Beruflich Dokumente
Kultur Dokumente
Final Report
Management Research Project
Submitted To
Dr. Durga Prasad Samantaray
Submitted By:
Chandra Prakash (06BS0876)
A Report
On
Construction of Commodity future Index
By
Chandra Prakash
A report Submitted in partial fulfillment of the requirements of MBA Program
ACKNOWLEDGEMENT
It gives me immense gratification to place on records my profound gratitude and sincere
appreciation to each and everyone of those who have helped me in this endeavor.
I am ineffably indebted to Dr. Durga Prasad Samantaray , Faculty Member, ICFAI Business School,
Hyderabad for conscientious guidance and encouragement that helped me to accomplish this
assignment.
adequate facilities to work upon, data collection and completion of project report on time.
On a personal note I would like to thank all my batch mates for their support.
Any omission in this brief acknowledgement does not mean lack of gratitude.
Date: 14 ‐ March ‐ 2008 Chandra Prakash
Place: IBS, Hyderabad Enrolment No. 06BS 0876
Academic Year 2007‐08
Class of 2008
TABLE OF CONTENTS
ACKNOWLEDGEMENT ......................................................................................................................................... 3
LIST OF ILLUSTRATIONS: ...................................................................................................................................... 5
ABSTRACT ............................................................................................................................................................ 6
INTRODUCTION ................................................................................................................................................... 7
OBJECTIVES .......................................................................................................................................................... 8
Methodology ....................................................................................................................................................... 9
Calculating index: ............................................................................................................................................ 9
Beta:............................................................................................................................................................... 10
Index Calculation ............................................................................................................................................... 12
The Rogers International Commodity Index ( RICI ® ): .................................................................................. 12
The Reuters‐CRB Index (CCI): ........................................................................................................................ 14
The S&P GSCI™: ............................................................................................................................................. 16
Constructing Our Own Index ............................................................................................................................. 18
Qualifying criteria for commodity selection: ................................................................................................. 18
Agriculture Sub Group: .................................................................................................................................. 19
Energy Sub group: ......................................................................................................................................... 20
Metal Sub Group: .......................................................................................................................................... 20
Final Assignment of Weightage: .................................................................................................................... 23
Value of Index ................................................................................................................................................ 24
Beta Calculation ............................................................................................................................................. 31
RECOMMENDATIONS AND REMARKS: .............................................................................................................. 32
LIMITATION S OF STUDY: ................................................................................................................................... 33
APPENDICES ....................................................................................................................................................... 34
REFRENCES: ....................................................................................................................................................... 43
GLOSSARY .......................................................................................................................................................... 44
LIST OF ILLUSTRATIONS:
Table 1 ( contribution of three sector on 1st jan 2007) ..................................................................................... 18
Table 2 (contribution of three sector on 1st jun 2007) ...................................................................................... 18
Table 3(contribution of commodities between 1st jan to 1st dec 2007) ............................................................ 19
Table 4(qualifying agri commodities) ................................................................................................................ 20
Table 5 (Qualifying enery commodities) ........................................................................................................... 20
Table 6(Qualifying metal commodities) ............................................................................................................ 20
Table 7(contribution) ......................................................................................................................................... 22
Table 8(final assignment of weightage) ............................................................................................................ 23
Table 9 index ..................................................................................................................................................... 29
Table 10 (Beta) .................................................................................................................................................. 31
Table 11 (RICI) .................................................................................................................................................... 41
Figure 1 –construction of RICI ........................................................................................................................... 12
Chart 1 Agri constituent .................................................................................................................................... 21
Chart 2(Metal constituent) ................................................................................................................................ 21
Chart 3‐(Energy constituents) ........................................................................................................................... 22
Chart 4( constituents) ........................................................................................................................................ 23
Chart 5 (index) ................................................................................................................................................... 29
Chart 6(index) .................................................................................................................................................... 30
Chart 7(RICI) ...................................................................................................................................................... 42
ABSTRACT
An index is a significant barometer for the performance of market and an ideal investment tool. This is a
market benchmark which gives a sufficient input to the investors to make an investment decision.
Commodity Spot market through out the country is not integrated. Thus spot price varies significantly
with geographical location. This way of determination of spot price by various agencies does not justify
the price being market representative. Thus index based on spot price can not be true indicator. Since
the commodity future market is running on electronic based online trading system which makes the
geographical constraint irrelevant for true price discovery. Thus constructing an index on future is more
appropriate than on spot commodity market. In this project we will be constructing a future index to
represent the market view.
INTRODUCTION
To make an investment decision into any asset the primary objective is to know the future performance of
that investment. The decision is solely made on the benchmark guiding indicator i.e INDEX. Here is the need
for an INDEX evolves. An Index is used to give information about the price movements of products in the
financial, commodities or any other markets. Financial indexes are constructed to measure price movements
of stocks, bonds, T‐bills and other forms of investments. Stock market indexes are meant to capture the
overall behavior of equity markets. A stock market index is created by selecting a group of stocks that are
representative of the whole market or a specified sector or segment of the market. An Index is calculated
with reference to a base period and a base index value.
There is a unique characteristics of commodity trading is that unlike equity where we see the financial
performance of the company by looking at there financial reports. But the same is not is the case of
commodities. This makes the benchmark index a more investment decision tool than other investment
avenues. Unlike financial market, where financial product like index future, in Indian commodity market
regulator(Forward Market Commission) still do not allow commodity index future. Thus the only purpose of
commodity future is to measure market sentiment and investors expectation. In financial market the cash
trading of equity is very prevalent. It provide excellent price discovery of underlying security. Thus equity
based indices like Sensex and nifty is good indicator of market movement.
OBJECTIVES
o To create a comprehensive commodity future index based on logic to indicate market expectation
and sentiments.
o Measuring the performance by calculating Beta of the constituents
METHODOLOGY
Calculating index:
Unlike any other Commodity future index (like NCDEX future Indices, MCX future indices) which Construct
indices on the weighted average prices (on some pre‐assumed logic)of the nearest month expiry contracts
for some defined basket of commodities, In this project we will take average of all the live contract in that
particular month on rolling basis. Example: Here is a data for future price of Chilli (Guntur LCA 334) at MCX
for the month of march 2006. Four column of the table contains the data of four different contracts. The
first row of the table contains the name of expiry month of contract.
