 there is no proper mechanism to assess price of the
same commodity across various exchanges3 as price depends on the contract
specification.
&. Bnline trading at the national level is mandatory only in respect of ?ational level
multi commodity exchanges3 0hile such a compulsion is not applica)le to the
regional ones. Eence transparency suffers.
'. 9emutuali5ation is yet to happen completely. Many exchanges are associations of
mem)ers 0ho retain trading rights and o0nership. 1his interest of the promoters as
traders has serious implications for the integrity of these exchanges.

16. Residents in ndia3 engaged in import and export trade3 may hedge the price ris2
of commodities in the international commodity exchangesGmar2ets. "pplications for
commodity hedging are to )e for0arded to R(. " one8time approval 0ill )e given
)y R( along 0ith the guidelines for underta2ing this activity. 1he Reserve (an2 of
ndia3 0hich is considering a proposal to grant )lan2et approval to ndian companies
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Awareness of commodity market with reference Derivative investors
that have an exposure to commodities to freely hedge in the international exchanges3
must also ensure that they use the products availa)le in the ndian commodity
derivatives mar2ets.
11. Bptions trading in commodities are prohi)ited as of no0 0hich puts constraints
on the mar2ets. ntroduction of options trading in commodities is a necessary
condition for institutional investors to trade in commodity derivatives trading3 as this
0ould ma2e it easier for the institutional investors to convert the commodity
derivatives products as financial products.
f the institutional investors3 li2e )an2s and mutual funds3 0hose presence as of no0 is
only in capital mar2ets need to start operating in commodity derivatives mar2ets as 0ell
then these additional issues are also re/uired to )e addressed.
12. Convergence of the regulators of capital mar2ets and commodity mar2ets is a pre8
re/uisite for free flo0 of funds )et0een mar2ets.
13. 1he players in capital mar2ets must ac/uire the re/uired expertise for trading in
commodity mar2ets and vice versa to have an integrated vie0 of all mar2ets.
1hy are ommodity Derivatives Re9)ired8
ndia is among the top8! producers of most of the commodities3 in addition to
)eing a ma*or consumer of )ullion and energy products. "griculture contri)utes a)out 22D to
the =97 of the ndian economy. t employees around !%D of the la)or force on a total of 1#3
million hectares of land. "griculture sector is an important factor in achieving a =97 gro0th
of &816D. "ll this indicates that ndia can )e promoted as a ma*or center for trading of
commodity derivatives.
t is unfortunate that the policies of $MC during the most of 1'!6s to 1'&6s
suppressed the very mar2ets it 0as supposed to encourage and nurture to gro0 0ith times. t
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0as a mista2e other emerging economies of the 0orld 0ould 0ant to avoid. Eo0ever3 it is
not in ndia alone that derivatives 0ere suspected of creating too much speculation that
0ould )e to the detriment of the healthy gro0th of the mar2ets and the farmers. Such
suspicions might normally arise due to a misunderstanding of the characteristics and role of
derivative product.
t is important to understand 0hy commodity derivatives are re/uired and the role they
can play in ris2 management. t is common 2no0ledge that prices of commodities3 metals3
shares and currencies fluctuate over time. 1he possi)ility of adverse price changes in future
creates ris2 for )usinesses. 9erivatives are used to reduce or eliminate price ris2 arising from
unforeseen price changes. " derivative is a financial contract 0hose price depends on3 or is
derived from3 the price of another asset.
10o important derivatives are futures and options.
(i) Commodity Futures Contracts/
" futures contract is an agreement for )uying or selling a Commodity for a
predetermined delivery price at a specific future time. $utures are standardi5e contracts that
are traded on organi5ed futures exchanges that ensure performance of the contracts and thus
remove the default ris2. 1he commodity futures have existed since the Chicago (oard of
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Awareness of commodity market with reference Derivative investors
1rade ;C(B13 000.c)ot.com< 0as esta)lished in 1&4& to )ring farmers and merchants
together. 1he ma*or function of futures mar2ets is to transfer price ris2 from hedgers to
speculators. $or example3 suppose a farmer is expecting his crop of 0heat to )e ready in t0o
months time3 )ut is 0orried that the price of 0heat may decline in this period. n order to
minimi5e his ris23 he can enter into a futures contract to sell his crop in t0o monthsI time at a
