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odity
Excess quantity is
rejected and is cash
settled. Matching limited
to the total capacity at the
Warehouse Matching is
done for the deliveries
based on Commodity
Location
Deli1ery t*ru Depository
7
2
SETTLEMENT CALENDAR
Commodity Physical Settlement schedule for
Pay-in/Pay-outs
Soya bean T28
Refned Soya bean oil T 28
Rapeseed Mustard Seed T 28
Rapeseed Mustard Seed Oil T 28
RBD Palmolein T 28
PL!"#$M T 28
Medium Staple Cotton T 27
Lon% Staple Cotton T 27
&old T 2&
Sil'er T 26
Settlement Pay-in
Pay-in will take place on date as specified in Settlement
Calendar. Commodities:
Seller ensures Demat of commodities prior to pay-in.
Instruction to DP by seller to move commodities to KCBPL Pool A/c.
Pay-in of commodities on Settlement Date thru KCBPL pool A/c.
Funds:
Pay-in of funds Thru the Clearing bank of the Member on the Pay-in day.
Settlement Pay-out
Pay-out will take place on date as specified in Settlement
Calendar. Commodities
Credit given into the Buyer member KCBPL Pool A/c.
Instruction by KCBPL to transfer from pool A/c to buyer clients Demat account.
Subsequent Remat of commodities and physical movement handled by buyer.
Fun
73
ADVANTAGES OF TRADING/INVESTING IN COMMODITIES
Benefits to the Industry, Exporters and Importers:
1. Hedging the price risk associated with future contractual commitments. For
instance, lets take a case of a Soy Bean exporter whose export commitment is
one month now (present market price is Rs.1700 per quintal). As per his analysts
recommendations, the prices are expected to rise (to an extant of Rs.1800 per
quintal) after one month, when he has committed for export. Now lets assume
that his export commitment is 10000 quintals.
Time Export Market Price
Commitment
Today Nil 1700
After one month 10000 1800
Instance 1: With no hedging.
Sale Price: Rs. 1850.
Cost Price: Rs. 1800.
So, net profit/ quintal = Rs.50.
Net Profit of deal=Rs.50x10000=Rs.5,
00,000. Instance 2: With Hedging:
Sale Price: Rs.1850.
Cost Price: Rs.1700. (where in the exporter goes long (buys)
today) So, net profit/ quintal=Rs.150.
Net Profit of deal=Rs.150x10000=15, 00,000.
An increase of 200% net profit.
74
2. Efficient price discovery:
With the starting of national wide commodities markets, regional price
differences in commodities prices are controlled. Hence, now the cost of a commodity is
almost same throughout the country. Prior to this there was lot of price differences of
commodities at various places. Example, the price of Gold in Hyderabad was different
from price of Gold in Mumbai, but now this disparity is curbed to an extant, though some
price still exists between the exchanges.
3. Benefits to the Banks:
Now the producer and consumer of the commodity can go for Hedging their
positions hence, the loaner of funds (Bank) is clear of the receivables. Thus, Hedged
positions of producers and consumers would reduce the risk of default faced by the
banks.
Lending for agricultural sector would go up with greater transparency in pricing
and storage.
4. Benefits to the clients:
The commodity prices move with strong broad based fundamentals. Hence, the
commodity prices do not move in an erratic fashion.
The price movements are also due to Global price movements of a particular commodity
hence, things like insider trading, and price manipulations do not exist in commodities
markets.
A commodity is always tradable. And also never a commodity price can be zero. In
case of stocks, a company may be de-listed, hence, it may go non tradable or the virtual
price being zero
75
FACTORS EFFECTING COMMODITIES MARKET
Before starting this section lets divide commodities into different classes:
Precious Metals: Gold, Silver.
Base Metals: Steel, Aluminum*, High Grade Copper, Nickel, Zinc, Tin.
Agricultural:
Grains: Soy, Soy Oil, Rice, and Rice
Oil*. Softs: Cotton, Coffee*, Sugar.
Energy: Crude Oil, Natural Gas. **
Factors affecting the prices of commodities:
The factors affecting the prices of various commodities can be divided into two:
Generic Factors:
These are the factors affecting all the commodity prices in
general. Demand and Supply.
Indian Rupee Vs other
currencies. Export/Import parity.
Political environment.
Specific Factors:
These are the factors affecting a particular commodity or a class of commodities.
Precious Metals:
Stock market dynamics.
Geo-political tensions.
US dollar Vs other major
currencies. Global macroeconomics.
Miners reports.
Agricultural:
Climatic conditions.
Crop production.
Government regulations.
Export rejection/orders.
76
Softs:
Climatic conditions.
Crop production.
Import duty.
Industrial Metals:
Industrial demand.
Substitute metals supply.
Government regulations.
Infrastructure projects.
Energy:
Production.
New excavations.
Geo-political tensions.