Expiry Month
Date Mar‐06 Apr‐06 May‐06 Jun‐06 Average
In the conventional indices only nearest expiry month is taken into account. i.e for month of march index
only first column data is taken for index construction. In our index we will take the average of all the live
contract. i.e average of all the four column.
Logic: Taking only near month data do not factor the future expectation of market into the index.
Average of all the four contract price will also include future expectation thus it makes the index more
comprehensive to market expectation.
Weight of each component will be taken on the basis of trade value
Trade Value= Volume X Contract Value
Logic: Trade value will indicate the amount of money transaction in particular commodity. Hence this will
indicate the degree of interest in the subject.
Constituent of Index:
• Agro product
• Metal
• Energy product
Beta:
Risk is an important consideration in holding any portfolio. The risk in holding commodity is generally
associated with the possibility that realized returns will be less than the returns expected.
Risks can be classified as Systematic risks and Unsystematic risks.
• Unsystematic risks:
These are risks that are unique to a firm or industry. Factors such as management capability,
consumer preferences, labour, etc. contribute to unsystematic risks. Unsystematic risks are
controllable by nature and can be considerably reduced by sufficiently diversifying one's portfolio.
• Systematic risks:
These are risks associated with the economic, political, sociological and other macro‐level changes.
They affect the entire market as a whole and cannot be controlled or eliminated merely by
diversifying one's portfolio.
Beta is calculated as :
where,
Y is the returns on your portfolio or stock ‐ DEPENDENT VARIABLE
X is the market returns or index ‐ INDEPENDENT VARIABLE
Variance is the square of standard deviation.
Covariance is a statistic that measures how two variables co‐vary, and is given by:
Where, N denotes the total number of observations, and and respectively represent the
arithmetic averages of x and y. In order to calculate the beta of a portfolio, multiply the weightage
of each commodity in the portfolio with its beta value to arrive at the weighted average beta of the
portfolio
Standard Deviation
Standard Deviation is a statistical tool, which measures the variability of returns from the expected
value, or volatility. It is denoted by sigma(s) . It is calculated using the formula mentioned below:
Where, is the sample mean, xi’s are the observations (returns), and N is the total number of
observations or the sample size.
INDEX CALCULATION
There are various benchmark indexes in world which has a great significance in making investment
strategies of financial planners and corporate. To choose the best suited index for the purpose of planning
one should see the logic and mechanism of constituting the index. Here below we are discussing the various
commodity indexes and their constitution method to have better understanding of method of construction
The Rogers International Commodity Index ( RICI ® ):
is a composite, USD based, total return index, designed by Jim Rogers on July 31st, 1998. The index was
designed to meet the need for consistent investing in a broad‐based international vehicle. Index is famous
for being one of the most diverse commodity indexes —
It is being calculated from 35 commodities from 11 international exchanges. List of commodities is subject to
change by RICI Committee, in general commodity will be considered fit to be included in the index, if it plays
a significant role in worldwide (developed and developing countries) consumption. Consumption is
measured via tracking international imports/exports pattern. If one particular commodity is being traded on
more than one international exchange, the most liquid contract globally, in terms of volume and open
interest combined is then aimed to be selected for inclusion in the index.
Figure 1 –construction of RICI
Index is divided into 3 sub‐indices, which reflect the 3 sub‐segments of the RICI® ‐ RICI® Agriculture, RICI®
Energy and RICI® Metals.
Sub‐indices contributions to main index are
• Agriculture ‐ 34.90%
• Energy ‐ 44.00%
• Metals ‐ 21.10%.
Calculation key points
For each commodity most valid (most active traded from committee point of view) expiration is chosen to
be included into RICI calculation. Index is being rolled at the end of each month to contracts that are
expected to be most active during next month. Generally, if the next calendar month of a futures contract
includes a first notice day, a delivery day or historical evidence that liquidity migrates to a next contract
month during this period, then the next contract month is intended to be applied to calculate the index –
taking legal constraints into account. The Index calculation methodology is reviewed annually by the index
committee during its meeting in December and possibly amended thereafter.
Values
Initial value of RICI® was set at July 31, 1998 to 1000. Since then up to December 2007 index grows up by
more than 300% to values of 4000+. Being known as one of the most diversified commodities index, RICI® is
known to have very large compound returns.
Total Component Weight calculation during non roll periods
The TCW for any given non‐roll date is calculated as the sum of adjusted Daily
Contract Prices (DCP), times respective Monthly Contract Weights (MCW). The
DCP are adjusted by price scalars reflecting reference currency rates versus
the U.S. Dollar such that all DCP adjusted are expressed in U.S. Dollars. For
non‐roll days we have:
(1)
1,
,
MCWc,t is the Monthly Contract Weight for each Index component,
DCPc,t is the Daily Contract Price in the local currency,
FXc,t is the Currency exchange rate between the quotation currency of the
Component instrument and the index reference currency. For official settlement price, the RICI® Index use a
direct or USD cross fixing price.
CRY Factor is +1 or –1 .
The Reuters‐CRB Index (CCI):
The Reuters‐CRB Index (CCI) was first calculated by Commodity Research Bureau, Inc. in 1957 and made its
inaugural appearance in the 1958 CRB Commodity Year Book. The Index was originally comprised of 28
commodities, 26 of which were traded on exchanges in the U.S. and Canada, and two cash markets. In
addition to those 26 markets, the Index also included the spot New Orleans cotton and Minneapolis wheat
markets which were added to balance some commodities repeated in the Index as by‐products of other
commodities.
The original base period was 1947‐49, the same as the Bureau of Labor Statistics Spot Market Index. This
was purposely done to facilitate easy comparison of both spot and futures indexes. The Reuters‐CRB Index
(CCI) can be viewed as a three‐dimensional index. In addition to averaging prices across 17
commodities (two dimensions), the Index also incorporates an average of prices across time, within
each commodity
The Reuters‐CRB Index (CCI) is computed using a three‐step process:
1) Each of the Index's 17 component commodities is arithmetically averaged using the prices for all of the
designated contract months which expire on or before the end of the sixth calendar month from the current
date, except that:
a. no contract shall be included in the calculation while in delivery;
b. there shall be a minimum of two contract months for each component commodity (adding contracts
beyond the six month window, if necessary);
c. There shall be a maximum of five contract months for each commodity (dropping the most deferred
contracts to remain at five, if necessary). The result is that the Index extends six to seven months
into the future depending on where one is in the current month. For example, live cattle's average
price on October 30, 1997 would be computed as follows:
(Dec. '97 + Feb. '97 + Apr. '98)
Cattle Average = ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
3
Soybean's average price on October 30, 1997 is:
(Nov. '97 + Jan. '98 + Mar. '98)
Soybean Average = ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐
3
2) These 17 component averages are then geometrically averaged by multiplying all of the numbers
together and taking the 17th root.