price determined no0. 1his 0ay he is a)le to hedge his ris2 arising from a possi)le adverse
change in the price of his commodity.
(ii) Commodity Options contracts:
Ci2e futures3 options are also financial instruments used for hedging and
speculation. 1he commodity option holder has the right3 )ut not the o)ligation3 to )uy ;or
sell< a specific /uantity of a commodity at a specified price on or )efore a specified date.
Bption contracts involve t0o parties J the seller of the option 0rites the option in favour of
the )uyer ;holder< 0ho pays a certain premium to the seller as a price for the option. 1here
are t0o types of commodity options> a McallI option gives the holder a right to )uy a
commodity at an agreed price3 0hile a MputI option gives the holder a right to sell a
commodity at an agreed price on or )efore a specified date ;called expiry date<.
1he option holder 0ill exercise the option only if it is )eneficial to himL other0ise
he 0ill let the option lapse. $or example3 suppose a farmer )uys a put option to sell 166
Auintals of 0heat at a price of U2! per /uintal and pays a MpremiumI of U6.! per /uintal ;or a
total of U!6<. f the price of 0heat declines to say U26 )efore expiry3 the farmer 0ill exercise
his option and sell his 0heat at the agreed price of U2! per /uintal. Eo0ever3 if the mar2et
price of 0heat increases to say U36 per /uintal3 it 0ould )e advantageous for the farmer to
sell it directly in the open mar2et at the spot price3 rather than exercise his option to sell at
U2! per /uintal
Modern Commodity Exchanges
1o ma2e up for the loss of gro0th and development during the four decades of
restrictive government policies3 $MC and the =overnment encouraged setting up of the
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Awareness of commodity market with reference Derivative investors
commodity exchanges using the most modern systems and practices in the 0orld. Some
of the main regulatory measures imposed )y the $MC include daily mar2 to mar2et
system of margins3 creation of trade guarantee fund3 )ac28office computeri5ation for the
existing single commodity Exchanges3 online trading for the ne0 Exchanges3
demutuali5ation for the ne0 Exchanges3 and one8third representation of independent
9irectors on the (oards of existing Exchanges etc.
Pnresolved ssues and $uture 7rospects
Even though the commodity derivatives mar2et has made good progress in the
last fe0 years3 the real issues facing the future of the mar2et have not )een resolved.
"greed3 the num)er of commodities allo0ed for derivative trading have increased3 the
volume and the value of )usiness has 5oomed3 )ut the o)*ectives of setting up commodity
derivative exchanges may not )e achieved and the gro0th rates 0itnessed may not )e
sustaina)le unless these real issues are sorted out as soon as possi)le. Some of the main
unresolved issues are discussed )elo0.
a. Commodity Options:
1rading in commodity options contracts has )een )anned since 1'!2. 1he mar2et
for commodity derivatives cannot )e called complete 0ithout the presence of this
important derivative. (oth futures and options are necessary for the healthy gro0th of the
mar2et. Fhile futures contracts help a participant ;say a farmer< to hedge against
do0nside price movements3 it does not allo0 him to reap the )enefits of an increase in
prices. ?o dou)t there is an immediate need to )ring a)out the necessary legal and
regulatory changes to introduce commodity options trading in the country. 1he matter is
said to )e under the active consideration of the =overnment and the options trading may
)e introduced in the near future.
'. The Warehousing and Standardiation:
$or commodity derivatives mar2et to 0or2 efficiently3 it is necessary to have a
sophisticated3 cost8effective3 relia)le and convenient 0arehousing system in the country.
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Awareness of commodity market with reference Derivative investors
1he Ea)i)ullah ;2663< tas2 force admitted3 +" sophisticated 0arehousing industry has
yet to come a)outK. $urther3 independent la)s or /uality testing centers should )e set up
in each region to certify the /uality3 grade and /uantity of commodities so that they are
appropriately standardi5ed and there are no shoc2s 0aiting for the ultimate )uyer 0ho
ta2es the physical delivery. Farehouses also need to )e conveniently located. Central
Farehousing Corporation of ndia ;CFC> 000.fieo.com< is operating !66 Farehouses
across the country 0ith a storage capacity of 16.4 million tonnes. 1his is o)viously not
ade/uate for a vast country. 1o resolve the pro)lem3 a =ramin (handaran .o*ana ;Rural
Farehousing 7lan< has )een introduced to construct ne0 and expand the existing rural
godo0ns. Carge scale privati5ation of state 0arehouses is also )eing examined.
c. Cash versus !hysica" Sett"ement:
t is pro)a)ly due to the inefficiencies in the present 0arehousing system that only
a)out 1D to !D of the total commodity derivatives trade in the country are settled in
physical delivery. 1herefore the 0arehousing pro)lem o)viously has to )e handled on a
0ar footing3 as a good delivery system is the )ac2)one of any commodity trade. "
International Research Journal of Finance and Economics - Issue 2 (2006) 1#1
particularly difficult pro)lem in cash settlement of commodity derivative contracts is that
at present3 under the $or0ard Contracts ;Regulation< "ct 1'!23 cash settlement of
outstanding contracts at maturity is not allo0ed. n other 0ords3 all outstanding contracts
at maturity should )e settled in physical delivery. 1o avoid this3 participants s/uare off
their positions )efore maturity. So3 in practice3 most contracts are settled in cash )ut
)efore maturity. 1here is a need to modify the la0 to )ring it closer to the 0idespread
practice and save the participants from unnecessary hassles.
d. The #egu"ator:
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Awareness of commodity market with reference Derivative investors
"s the mar2et activity pic28up and the volumes rise3 the mar2et 0ill definitely
need a strong and independent regular3 similar to the Securities and Exchange (oard of
ndia ;SE(< that regulates the securities mar2ets. Pnli2e SE( 0hich is an independent
)ody3 the $or0ards Mar2ets Commission ;$MC< is under the 9epartment of Consumer
"ffairs ;Ministry of Consumer "ffairs3 $ood and 7u)lic 9istri)ution< and depends on it
for funds. t is imperative that the =overnment should grant more po0ers to the $MC to
ensure an orderly development of the commodity mar2ets. 1he SE( and $MC also need
to 0or2 closely 0ith each other due to the inter8relationship )et0een the t0o mar2ets.
e. $ack o% Economy o% Sca"e:
1here are too many ;3 national level and 21 regional< commodity exchanges.
1hough over &6 commodities are allo0ed for derivatives trading3 in practice derivatives
are popular for only a fe0 commodities. "gain3 most of the trade ta2es place only on a
fe0 exchanges. "ll this splits volumes and ma2es some exchanges unvia)le. 1his
pro)lem can possi)ly )e addressed )y consolidating some exchanges. "lso3 the /uestion
of convergence of securities and commodities derivatives mar2ets has )een de)ated for a
long time no0. 1he =overnment of ndia has announced its intention to integrate the t0o
mar2ets. t is felt that convergence of these derivative mar2ets 0ould )ring in economies
of scale and scope 0ithout having to duplicate the efforts3 there)y giving a )oost to the
gro0th of commodity derivatives mar2et. t 0ould also help in resolving some of the
issues concerning regulation of the derivative mar2ets. Eo0ever3 this 0ould necessitate
complete coordination among various regulating authorities such as Reserve (an2 of
ndia3 $or0ard Mar2ets commission3 the Securities and Exchange (oard of ndia3 and the
9epartment of Company affairs etc.
f. Tax and $ega" &ott"enecks:
1here are at present restrictions on the movement of certain goods from one state
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Awareness of commodity market with reference Derivative investors
to another. 1hese need to )e removed so that a truly national mar2et could develop for
commodities and derivatives. "lso3 regulatory changes are re/uired to )ring a)out
uniformity in octroi and sales taxes etc. -"1 has )een introduced in the country in 266!3
)ut has not yet )een uniformly implemented )y all states.
1o study the 1rading mechanism of Commodity $uture mar2et and FholesaleG Cocal
mar2et
Second o)*ective is completed )y Collecting 7rimary as 0ell as secondary data. 7rimary
data is collected through personal intervie0 and discussion 0ith the Fholesale merchants
in "7MC yard (elgaum and secondary data is collected through Fe) sites. 1he follo0ing
Chart Sho0s the 7resent 1rading System of Cocal GFholesale mar2et.
hart showin4 Tradin4 System of Loca- %ark
1he emergence of organi5ed sector retail chain stores and a rise in competition is li2ely to
BABASAB PATIL MBA FINANCE PROJECT REPORT Page !%
Consumer
Super Mar2ets Cocal Retail
Stores
RationG$air
7rice Shops
Carge retailers Su) Fholesaler
Fholesaler
$ood Corporation of
ndia
Mar2et .ard Bperated )e either =ovt
Mandis or 7rivate 7layers
Small 4 Marginal
$armers
-illage level
Consolidation
Awareness of commodity market with reference Derivative investors
)e a catalyst for )ringing a)out much needed reform in the agriculture8related supply
chain. 1he large players in the retail sector and fast moving consumer goods are also
influencing the government to li)erali5e the regulations3 0hich hitherto have constricted
the operational environment. n addition3 political pressure is rising3 invo2ing a response