77
CHAPTER-4
DATA ANALYSIS AND INTERPRETATION
Multi Commodities Exchange of India Ltd (MCX) Gold Price
Date OpenPrice HighPrice LowPrice ClosePrice Traded Qty Tradedal!e Open
78
"#s$% "#s$% "#s$% "#s$% "#s La&hs% 'ntrest
()/)*/*()) *+,**-(( *+.(.-(( *+),(-(( *+,./-(( ,*+0.-(( +0.+*.-0. ))**.-((
(*/)*/*()) *+)1/-(( *+,)1-(( *+),(-(( *+)2(-(( ,)2.(-(( +*)*20-02 ))+()-((
(,/)*/*()) *+)/*-(( *+*(2-(( *+)2+-(( *+)1)-(( )(.1-(( ,(21+-// ))/(/-((
(,/)*/*()) *+)/*-(( *+*(2-(( *+)2+-(( *+)1)-(( )(,(-(( ,((0.-)/ ))/)(-((
(2/)*/*()) *+)+)-(( *+*21-(( *+())-(( *+)+1-(( ,,*0/-(( +0+0).-(0 ))10.-((
(0/)*/*()) *+(((-(( *+(((-(( *1/,)-(( *+(./-(( ,/*12-(( )(/0.)2-+( )**/,-((
(//)*/*()) *1++1-(( *+*/+-(( *1++1-(( *1+2,-(( ,+)20-(( )).)*)2-1, ),).0-((
(1/)*/*()) *+*12-(( *+.,,-(( *1+.1-(( *+*./-(( 20(.0-(( )0,/..+-,* )*.,/-((
(+/)*/*()) *+(/*-(( *+*)+-(( *+(*)-(( *+(+0-(( ,//2+-(( )(++++.-02 )**12-((
)(/)*/*()) *+)(0-(( *+)*)-(( *+(+(-(( *+)2,-(( )0)(-(( .010*-(+ )*)/.-((
)*/)*/*()) *+(+(-(( *+(+(-(( *11,0-(( *+)(0-(( )(0,/-(( ,(/2(.-(/ )**,/-((
)*/)*/*()) *+(+(-(( *+(+(-(( *1/2(-(( *+)(0-(( 2(/0+-(( ).0220,-1) )*,*,-((
),/)*/*()) *11)(-(( *+(*/-(( *1/1(-(( *11./-(( ..2/1-(( )*11,)2-() ))*,*-((
)./)*/*()) *11)(-(( *11)(-(( */121-(( *11/)-(( /1((/-(( **)+1.0-2, ),*)+-((
)2/)*/*()) *1(0(-(( *1(0(-(( */*1/-(( *1)1,-(( 1)(1.-(( **./,0)-)2 ),*)+-((
)0/)*/*()) */22(-(( */2/.-(( */(./-(( */2,)-(( 22+**-(( )2,.).*-2. ),+21-((
)//)*/*()) */2,0-(( */0.+-(( */2,(-(( */.+*-(( ,*)1-(( 111.*-., ),/).-((
)+/)*/*()) */0)*-(( *//+2-(( */2((-(( */0,0-(( .)*++-(( )).)()2-1+ ),,+(-((
*(/)*/*()) */012-(( */+(2-(( */02*-(( */0+*-(( ,0*2,-(( )((/12+-/) ),((*-((
*)/)*/*()) */+*(-(( *1)(0-(( *//,,-(( */10/-(( 2(220-(( ).)(1**-+/ ),0(*-((
**/)*/*()) *//2)-(( */1(0-(( */2+)-(( */1(+-(( .)/+/-(( ))21(0(-2+ ),+12-((
*,/)*/*()) *//./-(( */1*(-(( *//*)-(( */0+1-(( *)21)-(( 2++,.1-02 )..)0-((
*./)*/*()) *//1,-(( */1(.-(( *///2-(( *///+-(( )*/*-(( ,2,2,-2, ),0,2-((
*0/)*/*()) *//12-(( *//1+-(( *//.)-(( *//+0-(( ,,1.-(( +,+22-.) ),+(0-((
*//)*/*()) *//..-(( *//..-(( */2,.-(( *///+-(( )+)(,-(( 2*1((2-22 ).(2*-((
*1/)*/*()) */0*0-(( *//*(-(( */)2(-(( */02)-(( .)*0.-(( )),.01.-2( ).(2,-((
*+/)*/*()) */*()-(( */*)1-(( *02)/-(( */*1)-(( /*)22-(( )+,/**(-0* ).((+-((
,(/)*/*()) *0+.)-(( */2*,-(( *0+.)-(( *01,0-(( 2),,2-(( ),+1(+,-0) ),(+/-((
,)/)*/*()) */.)(-(( */.)(-(( */,)(-(( */..)-(( *,).-(( 0,*.+-)/ ),(,(-((
(*/()/*()* */,((-(( */.).-(( */*/)-(( */,*+-(( 0*0(-(( )/))0)-,2 ),2)0-((
(,/()/*()* */..1-(( *///+-(( */.).-(( */,1*-(( 2,22*-(( )./+2**-(1 )*0+*-((
79
(./()/*()
* *//()-(( */111-(( */2.(-(( */020-(( 0)+0.-(( )/)/2*,-+. )*0.0-((
(2/()/*()
* */1)*-(( */1/2-(( */01)-(( */12*-(( *1(+0-(( /1(2((-). ),,02-((
(2/()/*()
* */1)*-(( */1/2-(( */2.(-(( */12*-(( 0,2.)-(( )/0)+1.-(+ )*2)*-((
(0/()/*()
* */1,(-(( */+.2-(( */02*-(( */1*)-(( 22)*.-(( )2,,.(/-/) )*0)0-((
(//()/*()
* *//0.-(( *//01-(( *//,*-(( *//22-(( )*1/-(( ,2/).-.1 )**/(-((
FUTURE MARKET
BUYER SELLER
07/01/2012(Buying) 27764.00 27755.00
07/01/2012(Cl., period) 1287.00 1287.00
Profit 9.80 Loss 57.00
Loss 500 x9.80=4900, Profit 500 x9.800=4900
Because buyer future price will increase so, he can get profit. Seller future price also
increase so, profit decrease, Incase seller future will decrease, and he can get profit.