___________________________________________
Geometric Average = 17 √ Crude Avg. x Heating Avg. x ...Sugar Avg.
3) The resulting average is divided by 30.7766, the 1967 base‐year average for these 17 commodities. That
result is then multiplied by an adjustment factor of .8486. This adjustment factor is necessitated by the nine
revisions to the Index since its inception in 1957. Finally, that result is multiplied by 100 in order to convert
the Index into percentage terms:
Current Geometric Average
Index = ‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐ x .8486 x 100
1967 Geometric Average (30.7766)
Arithmetic vs. Geometric Averaging
The Reuters‐CRB Index (CCI) involves both geometric and arithmetic averaging techniques. Geometric
averaging has the statistically attractive property that successive percentage changes in a component's price
do not alter that component's relative weight in the Index. Arithmetic averaging, on the other hand, causes
the relative weight of a component to increase (or decrease) as that component appreciates (or depreciates)
in value. The implications of these differences in index computation techniques may be seen in Figure 3,
which reflects four different price scenarios. For convenience, assume that the index is comprised of only
three components ‐ X, Y, and Z ‐ and that these components are equally weighted. The base period for each
scenario is assumed to be 100.
The S&P GSCI™:
The S&P GSCI™ is designed to provide investors with a reliable and publicly available benchmark for
investment performance in the commodity markets comparable to the S&P 500 or FT equity indices. As
such, the S&P GSCI™ is a composite index of commodity sector returns, representing an unleveraged, long‐
only investment in commodity futures that is broadly diversified across the spectrum of commodities. The
returns are calculated on a fully‐collateralized basis with full reinvestment. The combination of these
attributes provides investors with a representative and realistic picture of realizable returns attainable in the
commodities markets.
Individual components qualify for inclusion in the S&P GSCI™ on the basis of liquidity and are weighted by
their respective world production quantities. The principles behind the construction of the index are public
and designed to allow easy and cost‐efficient investment implementation. Possible means of
implementation include the purchase of S&P GSCI™ related instruments, such as the S&P GSCI™ futures
contract traded on the Chicago Mercantile Exchange (CME) or over‐the‐counter derivatives, or the direct
purchase of the underlying futures
Economic Weighting
The S&P GSCI™ is world‐production weighted; the quantity of each commodity in the index is determined by
the average quantity of production in the last five years of available data. Such weighting provides the S&P
GSCI™ with significant advantages, both as an economic indicator and as a measure of investment
performance.
For use as an economic indicator, the appropriate weight to assign each commodity is in proportion to the
amount of that commodity flowing through the economy (i.e., the actual production or consumption of that
commodity). For instance, the impact that doubling the price of corn has on inflation and on economic
growth depends directly on how much corn is used (or produced) in the economy. From the standpoint of
measuring investment performance, production‐weighting is not only appropriate but vital. The key to
measuring investment performance in a representative fashion is to weight each asset by the amount of
capital dedicated to holding that asset. In equity markets, this representative measurement of investment
performance is accomplished through weighting indices by market capitalization. For commodities, there is
no direct counterpart to market capitalization. The problem is that commodities, and the related price risks,
are held in a variety of ways ‐ long futures positions, over‐the‐counter investments, long‐term fixed‐price
purchasing contracts, physical inventory at the producer, etc. ‐ making a complete accounting of capital
dedicated to holding commodities from the time they are produced to the time they are consumed
infeasible. A simple way to achieve a close analogue to true market capitalization, abstracting from
differences in inventory patterns, is to note that the net long position of the economy is proportional to the
quantity produced ‐ hence, production weighting.
A Broad Spectrum of Commodities
The S&P GSCI™ contains as many commodities as possible, with the rules excluding commodities only to
retain liquidity and investability in the underlying futures markets. Currently, the S&P GSCI™ contains 24
commodities from all commodity sectors: six energy products, five industrial metals, eight agricultural
products, three livestock products and two precious metals. This broad range of constituent commodities
provides the S&P GSCI™ with a high level of diversification both across subsectors and within each
subsector. This diversity minimizes the effects of highly idiosyncratic events, which have large implications
for the individual commodity markets, but are muted when aggregated to the level of the S&P GSCI™.
Together, the diversity of its constituent commodities and their economic weighting allow the S&P GSCI™ to
respond in a stable way to world economic growth, even as the composition of global growth changes
through time. When world growth is dominated by industrialized economies, the metals sector of the S&P
GSCI™ generally responds more than the agricultural components. Similarly, when emerging markets
dominate world growth, agricultural and petroleum‐based commodities generally respond the most. Thus,
for example, an index that significantly underweights agriculture would significantly underperform in a
global economy with weak OECD and strong emerging markets growth, much like a stock index that only
contained industrials would provide a misleading picture of a service‐led economy.
1 As the GSCI transitioned from including Unleaded Gasoline to including RBOB Gasoline, the GSCI contained
25 commodities, seven of which were in the energy sector. This transition period lasted from the August
2006 roll to the October 2006 roll.
Liquidity Constraints for Inclusion and Return Calculations
Individual commodities are screened by liquidity for inclusion in the S&P GSCI™. The eligibility requirements
are designed to promote cost‐effective implementation and true investability. Underlying liquidity eases
hedging of derivative products and investing in subsector or individual commodity overlays. Furthermore,
liquidity in the underlying futures markets facilitates the discovery of true market prices for the components
of the S&P GSCI™.
S&P GSCI™ returns are calculated (discussed in detail in the following section) based on the arithmetic
average of stable long positions in futures contracts. This methodology, along with the liquidity in the
underlying markets, allows easy implementation of the portfolio of futures contracts that the S&P GSCI™
represents. These characteristics of the GSCI are designed to allow for efficient and relatively inexpensive
arbitrage of publicly‐traded S&P GSCI™ related instruments such as the CME futures contract.
CONSTRUCTING OUR OWN INDEX
To construct our own index we are classifying the commodity market into 3 broad sub categories:
• Agro product
• Metal
• Energy product
Assumption: We are taking the base year as 1 January 2007 and the base value 1000.