from the government to change the regulations so as to ena)le farmers to operate more
productively.
? $irst3 instead of using the current chain3 0hich results in large mar28ups due to a
multiple num)er of intermediaries3 the farmers are )eginning to transact directly
0ith the large corporate3 reducing inefficiencies.
? Second3 some of the large retail players 0ill start contract manufacturing 0ith
farmers3 providing them 0ith the right /uality inputs ;fertili5ers and seeds<3
capital support and signals on the mix of output they need to produce to earn
maximum returns.
? 1hird3 an increase in direct sourcing )y large players 0ill also encourage the
private sector to invest in the logistics and infrastructure needed to improve the
productivity and efficiency of the supply chain.
Trading System o% NC'E(
1he trading system on the ?C9E@ provides a fully automated screen )ased trading for
futures on commodities on a nation0ide )asis as 0ell as an online monitoring and
surveillance mechanism. t supports an order driven mar2et and provides complete
transparency of trading operations. 1he trade timings of the ?C9E@ are 16.66 a.m. to
4.66 p.m. "fter hours trading has also )een proposed for implementation at a later stage.
1he ?C9E@ system supports an order driven mar2et3 0here orders match automatically.
Brder matching is essentially on the )asis of commodity3 its price3 time and /uantity. "ll
BABASAB PATIL MBA FINANCE PROJECT REPORT Page !&
Awareness of commodity market with reference Derivative investors
/uantity $ields are in units and price in rupees. 1he exchange specifies the unit of trading
and the delivery unit for futures contracts on various commodities. 1he exchange notifies
the regular lot si5e and tic2 si5e for each of the contracts traded from time to time. Fhen
any order enters the trading system3 it is an active order. t tries to find a match on the
other side of the )oo2. f it finds a match3 a trade is generated. f it does not find a match3
the order )ecomes passive and gets /ueued in the respective outstanding order )oo2 in
the system. 1ime stamping is done for each trade and provides the possi)ility for a
complete audit trail if re/uired.
?C9E@ trades commodity futures contracts having one month3 t0o month and three
Month expiry cycles. "ll contracts expire on the 26th of the expiry month. 1hus a
:anuary expiration contract 0ould expire on the 26th of :anuary and a $e)ruary expiry
contract 0ould cease trading on the 26th of $e)ruary. f the 26th of the expiry month is a
trading holiday3 the contracts shall expire on the previous trading day. ?e0 contracts 0ill
)e introduced on the trading day follo0ing the expiry of the near month contract.
Contract cycle
1he follo0ing figure sho0s the contract cycle for futures contracts on ?C9E@. "s can
)e seen3 at any given point of time3 three contracts are availa)le for trading O a near8
month3 a middle8month and a far8month. "s the :anuary contract expires on the 26th of
the month3 a ne0 three month contract starts trading from the follo0ing day3 once more
ma2ing availa)le three index futures contracts for trading.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page !'
Awareness of commodity market with reference Derivative investors
INTROD!TION TO P!LS" %AR2"T
ndia is the 0orldNs largest pulse producer3 consumer and importer accounting for 2%D of
the glo)al pulse production. Eo0ever3 stagnant production has led to declining per capita
consumption over the past 26 years. 1he per capita availa)ility has progressively declined
from #6 g in 1'!68!1 to 32 g at present. 1he )urgeoning demand8supply gap has led the
=overnment of ndia to ease the norms related to importing of pulses.
n ndia3 pulses are gro0n on 22823 million hectares area 0ith an annual production of
1381! million tons and per hectare of yield of #668#!6 2g. 7ulses account for around 1'D
of the gross cropped area and less than &D of the total food grain production of the
country. 1he ma*or pulses gro0n in ndia are 8 7igeon peas ;"rhar< and 1yson chic2 peas
;=ram or 9esi Chana<. 1heir share in the total pulses production is a)out 26D and 33D
respectively. mportant 7ulse Mar2ets in ndia are Mum)ai3 9elhi3 Chennai3 ndore3
,anpur3 (i2aner3 Eapur3 Eydera)ad3 :aipur3 :alandhar3 Cudiana3 and Sangrur.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #6
Awareness of commodity market with reference Derivative investors
ndian pulse mar2et is very price sensitive mar2et. 1here is a great deal of su)stituta)ility
)et0een pulse crops. f pigeon peas are high priced3 more yello0 peas 0ill )e consumed.
f desi chic2peas are lo0 priced3 more chic2peas 0ill )e consumed. 1his dynamic pulse
consumption pattern com)ined 0ith the large3 and sometimes varia)le3 domestic
production ma2es ndian mar2et demand difficult to predict on a year8to8year )asis.