The closing price of Gold Metal at the end of the contract period is 1287.00 and this
is considered as settlement price.
Multi Commodities Exchange of India Ltd (MCX) Silver Price
80
OpenPric
e
HighPric
e
LowPric
e
ClosePric
e
Tradedal!
e Open
Date
Traded
Qty
"#s$% "#s$% "#s$% "#s$% "#s La&hs% 'ntrest
()/)*/*()
) 2///2-(( 21**,-(( 2/)0/-(( 2//1/-(( 0**2,-(( )(///,0-*. 1010-((
(*/)*/*()) 2/,*.-(( 21)1,-(( 2/(*0-(( 2/,**-(( 0.2,0-(( )))2+22-.*
)()+(-(
(
(,/)*/*()
) 2/)((-(( 2/*))-(( 2/(/+-(( 2/),)-(( )011-(( *1+2.-,+ ++.*-((
(,/)*/*()) 2/)((-(( 2/*))-(( 2/(/+-(( 2/),)-(( )0++-(( *+).,-), ++.2-((
(2/)*/*()
) 2/)+/-(( 2/2+1-(( 20/(/-(( 2/)+0-(( 2*00.-(( +(.,2,-+0
))(0.-(
(
(0/)*/*()) 200()-(( 2/(1.-(( 22+(*-(( 201.(-(( 0,2.*-(( )(/.2,2-*0
))*1/-(
(
(//)*/*()
) 2/)11-(( 2/2.+-(( 20111-(( 20+/*-(( 2/*1.-(( +1,/*1-((
)(.((-(
(
(1/)*/*()) 2/*/,-(( 2/1,.-(( 22+2)-(( 2/)+(-(( 1,0(0-(( ).*0.+2-+(
)*11(-(
(
(+/)*/*()
) 20.++-(( 2/)((-(( 20)/,-(( 20*,/-(( 0,*/0-(( )(/2.)1-*)
)(/*/-(
(
)(/)*/*()) 2/(,/-(( 2/(2(-(( 20+(*-(( 20+2*-(( )*02-(( *)0))-2.
)(*),-(
(
)*/)*/*()
) 201)/-(( 201)/-(( 20***-(( 20+,,-(( )*(((-(( *(*+*0-*(
)),(.-(
(
)*/)*/*()) 201)/-(( 201)/-(( 22+0(-(( 20+,,-(( 0.1(,-(( )(+,,2+-.)
)*2,2-(
(
),/)*/*()
) 20)+1-(( 2/.((-(( 20)+1-(( 20).,-(( 2+2+0-(( )(),)).-),
)(1*1-(
(
)./)*/*()) 20.((-(( 20.1(-(( 2,.22-(( 202/1-(( ))00/+-(( )+*2((/-.0
)0101-(
(
)2/)*/*()
) 2.*.1-(( 2.*.1-(( 2*,)0-(( 2.,,*-(( ))/0/*-(( )1////.-/2
)2/*2-(
(
)0/)*/*()) 2,02(-(( 2.(,(-(( 2*1+(-(( 2,0(.-(( 0..2,-(( )(,.,+(-+)
)2+()-(
(
)//)*/*()
) 2,2((-(( 2,//(-(( 2,2((-(( 2,.21-(( **+*-(( ,0+),-1/
)2,0)-(
(
)+/)*/*()) 2,.((-(( 2,.((-(( 2*2..-(( 2,/).-(( 00)/.-(( )(.+11+-20
)/*+(-(
(
*(/)*/*()
) 2*/+2-(( 2,2/2-(( 2*2+2-(( 2*+0)-(( 2.2),-(( 1/(02+-*/
)0,)2-(
(
*)/)*/*()) 2,2)+-(( 2.)1.-(( 2*+,/-(( 2,.1/-(( /.1+/-(( )*()+/2-./
)/202-(
(
**/)*/*()
) 2,(((-(( 2,.0(-(( 2*0+(-(( 2,).1-(( 22/*+-(( 1102(1-)/
)1.(0-(
(
*,/)*/*()) 2,(((-(( 2,,.1-(( 2*+1*-(( 2*1+.-(( *,*02-(( ,/),+2-)(
)/202-(
(
*./)*/*()
) 2,)22-(( 2,)22-(( 2,(((-(( 2,(0/-(( )*12-(( *(./*-+.