Qualifying criteria for commodity selection:
We divided the whole spectrum of commodities in three sub group as “RICI “. We took the all the contract
on 1st Jan 2007 and on 1st June 2007
On 1st of Jan 2007
The following were the gross value of each sector when taking all the commodities (even those which were
not included in above 10).
Dated 1st Jan 2007
Value in (Lakhs) % contribution
Agriculture 79216.13 78
Metal 19120.17 19
Energy 3059.42 3
Grand Total 101395.72
Table 1 ( contribution of three sector on 1st jan 2007)
But in contrary on 1st June 2007 following were the contribution
Dated 1st Jun 2007
Value in Lakh % contribution
Agriculture 30722.79 3
Metal 782032.36 84
Energy 116550.14 13
Grand Total 929305.29
st
Table 2 (contribution of three sector on 1 jun 2007)
Thus to deal with these kind of dynamics we should take the time horizon rather a cross‐section of a day.
Thus to determine the constituents and their weight we are taking a time horizon of one year between 1st
Jan 2007 to 1st Dec 2007.
Agriculture Sub Group:
Value(In
Commodity Lakhs) % share Avg. Price
1 Potato 727995.90 26% 553.11
2 Guar Seed 463269.28 16% 1810.54
3 Chana 430633.60 15% 2293.11
4 Pepper 250952.49 9% 13533.68
5 Kapas 200412.18 7% 406.72
6 Turmeric 183769.81 7% 2218.75
7 Kapaskhali 114644.75 4% 361.88
8 Jeera 93668.99 3% 10695.33
9 Jute 87535.81 3% 1364.70
10 Wheat 78571.97 3% 885.21
11 Red Chilli 44598.42 2% 4587.18
12 Rice 40139.82 1% 1033.60
13 Mustard Seed 27796.63 1% 328.64
14 Soyabeen 27753.80 1% 1597.43
15 Urad 19595.89 1% 3456.84
16 Cotton Long 12386.27 0% 20220.16
17 Gur 3438.18 0% 524.65
18 Basmati Rice 819.76 0% 2732.00
19 Maize 78.21 0% 720.41
20 Masur 8.93 0% 2394.67
21 Coconut Oil 1.00 0% 4857.39
Castor Oil and
22 Seed 0.83 0% 435.91
Not
23 Coffee Not Available Not Available Available
2808072.52 100%
Table 3(contribution of commodities between 1st jan to 1st dec 2007)
Taking first four for our index construction on the ground of being value topper in this time horizon.
Time horizon 1st Jan 2007‐1st Dec 2007
%
Commodity Value(In Lakhs) share Avg. Price
Potato 727995.90 39% 553.11
Guar Seed 463269.28 25% 1810.54
Chana 430633.60 23% 2293.11
Pepper 250952.49 13% 13533.68
1872851.27 100%
Table 4(qualifying agri commodities)
Energy Sub group:
Energy contribution in trade between 1st jan to 1 dec
07
Value (in Lakh) % Contribution
CRUDEOIL 34322341.96 94%
NATURALGAS 2363938.04 6%
36686280 100%
Table 5 (Qualifying enery commodities)
Metal Sub Group:
Time horizon 1st jan‐1stDec 2007
COMMODITY Value In Lakhs % Contri
GOLD 89611441 41%
SILVER 48127776 22%
Copper 45542573 21%
ZINC 20442232 9%
NICKEL 7331335 3%
LEAD 3973921 2%
GOLDM 1883065 1%
ALUMINIUM 671348 0%
TIN 57356 0%
217641047 100%
Table 6(Qualifying metal commodities)
So here are the members of our Index where we took 4 Agriculture, 4 Metal and 2 energy commodity as our
representative commodities in the proportion of their weights.
o Agriculture
Potato 39%
Guar Seed 25%
Chana 23%
Pepper 13%
Agri
Pepper
13%
Potato
Chana 39%
23%
Guar Seed
25%
Chart 1 Agri constituent
o Metal
GOLD 41%
SILVER 22%
Copper 21%
ZINC 9%
Metal
ZINC
10%
Copper GOLD
22% 44%
SILVER
24%
Chart 2(Metal constituent)
o Energy
NATURAL
GAS Energy
6%
CRUDEOIL
94%
Chart 3‐(Energy constituents)
Natural Gas 6%
Crude Oil 94%
% contribution in
COMMODITY Value In Lakhs % Contri index
Metal
GOLD 89611441 44% 37%
SILVER 48127776 24% 20%
Copper 45542573 22% 19%
ZINC 20442232 10% 8%
203724022 100% 84%
Energy
CRUDEOIL 34322341.96 94% 14%
NATURALGAS 2363938.04 6% 1%
36686280 100% 15%
Agriculture
Potato 727995.90 39% 0%
Guar Seed 463269.28 25% 0%
Chana 430633.60 23% 0%
Pepper 250952.49 13% 0%
1872851.27 100% 1%
242283153.52 Grand Total
Table 7(contribution)
Here we can see in above that. MCX the contribution of Metal is 84% of total Trade , Energy is 15% of Total
Trade, and Agriculture is just 1% of total trade. If the below weightage will be used for constructing the
index it would not be represented fairly for all the sectors. So in spite of greater value trade of metal and
energy in respect to agriculture, we will give equal weightage to all the three sectors i.e. 33.33% to all
sectors.
Final Assignment of Weightage:
COMMODITY Value In Lakhs % Contri X0.3333
Metal GOLD 89611441 44% 15%
SILVER 48127776 24% 8%
Copper 45542573 22% 7%
ZINC 20442232 10% 3%
203724022 100%
Energy CRUDEOIL 34322341.96 94% 31%
NATURALGAS 2363938.04 6% 2%
36686280 100%
Agriculture Potato 727995.90 39% 13%
Guar Seed 463269.28 25% 8%
Chana 430633.60 23% 8%
Pepper 250952.49 13% 4%
1872851.27 100%
242283153.52 Grand Total
Table 8(final assignment of weightage)
We can justify the above with the fact that the use of index is to show the market dynamics.