P)-se %arket $o-ati-ity
=lo)al pulse trade has expanded rapidly in the last t0enty years. Eo0ever3 the trade
history is some0hat volatile due to supply and demand varia)ility. 1rade patterns have
also shifted during this time period. $ormer exporters ;li2e Chile as a lentil exporter< 12
have disappeared and ne0 exporters have developed. 1he next t0enty8year period is
li2ely to see these types of changes continue as Canada puts pressure on the supply side.
1he prices in the domestic mar2et fluctuate according to the domestic and
international demand and supply scenario. =enerally3 the prices drop 0hen the ne0 crop
comes in the mar2et. 1he analysis of five years price trend of gram at ndore reveal that
the prices are on an increasing trend from :une to Septem)er3 0hile it starts falling from
?ovem)er3 0ith the lo0est prices )eing reported in March and "pril3 0hen the ne0 crop
arrives in the mar2et.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #1
Awareness of commodity market with reference Derivative investors
"nalysis 4 nterpretation

BABASAB PATIL MBA FINANCE PROJECT REPORT Page #2
Awareness of commodity market with reference Derivative investors
occupation
24 24.0 24.0 24.0
13 13.0 13.0 37.0
37 37.0 37.0 74.0
25 25.0 25.0 99.0
1 1.0 1.0 100.0
100 100.0 100.0
business
profession
govt service
private service
others
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
occupation
1.0%
25.0%
37.0%
13.0%
24.0%
others
private service
govt service
profession
business
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #3
Awareness of commodity market with reference Derivative investors
Inter*retation/ the a)ove graph depicts that 3%D of the respondents are government
employees 32!D are from private service31D are from others li2e agriculturist 3 24D are
)usinessmen 4 13D are private service
nference> most of the respondents are 0ere from government service 4 )usiness men
Ann)a- income
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #4
Awareness of commodity market with reference Derivative investors
&annual inco$e
5.0%
14.0%
3'.0%
37.0%
(.0%
$ore than 400001
200001)400000
10001)200000
50000)100000
belo* 50000
Inter*retation/ a)ove graph depicts that most of the investors income lies )et0een
166618266666 follo0ed )y 3&D33%D investors income lies )et0een !66668166666314D
of the investors lies )et0een 2666184666663#D of the investors lies )elo0 !6666 4 !D
of the investors lies more than 466666
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #!
Awareness of commodity market with reference Derivative investors
nvestment criteria they prefer to invest
Investment creteria they prefer ot invest
10 10.0 10.0 10.0
4 4.0 4.0 14.0
32 32.0 32.0 4(.0
7 7.0 7.0 53.0
5 5.0 5.0 5'.0
' '.0 '.0 ((.0
32 32.0 32.0 9'.0
2 2.0 2.0 100.0
100 100.0 100.0
+an, deposit
-eal estate
stoc,s
co$$odit! future $ar,et
$utual fund
life insurance
derivitive $ar,et
bonds
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
.nvest$ent creteria the! prefer ot invest
2.0%
32.0%
'.0%
5.0%
7.0%
32.0%
4.0%
10.0%
bonds
derivitive $ar,et
lif e insurance
$utual fund
co$$odit! f uture $ar
stoc,s
-eal estate
+an, deposit