)/...-(
(
*0/)*/*()) 2,)./-(( 2,*((-(( 2*111-(( 2,))*-(( .2+,-(( /,)(0-)(
)/0(/-(
(
*//)*/*()
) 2,().-(( 2,(++-(( 2*211-(( 2,),/-(( *011*-(( .*0(1*-/+
)1+/(-(
(
*1/)*/*()) 2*2+(-(( 2*1(0-(( 2(*1)-(( 2*/))-(( /),02-(( ))(.(,0-,.
*),+*-(
(
*+/)*/*()
) 2(2(2-(( 2(2(2-(( .120*-(( 2(0,0-(( )(2)21-(( )20(2,.-22
)+2(+-(
(
,(/)*/*()) 2(2((-(( 2)+2)-(( 2(*02-(( 2(*)1-(( /.12+-(( ))./,*0-(.
)/+(+-(
(
,)/)*/*()
) 2)*((-(( 2)*1+-(( 2(+(2-(( 2)..2-(( ,.,*-(( 2*2++-0,
)/+.0-(
(
(*/()/*()* 2)(((-(( 2),1)-(( 2)(((-(( 2)(*+-(( 12()-(( ),(0+2-+)
)1,21-(
(
81
(,/()/*()
* 2).+,-(( 2,2((-(( 2).+,-(( 2),,(-(( 1,0**-(( ),)0.,2-//
)0(/.-(
(
(./()/*()
* 2,(((-(( 2,.*(-(( 2*.))-(( 2,)(+-(( 2)2.,-(( 1)/,.0-0, )0*,,-((
(./()/*()
* 2,(((-(( 2,.*(-(( 2**0(-(( 2,)(+-(( +)**1-(( )..2.0.-01
)221/-(
(
(2/()/*()
* 2*+((-(( 2*+11-(( 2*))0-(( 2*/0)-(( .),.,-(( 02)0,/-++ )/00,-((
(2/()/*()
* 2*+((-(( 2*+11-(( 2)10)-(( 2*/0)-(( +(.0+-(( ).**(*/-(*
)21+)-(
(
(0/()/*()
* 2*0*2-(( 2*/21-(( 2)2.1-(( 2*/.(-(( 1)((1-(( )*/(.(.-1. )/++(-((
(//()/*()
* 2)/1+-(( 2)1+*-(( 2)011-(( 2)101-(( *,,+-(( ,0,.,-1,
)1).,-(
(
FUTURE MARKET
BUYER SELLER
07/01/2012(Buying) 51789.00 51868.00
07/01/2012(Cl., period) 2339.00 2339.00
Profit 23.69 Loss 68.27
Loss 500 x68.27=34135, Profit 500 x23.69=11845
Because buyer future price will increase so, he can get profit. Seller future price also
increase so, profit decrease, Incase seller future will decrease, and he can get profit.
The closing price of Silver Metal at the end of the contract period is 2339.00 and this
is considered as settlement price.
82
4.1 Analysis & Interpretation of the Questionnaire
All the questions are analyzed question wise for easier understanding and
proper interrelation after the analysis is done.
These are the analysis of a sample of 50 people who include people from all
walks of life like businessmen, students, investors, traders, employees etc.
Each question is detailed with the no, of people who have marked that as
the answer, provided with the graph for making it easy to understand and
interpret.
1. Occupation
Options Responds
Salaries 17
Self Employed 25
Retired 0
Others (If so, specify___________) 8
83
As per the chart we can identify that most of the individuals are self
employed and probably run there own business. With the boom of IT and
finance sector in the early 20
th
century the number of jobs in both the
sectors have increased a lot and resulted in employment in different areas
which has helped the country in many ways.
84
2. Annual Income
Options Responds
Less than 5 lakhs 17
5 lakhs 10 lakhs 4
10 lakhs 15 lakhs 13
15 lakhs 20 lakhs 4
Above 20 lakhs 12
Depending on the age of the individuals are well as other factors, the chart
highlights that most of the investors are from a young age group and have a
salary of less than 5 lakhs per annum. On the other hand the we have lots of
guys with income over 20 lakhs signifying the facts that the investors are
either rich people who want to increase there assets or young ones who are
trying to come up with various methods to reach the top notch.
3. Percentage of your income you invest?
Options Responds
None
Under 5% 17
5 to 10% 13
10 to 15% 12
Above 15 % 8
From the sample who took the questionnaire, a large chunk of individuals tend to
invest less than 5% of their income which is understandable in a growing country like
India where so many people are below the poverty line and struggle to make ends
meet. The chart highlights the fact that only 8% of the people invest 15% of there
income in various commodities or policies. May be if more of the investors or higher
income group were in the sample, the charts would give a different picture.
4. Where do you invest?
Options Responds
Mutual Funds 7
Equities/ Derivatives 19
Insurance (Includes ULIP) 12
Commodity futures 12
Others (If so, specify___________) 0
Equity investment generally refers to the buying and holding of shares of stock in
the market by individuals and funds in anticipation of income from dividends and
capital gain as the value of the stock rises. Equities along with insurance policies like
ULIP which have long term benefits are what customers opt for. As the chart
highlights a spare few go for mutual funds and commodities future as it is high risk.