Even if the value of agricultural product which is traded on the exchange is less, they have significant price
dynamics. To capture the price dynamics of each component one should take the component contribution
as below:
Chana Pepper
8% 5%
Guar Seed GOLD
8% 15% SILVER
8%
Potato Copper
13% 7%
CRUDEOIL ZINC
NATURALGAS 3%
31%
2%
Chart 4( constituents)
Value of Index
we will take the price of futures for each constituent for all the live contracts and will calculate the average
of these prices. This will represent the price of that commodity. Now with keeping the above deduced
weightage and determined representative price the index value will be calculated.
The value on the date 1st January 2007 will be equated to 1000 and the same multiplying factor will carried
till the next re‐evaluation of weight of each constituent.
Here below is the table of calculated index as per above logic and calculation. Last column contain the
commodity index value.
06‐02‐07 9587 20343 251 147 2631 340 511 2035 2112 12643 4814 1020
07‐02‐07 9580 20393 247 144 2605 343 521 2024 2128 13044 4826 1022
08‐02‐07 9624 20475 246 142 2594 344 527 2007 2108 12915 4828 1023
09‐02‐07 9720 20623 252 143 2696 348 522 1951 2116 12874 4880 1034
10‐02‐07 9737 20607 252 143 2675 347 540 1973 2104 12868 4878 1033
12‐02‐07 9679 20333 248 141 2585 328 572 1960 2087 12618 4811 1019
13‐02‐07 9699 20587 258 145 2644 329 584 1938 2095 12654 4855 1028
14‐02‐07 9742 20665 256 148 2586 322 552 1887 2104 12707 4844 1026
15‐02‐07 9729 20661 263 153 2553 322 563 1893 2082 12796 4836 1024
16‐02‐07 9736 20696 261 152 2669 336 563 1900 2064 12907 4880 1034
17‐02‐07 9746 20681 261 152 2673 332 567 1860 2065 12859 4877 1033
19‐02‐07 9782 20753 261 153 2659 335 574 1865 2016 13065 4889 1036
20‐02‐07 9637 20478 257 151 2629 332 571 1898 2026 13064 4839 1025
21‐02‐07 9869 20953 263 152 2690 346 590 1885 2079 13054 4936 1046
22‐02‐07 9890 21056 274 156 2744 348 609 1912 2105 12824 4963 1051
23‐02‐07 9948 21338 281 161 2756 345 591 1903 2050 12730 4987 1056
24‐02‐07 9945 21370 281 162 2759 346 609 1913 2066 12801 4998 1059
26‐02‐07 9988 21461 282 162 2778 345 635 1921 2117 12755 5024 1064
27‐02‐07 9963 21382 278 160 2795 344 624 1894 2069 12802 5013 1062
28‐02‐07 9780 20923 271 157 2772 329 628 1887 2067 12774 4939 1046
01‐03‐07 9730 20234 276 156 2794 326 666 1869 2066 12867 4891 1036
02‐03‐07 9444 19089 272 150 2796 329 659 1863 1998 12799 4747 1006
03‐03‐07 9485 19284 272 150 2790 325 642 1872 1987 12672 4760 1008
05‐03‐07 9448 19459 269 149 2749 329 639 1867 2038 12356 4746 1005
06‐03‐07 9504 19779 273 151 2767 336 636 1888 2023 12467 4790 1015
07‐03‐07 9561 19853 279 153 2817 333 637 1888 2090 12301 4819 1021
08‐03‐07 9585 19880 283 153 2814 328 655 1890 2049 12290 4823 1022
09‐03‐07 9554 19682 278 149 2787 325 663 1943 2113 12271 4804 1018
10‐03‐07 9546 19697 279 149 2765 322 662 1959 2125 12252 4798 1016
12‐03‐07 9536 19821 284 149 2725 314 673 1925 2106 12051 4783 1013
13‐03‐07 9487 19633 281 147 2733 315 684 1930 2136 12187 4773 1011
14‐03‐07 9406 19445 281 146 2704 319 656 1918 2116 12045 4725 1001
15‐03‐07 9480 19780 293 150 2694 313 641 1935 2162 12302 4774 1011
16‐03‐07 9535 19886 295 147 2711 314 638 1958 2147 12643 4810 1019
17‐03‐07 9539 19879 295 148 2703 313 638 1949 2152 12621 4806 1018
19‐03‐07 9547 19922 297 145 2704 309 630 1942 2150 12692 4812 1019
20‐03‐07 9559 19993 296 145 2674 310 616 1918 2175 12691 4809 1019
21‐03‐07 9546 19945 294 142 2675 321 606 1956 2198 12990 4819 1021
22‐03‐07 9605 20129 299 144 2735 329 576 1990 2240 13092 4868 1031
23‐03‐07 9516 19884 300 144 2768 330 570 2012 2269 13164 4851 1028
24‐03‐07 9514 19888 301 143 2772 330 566 2018 2303 13208 4857 1029
26‐03‐07 9546 20018 304 145 2788 327 560 1997 2296 13329 4879 1034
27‐03‐07 9519 19883 297 143 2791 333 560 1998 2319 13671 4880 1034
28‐03‐07 9540 19993 298 143 2834 340 567 2030 2370 13664 4913 1041
29‐03‐07 9535 19974 301 145 2923 343 568 2032 2374 13519 4934 1045
30‐03‐07 9518 20013 304 145 2919 341 563 2033 2408 13854 4949 1048
02‐04‐07 9513 19909 306 144 2936 341 561 2010 2380 14062 4949 1048
03‐04‐07 9469 19934 317 146 2863 329 574 1999 2397 13874 4917 1042
04‐04‐07 9523 20045 322 153 2843 331 587 2021 2445 14129 4946 1048
05‐04‐07 9521 20097 321 153 2831 335 570 2054 2423 14732 4969 1053
06‐04‐07 9697 19898 321 153 2825 334 572 2053 2409 15052 4989 1057
07‐04‐07 9703 20137 322 154 2827 332 567 2043 2394 15366 5020 1063