Inter*retation/ $rom this chart it is 2no0n that 32D of the respondents prefer to invest
in derivative and stoc2s3 16D of the respondents in )an2 deposit3 &D 4 %D in life
insurance 4 commodity mar2et 3!D in mutual fund 34D in real estate 4 2D in )onds
BABASAB PATIL MBA FINANCE PROJECT REPORT Page ##
Awareness of commodity market with reference Derivative investors
Awareness of derivitive market
100 100.0 100.0 100.0 !es Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
&*areness of derivitive $ar,et
100.0%
!es
Inter*retation/ as my targeted customer is derivative investors the a)ove diagram
depicts a)out the a0areness level of the derivative investors is 166D
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #%
Awareness of commodity market with reference Derivative investors
Have you invested in future & options
100 100.0 100.0 100.0 !es Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
/ave !ou invested in future 0 options
100.0%
!es
Inter*retation/ as my targeted customer is derivative investors the a)ove diagram
depicts a)out the investment level of the derivative investors is 166D that is respondents
are purely from derivative mar2et
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #&
Awareness of commodity market with reference Derivative investors
factors considered while investing in derivitive market
9 9.0 9.0 9.0
39 39.0 39.0 4'.0
45 45.0 45.0 93.0
7 7.0 7.0 100.0
100 100.0 100.0
price
ris,
return
de$and 0 suppl!
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
BABASAB PATIL MBA FINANCE PROJECT REPORT Page #'
Awareness of commodity market with reference Derivative investors
factors considered *hile investing in derivitive $ar,et
7.0%
45.0%
39.0%
9.0%
de$and 0 suppl!
return
ris,
price
Inter*retation/ Most of the investors consider 4!D of return33'D of ris23'D price4 %D
demand and supply .0hile investing in derivatives mainly they considered returns 4 ris2
"0areness level of commodity mar2et
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %6
Awareness of commodity market with reference Derivative investors
Awreness of commodity market
(4 (4.0 (4.0 (4.0
3( 3(.0 3(.0 100.0
100 100.0 100.0
!es
no
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
&*reness of co$$odit! $ar,et
3(.0%
(4.0%
no
!es
Inter*retation/ 1he a)ove pie chart depicts that #4D of the trader a0are a)out the
Commodity $uture mar2et and 3#D of them are not a0are a)out Commodity $uture
Mar2et. So there is a need to create a0areness a)out the commodity future mar2et and its
)enefits. 1here is a lot of potential is there to create customer and influence them to
invest in Commodity $uture mar2et
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %1
Awareness of commodity market with reference Derivative investors
have you invested in commodity market
39 39.0 39.0 39.0
(1 (1.0 (1.0 100.0
100 100.0 100.0
!es
no
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
have !ou invested in co$$odit! $ar,et
(1.0%
39.0%
no
!es
Inter*retation> $rom the a)ove diagram 0e can say that out of 166 traders only 3'D
have invested in commodity mar2et #1D have not invested in commodity mar2et so even
though the most of the traders are a0are a)out Commodity $uture mar2et they are not
trading in $uture mar2et traders feel there is a high ris2 involved in the future mar2et.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %2
Awareness of commodity market with reference Derivative investors
how do you came to know about commodity market
(1 (1.0 (1.0 (1.0
12 12.0 12.0 73.0
9 9.0 9.0 '2.0
1' 1'.0 1'.0 100.0
100 100.0 100.0
not atte$pted
frnds1colleauges
bill boards1advt1brochure
agents
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
ho* do !ou ca$e to ,no* about co$$odit! $ar,et
1'.0%
9.0%
12.0%
(1.0%
agents
bill boards1advt1bro
frnds1colleauges
not atte$pted
Inter*retation> most of the investors came to 2no0 a)out the commodity )y agents the
respondents 0ho have invested in commodity mar2et from them 1&D of the people came
to 2no0 )y agents 3'D from the )ill )oards GadvertisementG)rochure 412D people came
to 2no0 )y there friends and colleagues. Eere not attempted indicates the people 0ho
have not invested in commodity mar2et have not attempted this /uestion.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %3
Awareness of commodity market with reference Derivative investors
commodity you prefer for trading
(4 (4.0 (4.0 (4.0
10 10.0 10.0 74.0
5 5.0 5.0 79.0
1( 1(.0 1(.0 95.0
5 5.0 5.0 100.0
100 100.0 100.0
not atte$pted
&gro products
+ase $etals
"recious $etals
2nerg! products
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %4
Awareness of commodity market with reference Derivative investors
co$$odit! !ou prefer for trading
5.0%
1(.0%
5.0%
10.0%
(4.0%
2nerg! products
"recious $etals
+ase $etals
&gro products
not atte$pted
Inter*retation> among the persons 0ho have invested in commodity in them 16D prefer
to trade in agro products3 !D in )ase metals3 1#D in precious metals 4 ! D in energy
products .here not attempted indicates the people 0ho have not invested in commodity
mar2et have not attempted this /uestion.
Factors considered while trading in commodity market
(5 (5.0 (5.0 (5.0
3 3.0 3.0 ('.0
' '.0 '.0 7(.0
13 13.0 13.0 '9.0
11 11.0 11.0 100.0
100 100.0 100.0
not atte$pted
price
season
ris,
return
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %!
Awareness of commodity market with reference Derivative investors
Factors considered *hile trading in co$$odit! $ar,et
11.0%
13.0%
'.0%
3.0%
(5.0%
return
ris,
season
price
not atte$pted
Inter*retation/ Most of the investors consider 11D of return313D of ris233D price4 &D
of season. Fhile investing in commodities mainly they considered returns 4 ris2 0hile
investing in commodity mar2et they mainly consider returns 4 ris2. here not attempted
indicates the people 0ho have not invested in commodity mar2et have not attempted this
/uestion.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %#
Awareness of commodity market with reference Derivative investors
commodity future mkt provides benefit
(2 (2.0 (2.0 (2.0
9 9.0 9.0 71.0
10 10.0 10.0 '1.0
1' 1'.0 1'.0 99.0
1 1.0 1.0 100.0
100 100.0 100.0
not atte$ted
strongl! agree
agree
neutral
disagree
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
co$$odit! future $,t provides benefit
1.0%
1'.0%
10.0%
9.0%
(2.0%
disagree
neutral
agree
strongl! agree
not atte$ted
Inter*retation/ most of the investors say it is in neutral position 4 some 0ho are
)enefited lot they 0ill go for factors li2e agree 4 strongly agree 4 percentage of
disagree is very less among invested people
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %%
Awareness of commodity market with reference Derivative investors
Reasons why they have not invested in commodity mkt
39 39.0 39.0 39.0
5 5.0 5.0 44.0
10 10.0 10.0 54.0
7 7.0 7.0 (1.0
33 33.0 33.0 94.0
( (.0 (.0 100.0
100 100.0 100.0
those *ho hv invested
3ot intersted
.nfo non availabilit!
high invest$ent
co$ple4 understanding
high ris,
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
-easons *h! the! have not invested in co$$odit! $,t
(.0%
33.0%
7.0%
10.0%
5.0%
39.0%
high ris,
co$ple4 understandin
high invest$ent
.nf o non availabilit
3ot intersted
those *ho hv investe
Inter*retation/ 1he a)ove pie chart sho0s that most of the traders are not interested to
invest in Commodity $uture Mar2et due to complex understanding involved in it around
33D of the traders are given this reason and !D of them are not interested in investing in
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %&
Awareness of commodity market with reference Derivative investors
this mar2et3 # 4 %D thin2 that it involves high ris2 and high investment So there is great
need to create a0areness a)out Commodity $uture mar2et )y telling its advantages.
planning for trading in commodity mkt in future
(7 (7.0 (7.0 (7.0
33 33.0 33.0 100.0
100 100.0 100.0
!es
no
Total
Valid
Freuenc! "ercent Valid "ercent
#u$ulative
"ercent
planning for trading in co$$odit! $,t in future
33.0%
(7.0%
no
!es
Inter*retation> $rom the a)ove graph 0e conclude that most of the traders are interested
to invest in Commodity $uture Mar2et if proper a0areness is created among them and
BABASAB PATIL MBA FINANCE PROJECT REPORT Page %'
Awareness of commodity market with reference Derivative investors
other 33D are not interested to invest .1hese #%D of traders are the potential customers
for the company.
0indin4s
• More than !6D of the 1raders in are a0are a)out the commodity future
Mar2et