5. Why do you invest in trading?
Options Responds
Awareness 29
Peer Influence 8
Conservatism 0
Looking for assistance 13
In this tech savvy world of computers and numbers, everyone is in a rat race to
outdo each other. Trading is a way to increase the capital of ones company or
business with the hope that the business would be able to generate more profit
than the interest charges. Most of the youngsters in todays world invest in some
sort of trading. Some of it is due to peers influence as well. There is a large variety
of population who are not aware on how to trade and need guidance. Various
online sites have been setup with step-step procedures explaining the same.
88
6. How do you rate your risk taking apatite?
Options Responds
Risk Seeker 13
Risk Averse 17
Moderate 20
No Answer 0
Majority of the people in this world would thinks twice before investing
there savings. Every individual wants to increase his savings and have a
lavish lifestyle. As the chart show there are very few guys who take big time
risks related to there savings and investments. Most of them are risk averse
and about 50% of them come into the moderate category. The moderate
ones do a detailed investigation before investing and trading there savings.
7. What would you use commodities for?
89
Options Responds
Trading 21
Reasonable Returns 8
Investing 21
No Answer 0
Trading is a direct exchange of goods and services. Trading can also refer to the
action performed by traders and other market agents in the financial markets.
Commodities are most often used in trading and in investment of products.
Investing is the active redirection of resources: from being consumed today,
to creating benefits in the future; the use of assets to earn income or profits.
The use of commodities in trading and investment can result in huge profits
in the long term.
8. How would you prefer when trading in commodities?
90
Options Responds
Trading 0
Mid Term (1-3 months) 4
Short Term (upto 1 month) 17
Long Term (3-12 month) 29
A commodity is some good for which there demand is, but which is
supplied without qualitative differentiation across a market. It is a product
that is the same no matter who produces it, such as petroleum, notebook
paper, or milk. In other words, copper is copper. The price of copper is
universal, and fluctuates daily based on global supply and demand.
91
9. You prefer to invest in commodities (futures) that have?
Options Responds
High Risk, High Return 9
Medium Risk, Medium Return 33
Low Risk, Low Return 8
People always want to invest in commodities where they have more than
50% chance of getting a profit. Keeping the future in mind customers tend
to invest in commodities which have medium risk and medium return, rather
than investing in high risk ones as it is a huge gamble. It might pay off once
in a while but it might result in ending all your saving as well.
10. Do you know investment in commodities can be classed as an Asset?
92
Options Responds
Yes 37
No 13
Commodities speculation is about the riskiest place to deploy your savings: it's
really in a different category than investing. Commodities exchanges arc really
supercharged belting parlors made up of a series of hyperactive markets where
you can bet on the price movements of a variety of products. The list includes
precious metals, raw materials, grains and meal, ail and gas even financial
products like Treasury bills.
Though they carry big risks for individual investors, commodities markets were
originally set up lo help spread the risk of price changes among a large pool of
players. Using futures contracts, for example, a Tanner can sell a crop before
its planted, even though he might get a better price in the future (which is
where the name comes from.) If a boom in demand drives up prices by harvest
time, the buyer of the futures contract wins.
But if a bumper crop floods the market and prices plunge, our speculator could lose
everything. No matter what happens, the farmer has enough money in the
93
bank to buy the for next year's crop, Hence commodities can be classified us
an asset.
11. In which of the following types of Commodities do you prefer to invest?
Options Responds
94
Bullions (Gold and Silver) 17
Metals (Copper, Lead, Nickle etc) 10
Agri 7
Energy 10
Mixed 6
A new survey from New York-based hedge fund Ospraie Management
LLC had shown that gold is among the five best commodity-investment.
Experts say rising costs are hindering the exploration by gold producers
such as Barrick Gold Corp, the worlds largest gold mining company.
The past decade has seen a dramatic transformation in the energy sector
with a gradual, but steady movement from a state-owned, monopolistic
industry to a more open and competitive sector based on free-market
principles. The bullions like Gold and silver always has an edge in the
market but commodities like energy and metals are picking up But
precious metals will always have their stand when it comes to peoples
sentiments of investing their money in Gold n Silver.
12. If you trade in commodities, how do you rate it when compared to Equities on a
scale of 5?
95
Options Responds
1 11
2 0
3 29
4 0
5 10
More than half of the sample trusts both commodities and equities for putting their
money in it. Though commodities has started decades after which equity trading
started, its growth is tremendous with its turn over almost equal or more than equity
tune over in today scenario.
Others have their own opinion of their investments and prefer more of equities or
more of commodities according to their past experience, performance, liking,
comfort zone.
4.2 CROSS TABS
Question 3
Options Male Female
None 0 0
Under 5% 9 8
5-10% 13 0
10-15% 9 4
Above 15% 4 3
Question 9
Options Male Female
HR/HR 8 0
MR/MR 23 11
LR/LR 4 4
98
CHI-SQUARE TESTS
1. Chi square analysis between questions 2 and question 3.
HO: Annual income is not related to the % of income you invest in
commodities. H1: Annual income is related to the % of income you invest in
commodities. TABLES
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
Annual income % of
income invested 62 100.0% 0 .0% 62 100.0%
Annual income * % of income invested Crosstabulation
Count
% of income invested
Under 5% 5 to 10 to 15% Above Total
10% 15%
Annual 12 0 0 0 0 0
income
Less than 5 0 9 0 1 7 17
lakhs
5 to 10 lakhs 0 4 0 0 0 4
10 to 15 lakhs 0 4 9 0 0 13
15 to 20 lakhs 0 0 4 0 0 4
Above 20 0 0 0 12 0 12
lakhs
Total 12 17 13 13 7 62
99
Chi-Square Tests
Value Dt. Asymp. Sig.(2-
sided)
Pearson Chi-Square 1.683E2a 20 .000
Likelihood Ratio 149.593 20 .000
N of Valid Cases 62
1. 30 cells (100.0%) have expected countless than 5. The minimum
expected count is 45.