09‐04‐07 9681 20180 334 157 2777 334 571 2043 2400 15892 5028 1065
10‐04‐07 9722 20305 334 157 2772 343 570 2023 2403 15950 5043 1068
11‐04‐07 9722 20244 340 157 2769 345 571 2031 2373 16043 5040 1068
12‐04‐07 9699 20217 332 155 2807 344 577 2047 2432 16177 5058 1071
13‐04‐07 9730 20343 334 154 2815 342 576 2096 2400 15899 5065 1073
16‐04‐07 9727 20260 333 154 2840 326 599 2092 2454 16267 5087 1078
17‐04‐07 9695 20159 342 159 2806 321 616 2090 2461 15513 5036 1067
18‐04‐07 9697 20138 339 158 2787 323 603 2087 2423 15450 5022 1064
19‐04‐07 9652 19844 335 156 2766 322 600 2070 2432 15678 4993 1058
20‐04‐07 9680 20008 337 157 2765 319 602 2029 2419 15529 5000 1059
21‐04‐07 9688 20019 338 157 2772 325 605 2105 2428 15795 5022 1064
23‐04‐07 9649 20003 337 158 2797 326 608 2072 2426 15962 5027 1065
24‐04‐07 9510 19557 328 157 2750 326 603 1962 2386 16169 4951 1049
25‐04‐07 9445 19427 329 156 2768 328 597 1953 2335 15653 4910 1040
26‐04‐07 9273 18784 319 154 2761 321 601 1937 2299 15744 4830 1023
27‐04‐07 9350 18999 323 154 2787 329 600 1903 2305 15093 4838 1025
28‐04‐07 9397 19115 324 154 2790 327 599 1925 2308 14909 4850 1027
30‐04‐07 9388 18992 325 156 2808 332 602 1935 2336 14878 4847 1027
01‐05‐07 9318 18759 333 162 2773 330 606 1918 2345 15059 4815 1020
02‐05‐07 9289 18723 334 163 2720 328 612 1867 2365 15609 4812 1019
03‐05‐07 9361 18886 341 168 2688 332 609 1850 2353 15838 4833 1024
04‐05‐07 9397 18849 343 171 2629 331 610 1853 2357 15747 4814 1020
05‐05‐07 9396 18866 341 171 2623 332 611 1815 2329 15431 4796 1016
07‐05‐07 9378 19352 338 169 2603 327 604 1779 2322 15314 4816 1020
08‐05‐07 9337 19323 338 170 2628 323 600 1778 2285 15301 4812 1019
09‐05‐07 9294 19190 334 169 2594 323 595 1770 2284 15135 4775 1012
10‐05‐07 9203 18922 330 168 2632 328 587 1750 2277 15360 4758 1008
11‐05‐07 9215 19034 331 169 2640 333 594 1794 2331 14972 4764 1009
12‐05‐07 9216 19032 330 169 2644 331 592 1765 2300 14728 4751 1006
14‐05‐07 9123 18867 319 164 2643 336 589 1783 2307 15044 4737 1003
15‐05‐07 9162 18940 323 164 2645 330 579 1787 2300 15058 4748 1006
16‐05‐07 9032 18554 314 158 2683 327 602 1774 2283 15284 4718 999
17‐05‐07 8968 18417 303 153 2747 335 596 1745 2211 15245 4706 997
18‐05‐07 8984 18501 303 153 2745 334 596 1770 2283 14934 4710 998
19‐05‐07 8981 18235 303 153 2748 335 600 1733 2295 14682 4678 991
21‐05‐07 8968 18561 310 156 2780 337 603 1808 2268 14932 4727 1001
22‐05‐07 8915 18427 301 153 2736 334 601 1772 2214 14572 4672 990
23‐05‐07 8927 18465 300 151 2736 332 599 1783 2172 13607 4635 982
24‐05‐07 8829 18304 292 148 2691 328 602 1792 2242 14374 4630 981
25‐05‐07 8831 18346 302 152 2707 322 603 1774 2220 13587 4605 975
26‐05‐07 8841 18388 302 152 2713 324 605 1786 2176 13592 4610 976
28‐05‐07 8815 18271 301 151 2689 320 607 1798 2214 13593 4593 973
29‐05‐07 8820 18506 300 148 2619 320 619 1785 2224 13262 4579 970
30‐05‐07 8821 18532 300 149 2658 332 618 1771 2212 13514 4602 975
31‐05‐07 8870 18789 307 151 2640 328 608 1786 2236 13814 4638 982
01‐06‐07 8973 19061 308 155 2689 327 608 1785 2265 13895 4696 995
02‐06‐07 8984 19102 307 155 2688 327 611 1810 2238 13686 4692 994
04‐06‐07 8988 19131 313 157 2732 337 615 1825 2254 13581 4709 997
05‐06‐07 8964 19173 312 156 2719 334 613 1832 2242 13669 4707 997
06‐06‐07 9191 19093 308 152 2737 335 614 1805 2235 13734 4740 1004
07‐06‐07 9093 18840 307 151 2767 326 618 1779 2285 13808 4719 1000
08‐06‐07 9013 18474 301 151 2720 324 618 1811 2245 13652 4656 986
09‐06‐07 9008 18532 301 151 2717 323 622 1779 2245 13529 4652 985
11‐06‐07 9004 18559 305 155 2723 319 626 1791 2257 13751 4667 989
12‐06‐07 8937 18362 299 152 2699 318 628 1791 2247 13674 4630 981
13‐06‐07 8962 18388 302 152 2743 319 633 1710 2245 14013 4657 986
14‐06‐07 8986 18473 308 154 2787 323 629 1738 2254 13346 4657 987
15‐06‐07 8993 18537 309 154 2805 328 625 1687 2271 13687 4680 991
16‐06‐07 9003 18561 309 154 2828 324 634 1677 2247 13125 4666 988
18‐06‐07 9018 18525 309 152 2853 320 643 1683 2266 13847 4705 997
19‐06‐07 9052 18627 307 151 2873 314 647 1681 2251 14020 4730 1002
20‐06‐07 9028 18525 310 150 2819 306 653 1703 2258 14096 4708 997
21‐06‐07 8930 18319 308 146 2831 312 656 1716 2305 14127 4687 993
22‐06‐07 8953 18262 307 147 2844 303 661 1688 2329 14314 4697 995
23‐06‐07 8949 18279 307 147 2843 299 650 1683 2346 14828 4718 999
25‐06‐07 8928 18091 307 145 2848 298 658 1684 2373 14881 4706 997