• Eardly 36D traders are invested in the commodity future mar2et
• Most of the investors are not ready to invest in commodity future mar2et they feel it
involve high ris2.
• Returns and the Ris2 of the commodity are the most critical factors3 0hich
1raders 0ill consider 0hile investing in any commodity
• Most of the investors are ready to invest in commodity future mar2et if proper
information is provided
• "s commodity future mar2et is ne0 and emerging 3many investors and farmers are
not fully a0are of this mar2et .as the mar2et helps to trade transparently 0ithout
middlemen and agents
• Fhile finding the reasons 0hy most of the people are not trading in commodity
mar2et found that many respondents are not interested at all in this trade this is
)ecause of una0areness 4 mythical perception a)out commodity mar2et.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &6
Awareness of commodity market with reference Derivative investors
• Most of the respondents are 0ere from government service 4 )usiness men
S)44estion
• 1here is need to create a0areness a)out commodity $uture Mar2et. "0areness
program has to )e conducted )y ,arvy consultants3 )ecause since this 0as ne0 to the
mar2et .so it can )e done through )y giving advertisements in local channels3
?e0spapers3 )y sending E8mail to present customers etc
• $rom survey it is found that most of the potential customers are concerned a)out the
(ro2erage charges so ,arvy can loo2 upon this. f it can charge moderate )ro2erage
it 0ill help to attract more and more customers.
• More agents and mar2eting executives should )e appointed to educate the customers
)ecause the customers having many myths in there mind
• "nd also create the a0areness of electronic commodity trading
• $irm should approach people 0ho are already into the )usiness of commodities
.special campaigns G investors meets should )e conducted for these people since they
are a0are of rate fluctuation 3mar2et trends etc . 1hey have got mar2et idea that
)enefits them in price prediction. 1hey 0ill )e in high spirits 0hen price ris2 of them
0ill )e managed.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &1
Awareness of commodity market with reference Derivative investors