Comments:
From the analysis we can see that the Pearson chi-square is < 0.05 therefore we accept H1.
Therefore Annual income is related to the % of income you invest in commodities.
100
2. Chi quare analysis between questions 1 and question 4.
HO: Occupation is not related to where we invest.
H1: Occupation is related to where we invest.
TABLES:
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
Occupation * place
of investment 62 100.0% 0 .0% 62 100.0%
Occupation * Where you Invest Cross tabulation
Count
Place of invested
Equity Commodity Bank Mutual Insurance Total
- future funds
Occupation 2 0 0 0 0 0 2
Rental income 3 0 0 0 0 0 3
Horse race 1 0 0 0 0 0 1
Lottery 1 0 0 0 0 0 1
Bank interest 2 0 0 0 0 0 2
Capital Gains 1 0 0 0 0 0 1
Retired 2 0 0 0 0 0 2
Salaried 0 9 0 0 8 0 17
Self employed 0 8 4 1 0 12 25
Others 0 0 8 0 0 0 8
Total 12 17 12 1 8 12 62
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Chi-Square Tests
Value Dt. Asymp. Sig.(2-
sided)
Pearson Chi-Square 1.328E2a 45 .000
Likelihood Ratio 122.798 45 .000
N of Valid Cases 62
1. 59 cells (98.3%) have expected count less than 5. The minimum
expected count is 02.
Comments:
From the analysis we can see that the Pearson chi-square value is < 0.05
therefore we accept H1.
Therefore occupation is related to where we invest.
3. Chi square analysis between questions 2 and question
6. 102
HO: Annual income is not related to the risk taking apatite.
H1: Annual income is related to the risk taking apatite.
TABLES:
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
Annual income % of
risk taking apitite 62 100.0% 0 .0% 62 100.0%
Annual income * Risk taking apatite. Crosstabulation
Count
Risk taking apitite
Risk Risk Moderate Total
seeker averse
Annual income 12 0 0 0 12
Less than 5 lakhs 0 13 4 0 17
5 to 10 lakhs 0 0 4 0 4
10 to 15 lakhs 0 0 8 5 13
15 to 20 lakhs 0 0 0 4 4
Above 20 lakhs 0 0 0 12 12
Total 12 13 16 21 62
Chi-Square Tests
103
Value Dt. Asymp. Sig.(2-
sided)
Pearson Chi-Square 1.386E2a 15 .000
Likelihood Ratio 132.972 15 .000
N of Valid Cases 62
1. 23 cells (95.8%) have expected countless than 5. The minimum
expected count is 77.
Comments:
From the analysis we can see that the Pearson chi-square is < 0.05 therefore we
accept H1.
Therefore Annual income is related to the risk taking apatite.
4. Chi square analysis between questions 6 and question 11.
104
HO: risk taking apatite is not related to the type of commodities you prefer to invest.
H1: risk taking apatite is related to the type of commodities you prefer to invest.
Case Processing Summary
Cases
Valid Missing Total
N Percent N Percent N Percent
risk taking apatite *
type of commodities 62 100.0% 0 .0% 62 100.0%
Risk taking apetite * Type of commodities Cross tabulation
Count
Investment preference
Bullions Metals Agri Energy Mixed Total
Risk taking 12 0 0 0 0 0 12
apatite
Risk seeker 0 6 1 1 4 1 13
Risk averse 0 4 3 6 3 0 16
Moderate 0 7 7 0 3 4 21
Total 12 17 11 7 10 5 62
Chi-Square Tests
105
Value Dt. Asymp. Sig.(2-
sided)
Pearson Chi-Square 83.799a 15 .000
Likelihood Ratio 80.907 15 .000
N of Valid Cases 62
1. 23 cells (95.8%) have expected count less than 5. The minimum expected
count is 97.
Comments:
From the analysis we can see that the Pearson chi-square value is < 0.05 therefore
we accept H1.
Therefore risk taking apatite is related to the type of commodities you prefer to invest
106
CHAPTER 5
FAQ's About Commodities
Matt is the President of Optimus Trading Group, which is a futures brokerage firm that
specializes in online futures trading and managed futures accounts. Matt has been
involved in the futures industry for more than a decade and he understands the needs
and struggles of the commodity trader in this ever expanding and changing
environment,
17. Many readers out here are new to the commodities markets and are wondering the
best way to get involved in commodities. Some guidance from markets experiences?
1. Yes; choose a market that does not carry a lot of leverage, relative to your account
size, place a trade on one contract and see how you react emotionally to the fluctuations.
If you are comfortable with the ups and downs it means that you have the right
temperament for these markets.