26‐06‐07 8847 17369 303 141 2815 295 660 1637 2373 14956 4625 980
27‐06‐07 8829 17264 304 139 2840 294 656 1633 2331 14711 4608 976
28‐06‐07 8868 17435 309 140 2852 281 655 1601 2365 14985 4642 983
29‐06‐07 8871 17334 309 138 2875 281 659 1608 2387 14750 4635 982
30‐06‐07 8870 17260 308 140 2876 283 663 1654 2376 15010 4643 984
02‐07‐07 8900 17534 313 143 2878 279 667 1667 2401 14901 4670 989
03‐07‐07 8883 17418 315 142 2893 280 681 1648 2404 15232 4676 991
04‐07‐07 8868 17472 316 142 2892 279 676 1662 2367 14677 4654 986
05‐07‐07 8800 17323 318 142 2899 275 685 1681 2395 14841 4645 984
06‐07‐07 8822 17665 318 142 2919 267 681 1682 2374 14652 4672 990
07‐07‐07 8836 17666 318 142 2929 267 677 1707 2364 14559 4675 990
09‐07‐07 8896 17681 322 142 2912 268 674 1705 2358 14323 4669 989
10‐07‐07 8906 17838 318 140 2929 275 667 1661 2337 14324 4682 992
11‐07‐07 8902 17837 319 142 2933 276 662 1670 2342 14485 4690 993
12‐07‐07 8958 18097 317 146 2942 267 661 1702 2376 14652 4734 1003
13‐07‐07 8941 18044 318 146 2970 276 664 1712 2395 14713 4741 1004
14‐07‐07 8957 18045 318 146 2979 276 653 1706 2395 14725 4745 1005
16‐07‐07 8938 17962 315 145 2972 265 682 1710 2407 14762 4739 1004
17‐07‐07 8914 17901 314 144 2984 261 672 1716 2410 14772 4734 1003
18‐07‐07 8988 18207 316 144 3013 267 646 1714 2415 14875 4780 1013
19‐07‐07 9012 18269 323 146 3033 274 640 1755 2405 14903 4798 1016
20‐07‐07 9069 18319 327 151 3034 265 632 1749 2413 14903 4811 1019
21‐07‐07 9077 18326 327 151 3038 281 624 1756 2411 14910 4813 1020
23‐07‐07 9042 18222 324 151 3004 265 633 1756 2409 14946 4791 1015
24‐07‐07 9038 18337 321 152 2963 260 630 1748 2411 14879 4783 1013
25‐07‐07 8961 18021 317 149 3022 262 628 1751 2399 14866 4763 1009
26‐07‐07 8842 17721 314 144 3030 263 652 1776 2410 14737 4724 1001
27‐07‐07 8825 17569 316 144 3075 272 653 1759 2372 14602 4714 999
28‐07‐07 8836 17567 317 144 3097 273 654 1756 2342 14560 4718 999
30‐07‐07 8881 17772 319 144 3091 282 670 1791 2341 14605 4746 1005
31‐07‐07 8878 17826 323 145 3114 271 668 1818 2332 14107 4739 1004
01‐08‐07 8849 17974 318 145 3068 278 653 1822 2325 14075 4728 1002
02‐08‐07 8859 18040 318 144 3075 266 651 1785 2326 14013 4731 1002
03‐08‐07 8920 18151 310 141 3050 265 639 1760 2295 13820 4727 1001
04‐08‐07 8916 18147 310 141 3037 265 643 1737 2309 13761 4720 1000
06‐08‐07 9015 18080 309 139 2942 269 650 1724 2320 13236 4679 991
07‐08‐07 9014 18157 313 142 2919 270 659 1733 2317 13075 4674 990
08‐08‐07 9052 18230 308 142 2938 270 647 1746 2306 13053 4689 993
09‐08‐07 8946 17764 303 141 2912 283 652 1779 2331 12939 4628 980
10‐08‐07 9020 17931 304 139 2897 296 648 1798 2330 13168 4658 987
11‐08‐07 9032 17988 304 139 2899 295 653 1809 2337 13453 4679 991
13‐08‐07 9018 17941 308 139 2915 295 662 1836 2359 13412 4681 992
14‐08‐07 9017 17886 304 138 2925 298 642 1866 2356 9934 4540 962
16‐08‐07 8958 16858 289 128 2947 302 638 1851 2366 13084 4580 970
17‐08‐07 8968 16922 290 130 2959 304 635 1821 2352 13134 4588 972
18‐08‐07 8979 16999 292 132 2960 302 648 1821 2362 13068 4596 974
20‐08‐07 8967 16855 291 129 2895 271 646 1802 2379 12837 4552 964
21‐08‐07 8952 16573 288 127 2858 278 641 1893 2403 12625 4516 957
22‐08‐07 8942 16558 292 129 2833 278 645 1877 2401 12317 4493 952
23‐08‐07 8965 16632 297 131 2839 278 642 1878 2407 11965 4491 951
24‐08‐07 9014 16914 304 133 2897 279 639 1878 2407 11991 4539 962
25‐08‐07 9014 16911 304 132 2917 276 632 1826 2396 12042 4542 962
27‐08‐07 9019 16713 304 131 2908 268 641 1786 2368 11979 4517 957
28‐08‐07 9019 16760 300 129 2941 278 643 1778 2361 11752 4521 958
29‐08‐07 9018 16779 302 127 2971 269 639 1778 2331 11752 4528 959
30‐08‐07 9015 16758 303 127 2977 272 642 1792 2317 11852 4532 960
31‐08‐07 9046 16934 305 128 2987 269 643 1791 2335 11846 4556 965
01‐09‐07 9047 16908 304 129 2983 266 647 1813 2325 11846 4554 965
03‐09‐07 9050 16990 302 129 3005 260 644 1815 2332 11860 4568 968
04‐09‐07 9160 17212 299 125 3024 266 642 1847 2307 12167 4621 979
05‐09‐07 9163 17096 294 121 3041 271 641 1825 2316 12207 4617 978
06‐09‐07 9292 17686 297 121 3036 267 642 1816 2326 12171 4681 992
07‐09‐07 9361 17874 293 119 3069 264 639 1758 2284 12086 4705 997
08‐09‐07 9369 17867 293 119 3074 264 637 1756 2276 12265 4713 998
10‐09‐07 9381 17881 292 116 3048 266 610 1765 2253 12107 4697 995
11‐09‐07 9442 17972 301 118 3078 271 621 1755 2254 11919 4716 999
12‐09‐07 9423 17908 298 117 3161 283 632 1765 2216 12086 4740 1004