ONL!SION
Commodity futures mar2ets are ne0 and emerging mar2et. 1he a0areness of the mar2et
is very less among the investors 0ho can use this trade to sell there products 0ithout the
middlemen or agents it also help the actual )uyers too. Eere trader also can transfer his
ris2 to some other 0ho can handle it or can appetite the ris2 through hedging techni/ues
Compared to capital mar2et commodity mar2et is less ris2y in
volatility context here the prices do not change 0ithin a fraction of second .significantly3
minimum margin ready physical possession3 no manipulation 4 fraud3 maximum
profita)ility is availa)le over here since the commodity mar2et helps all such as farmers3
industries and individuals investors it is gro0ing at a faster rate in glo)al outloo2.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &2
Awareness of commodity market with reference Derivative investors
BIBLOGRAPHY
News Papers;
? Business Line
? Economic times
? Times of India
1e' site
? 000.moneycontrol.com
? 000.google.com
? [email protected]
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &3
Awareness of commodity market with reference Derivative investors
? [email protected]
Te7t 'ooks
$utures 4 Bptions second addition )y -ohra 4 (agri
5!"STIONNAIR"


NA%" / ::::::::::::::::::::::::::::::::::
A," / ::::::::::::::::::::::::::::::::::
ADDR"SS / ::::::::::::::::::::::::::::::::::
ONTAT NO/ ::::::::::::::::::::::::::::::::::
1< Fhich of the follo0ing 0ill )est descri)e your occupation
;?ote> please tic2 )elo0 the option you 0ant to choose<
3)siness Profession ,ovt.services Private service Others s*ecify
2< Fhat is your annual incomeT
3e-ow ;<<<< ;<<<<6=<<<<< =<<<<=6><<<<< ><<<<=6?<<<<< %ore than ?<<<<=
3< Fhich among these investment criteria you usually preferT

(an2 deposits Mutual fund
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &4
Awareness of commodity market with reference Derivative investors
Real estate Cife insurance
Stoc2s 9erivative mar2et

Commodity future trading (onds
4< "re you a0are a)out the derivative mar2etT
.es ?o

!< f yes have you invested in future 4 optionT

.es ?o
#< Fhich factors 0ould you consider 0hile investing in derivative mar2etT
Price Risk Ret)rn Demand @ s)**-y

%< "re you a0are of commodity mar2etT

.es ?o
&< f yes have you invested in commodity mar2etT
;f no directly go to /uestion 13<
.es ?o
'< Eo0 do you come to 2no0 a)out commodity future tradingT

0riendsAco--ea4)es 3i--'oards
AadvtA'roch)re
A4entsA 'rokers Other s*ecify
16< Fhich commodity you prefer for tradingT

A4ro
*rod)ctsBCeeraD
Soy'ean etcE
3ase meta-s
Ba-)min)mD nicke-E
Precio)s
meta-sB4o-dA
Si-verE
"ner4y
Prod)ctsBcr)de
oi-
0erro)s
meta-s
BironD stee-E
tota-
11< Fhich factor do you normally consider 0hile trading in commodity mar2etT
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &!
Awareness of commodity market with reference Derivative investors
Price Season Risk Ret)rn Demand @ s)**-y
12< Commodity future mar2et provides )enefitsT
Stron4-y a4ree A4ree Ne)tra- Disa4ree Stron4-y dis
a4ree
13< Fhat made you not to invest in commodity future tradingT

Not interested Info non
avai-a'i-ity
+i4h
investment
om*-e7
)nderstandin4
+i4h risk
14< "re you planning for investing 4trading in commodity future mar2et in futureT
.es ?o
Respondent signature
Thank you
.
BABASAB PATIL MBA FINANCE PROJECT REPORT Page &#

doc_853548871.doc