Here is what you should do prior to placing the first trade to become even more
comfortable: track 10 commodities and familiarize yourself with their leverage, their
daily fluctuations and then choose a future contract that you feel comfortable with.
Of course, this is only the beginning. The key is in developing a long-term methodology,
i.e.: a reason to buy and/or sell contracts. Money management (risk) is an essential
component in developing EI successful methodology,
Q. Best Service recommended: the use of a full service commodity broker or an online
discount commodity broker?
A, Always believe that in the long run trading online should be the trader's ultimate
goal.
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Beginning traders should seek the assistance of a professional lo minimize errors and to
develop confidence in order placement, margin requirements and even the trading
platforms available. Brokers should be able to provide technology along with advice to
beginner traders. In The long run, believe Thai clients should Learn to become
independent and self-reliant lo trade according lo their own risk tolerance, lime
constraints or availability and lo develop discipline.
17.What mistakes do commonly traders make in the commodities markets?
1. In general terms, it's the lack of planning and preparation, Tlie mistakes could range
from misunderstanding the volatility, lo lack of money management or just not having a
methodology. However, part of trading is making mistakes, and hopefully learning from
these mistakes.
Learning the contract sizes, the various exchange orders and developing some
technical analysis skills could help tremendously.
17. Do traders receive any type of help if they trade online or are they left to completely
fend for themselves?
1. Part of any good brokerage is giving customers technical support for the platform
they've chosen. Guidance is given as lo the functionality of the trading platform, order
status and/or other issues that might arise for self-direct traders.
Customers should always shop for brokers that give them timely and extensive
support.
Q. is there a minimum balance that that is recommended for opening an account to trade
commodities?
A. Yes. Rs.25,000 is something that customers should consider. The ability to withstand
fluctuations, having sufficient margins is the key to survival in this market. Smaller
accounts can be successful, but the leverage could cause higher fluctuations in their
accounts. Never over trade and don't over leverage your account.
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Q. Some investors feel they dont have the time or knowledge to trade commodities. Can
managed futures might work for them?
A. Lack of time is a big consideration and can prevent a trader from taking profits (or
cutting losses) in & timely fashion. Some traders can be very knowledgeable about
commodities but applying their methodology and developing the emotional make up
necessary to trade is another matter
If the above conditions apply to someone who wants to participate in the commodities
markets, managed futures could be a very good solution.
17. What should investors examine about a managed futures fund to decide if they
should Invest in it?
1. Here are the factors to consider;
Track record
Monthly and intraday drawdown ( measures of volatility)
Money Under management
Type of contracts traded and me risk associated with them
Liquidity of die contracts Traded
17. What financial requirements does someone have to meet in order to trade
commodities or open a managed futures account?
1. Typically, managed futures accounts require higher levels of capital. They can start
from Rs,25,000 and higher However, regardless of the amount required, funds invested
in this type of investment should be risk capital. Keep in mind that managed accounts
can and do go through draw downs and volatility.
Recommended is having a minimum net worth of Rs.2,50,000/- and risk capital of
Rs.50,000/- also as a minimum requirement.
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CHAPTER-6
FINDINGS
CONCLUSION
SUGGESTIONS
BIBLIOGRAPHY
110
FINDINGS
After almost two years that commodity trading is finding favor with Indian investors and
is been seen as a separate asset class with good growth opportunities. For diversification
of portfolio beyond shares, fixed deposits and mutual funds, commodity trading offers a
good option for long-term investors and arbitrageurs and speculators. And, now, with
daily global volumes in commodity trading touching three limes that of equities, trading
in commodities cannot be ignored by Indian investors.
From all the information given above, we underhand the importance of trading in
commodity market. The booming economy of India Is pushing the growth of commodity
trading for various types of investors of higher level where people have another
opportunity to invest their money in one of the other best diversifying sector
Commodities.
The questionnaire answered all the required questions of from a general point of view
that investors consider commodities is Important as equities though it is not very new to
all the people investing their money in the exchanges. The turnover that commodity is
having is quiet an example that we have accepted commodities as another investing zone
for our investments.
Further, we have understood that Commodity can be used as an asset building tool for a
long term process with the example of Gold by paying less than that is normally required
by the person buying it physically. Hence COMMODITY CAN BE USED
AS AN ASSET CLASS
1 Due to the increasing of inflation in the country the Gold and silver got very much
importance and it was increased and the commodities market.
2 It shown that the more of the given share is known as commodities i.e. 67% and
other got very less as compared to commodities.
111
1 Majority of the Investors trade in the Commodities Market but few Done & Left
due to Losses & Settlement Problems.
2 Investors purchased commodities from karvy because of the companys policies
and information availability.
3 Most of the investors feel that commodity trading id very good and remaining
says good for investing
4 Trading in Commodities Futures is More Beneficial & More Leveraging got more
percentage.
5 Due to the increase in the services in the country the Services they prefer from a
Financial Advisory Institution is telephone.
6 Most of the investors preferring Karvy for investing in the commodity market.
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CONCLUSION
Commodities market, contrary to the beliefs of many people has been in existence in
India through the ages. However the recent attempt by the Government to permit
Multi-commodity National levels exchanges has indeed given it, a shot in the arm.
Commodity includes all kinds of goods. FCRA defines goods as every kind of
movable property other than actionable claims, money and securities. Futures
trading are organized in such goods or commodities as are permitted by the Central
Government. Firstly, the price movements are more predictable, purely based on
demand and supply of that commodity, unlike in other markets where price
manipulations are very much possible, hence the investor is fixed.
To that extent market price risk is reduced. Secondly, the markets are working
virtually round the clock,(NCDEX works from 10:00 AM to 4:00 PM and next
session from 7:00 PM to 11:00PM)so any drastic news is digested. In case of other
markets this provision is not there, just think of September 11
th
episode, next day
equity markets opened far down and the Investors are left hanging. The future
contracts available on a wide spectrum of commodities like Gold, Silver, Cotton,
Steel, Soya oil, Soya beans, Wheat, Sugar, Channa etc., provide excellent
opportunities for hedging the risks of the formers ,importers, exporters, traders and
large scale consumer. Karvy Commodities Broking Private Limited is another venture
of the prestigious karvy group. With our well establish presence in the multifarious
facets of the modern financial services industry from Stock Broking to registry
services.
113
SUGGESTIONS
1 Investing in commodities as an asset is always good for long term.
2 Invest with at least double the margin money that is required for a particular
commodity.
Ex: If investing in copper, margin is Rs.20,000 and price of copper in January is
Rs.150/- with a target of Rs.250/- in 6-8 months, keep Rs.40,000/- extra in case of
further fall in the prices (if it falls below 150/-) to be on a safer side.
3 It's a good instrument diversification,
4 Commodity Mutual Funds can be increased.
5 Commodity market presently deals with FUTURES contract and most probably
OPTIONS are provided, it would be convenient to the investors.
6 As the fund managers take decisions with mutual fund investment, it would be
another option for him to invest through mutual funds in commodity market.
7 If Government takes this commodity market into awareness for the farmers, it
would be better for them to take their own decisions for commodity which they
want to trade.
8 As there is an option for the trader to take the physical delivery, it would be better
if the Government cuts the tax rate for the physical delivery of goods.
9 Avoid buying shares of the company which are not traded on your stock
exchange.
10 Investor must show interest in steady and fast growth shares only.
114
1 Avoid buying Turn rounds (making loss continuously), Cyclical (cycles of good
and bad performance), Dog shares (very inactive or passive).
2 Avoid companies with low PIE ratio relative to the market as always.
3 If the investor is confident of EPS moving up and expects PIE to increase as well
stick to the shares and be patients.
115
ANNEXURE
COMMODITY AS AN ASSET CLASS
Name
Age
Gender[ ] Male [ ] Female
Education Qualification:
1. Occupation:
3 Salaried
3 Self Employed
3 Retired
3 Others (If so, specify ___________________)
2. Annual Income
3 Less than 5 lakhs 3
5 lakhs 10 lakhs 3
10 lakhs 15 lakhs 3
15 lakhs 20 lakhs 3
Above 20 lakhs
3. Percentage of your income you invest?
[ ] None [ ] Under 5% [ ] 5 to 10% [ ] 10 to 15% [ ] Above 15%
4. Where do you invest?
[ ] Equities/ Derivatives [ ] Mutual Funds
[ ] Commodity Futures [ ] Insurance (Includes ULIP)
[ ] Others (If so, specify ________________________)
5. Why do you invest in trading?
116
[ ] Awareness [ ] Conservatism
[ ] Peer Influence [ ] Looking for assistance
6. How do you rate your risk taking apatite?
[ ] Risk seeking [ ] Moderate [ ] Risk Averse [ ] No Answer
7. What would you use commodities for?
[ ] Trading [ ] Investing
[ ] Reasonable Returns [ ] No Answer
8. How would you prefer when trading in commodities?
[ ] Trading [ ] Short Term (Upto 1 month)
[ ] Mid Term (1-3 months [ ] Long Term (3-12 months)
9. You prefer to invest in commodities (futures) that have?
[ ] High Risk, High Return [ ] Medium Risk, Medium Return
[ ] Low Risk, Low Return
10. Do you know investment in commodities can be classed as an Asset?
[ ] Yes [ ] No
11. In which of the following types of Commodities do you prefer to invest?
[ ] Bullions (Gold and Silver) [ ] Metals (Copper, Lead, Nickle etc.)
[ ] Agri [ ] Energy
[ ] Mixed
12. If you trade in commodities, how do you rate it when compared to Equities on a
scale of 5?
1 2 3 4 5
Less Better
--------------------------------------------------------------------------------------------------------
117
BIBLIOGRAPHY
1. Donald E. Fisher, Ronald J. Jordan, Securities Analysis and
Portfolio Management,, 1999, sixth edition, futures and options
Page no: 404-435,489,493. Prentice hall of India
2. Sharpe W.F. Alexander J. Bailey, investments, 1998, 5th edition, Derivatives,
Prentice Hall of India,.
3. SCHAUM"S out lines, investments,2
nd
edition, new chapters on
future And options.
Karvy finapolies, Monthly editions, Broachers of karvy com trade.
WEBSITES:
KARVY LEARNING
CENTRE www.karvy.com
www.karvycommodities.com
www.ncdex.com
www.mcx.com
www.derivativesindia.com
Thank you
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