13‐09‐07 9388 17814 302 119 3166 277 634 1763 2206 12274 4736 1003
14‐09‐07 9399 17884 302 119 3175 286 634 1756 2208 12188 4742 1005
17‐09‐07 9473 18045 304 117 3156 293 649 1759 2220 12176 4763 1009
18‐09‐07 9475 18135 306 118 3181 289 607 1748 2213 12231 4774 1011
19‐09‐07 9503 18256 314 122 3165 280 615 1736 2206 12185 4781 1013
20‐09‐07 9508 18353 312 119 3157 275 611 1728 2240 12171 4788 1014
21‐09‐07 9508 18590 313 118 3177 288 609 1753 2223 12122 4811 1019
22‐09‐07 9515 18635 313 118 3183 304 609 1753 2235 12244 4824 1022
24‐09‐07 9510 18647 318 119 3187 307 607 1745 2249 12175 4823 1022
25‐09‐07 9476 18551 317 119 3127 306 601 1700 2241 12143 4786 1014
26‐09‐07 9437 18519 315 121 3083 303 594 1691 2242 12146 4762 1009
27‐09‐07 9469 18572 317 124 3203 298 591 1691 2258 11977 4803 1017
28‐09‐07 9581 18777 317 123 3235 300 595 1685 2256 12084 4850 1027
29‐09‐07 9615 18853 317 125 3198 299 591 1674 2272 12139 4852 1028
01‐10‐07 9635 18851 321 126 3139 303 591 1662 2271 12169 4837 1025
03‐10‐07 9469 18461 327 126 3135 309 592 1680 2266 12169 4781 1013
04‐10‐07 9470 18314 323 123 3167 311 589 1689 2242 12154 4777 1012
05‐10‐07 9526 18385 322 123 3164 304 591 1690 2250 12268 4796 1016
06‐10‐07 9585 18390 322 123 3158 302 595 1669 2262 12466 4811 1019
08‐10‐07 9508 18256 314 119 3093 289 588 1660 2263 12493 4767 1010
09‐10‐07 9542 18448 314 120 3139 296 579 1678 2287 12539 4806 1018
10‐10‐07 9569 18541 318 122 3131 299 600 1692 2295 13000 4838 1025
11‐10‐07 9652 18714 317 123 3226 298 596 1682 2291 13130 4897 1037
12‐10‐07 9654 18701 316 124 3246 297 606 1686 2304 13130 4905 1039
13‐10‐07 9656 18705 316 124 3245 298 606 1687 2339 13332 4917 1041
15‐10‐07 9731 18712 318 125 3314 309 612 1697 2369 13695 4969 1053
16‐10‐07 9885 18992 316 122 3359 309 550 1709 2380 13961 5032 1066
17‐10‐07 9911 19018 314 119 3374 313 549 1709 2376 13939 5041 1068
18‐10‐07 9980 19040 310 119 3397 311 548 1704 2386 13939 5061 1072
19‐10‐07 10030 18862 311 120 3381 303 535 1717 2406 13936 5050 1070
20‐10‐07 10034 18866 311 119 3385 302 525 1744 2405 13936 5053 1070
22‐10‐07 9927 18825 310 117 3393 313 526 1769 2357 13936 5034 1066
23‐10‐07 9959 18952 307 117 3335 307 523 1780 2358 13936 5031 1066
24‐10‐07 9941 18812 304 114 3396 314 513 1778 2346 14494 5056 1071
25‐10‐07 9991 19013 305 115 3480 316 510 1780 2359 14548 5109 1082
26‐10‐07 10152 19338 309 116 3524 315 514 1781 2360 14580 5175 1096
27‐10‐07 10196 19426 310 116 3545 317 515 1781 2363 15163 5219 1106
29‐10‐07 10249 19689 308 115 3594 321 509 1788 2351 15163 5262 1115
30‐10‐07 10190 19601 305 113 3563 326 518 1788 2329 15045 5231 1108
31‐10‐07 10237 19694 303 111 3638 333 516 1779 2328 14921 5263 1115
01‐11‐07 10193 19419 298 111 3620 347 513 1775 2327 14921 5228 1107
02‐11‐07 10336 19680 295 112 3683 339 514 1775 2334 14801 5285 1119
03‐11‐07 10392 19839 295 112 3697 339 513 1756 2340 14801 5309 1125
05‐11‐07 10435 19960 292 110 3702 331 514 1729 2328 14594 5315 1126
06‐11‐07 10533 20464 294 113 3745 321 514 1729 2333 14253 5370 1138
07‐11‐07 10649 20773 291 110 3705 313 516 1731 2344 14285 5402 1144
08‐11‐07 10668 20634 284 111 3715 313 516 1692 2336 14285 5393 1142
09‐11‐07 10648 20499 277 109 3679 320 516 1712 2338 14285 5369 1137
10‐11‐07 10658 20566 280 110 3722 321 516 1714 2342 14285 5390 1142
12‐11‐07 10405 20094 274 107 3662 326 512 1714 2350 14419 5301 1123
13‐11‐07 10366 19962 275 107 3544 325 512 1714 2354 14419 5248 1112
14‐11‐07 10455 20341 287 109 3619 324 512 1705 2356 14461 5317 1126
15‐11‐07 10256 19799 273 105 3581 317 510 1708 2374 14652 5240 1110
16‐11‐07 10227 19777 279 102 3628 323 496 1700 2352 14652 5245 1111
17‐11‐07 10210 19756 278 101 3627 325 489 1684 2343 14652 5237 1109
19‐11‐07 10129 19537 266 93 3637 321 494 1666 2342 14652 5208 1103
20‐11‐07 10218 19785 269 94 3749 309 503 1642 2340 14652 5275 1117
21‐11‐07 10269 19704 259 89 3757 310 506 1705 2317 14066 5259 1114
22‐11‐07 10330 19771 261 90 3753 311 514 1685 2296 14066 5270 1116
23‐11‐07 10530 19945 267 92 3819 319 523 1689 2283 14066 5335 1130
26‐11‐07 10654 20135 270 96 3816 322 525 1678 2284 14066 5368 1137
27‐11‐07 10539 19806 265 96 3719 313 524 1692 2259 13926 5287 1120
28‐11‐07 10404 19653 268 99 3601 303 520 1692 2274 13926 5219 1106
29‐11‐07 10405 19615 274 100 3589 300 515 1709 2286 13926 5214 1105
30‐11‐07 10239 19173 279 102 3528 297 514 1727 2274 13926 5136 1088
01‐12‐07 10246 19186 281 103 3508 295 510 1732 2264 13926 5131 1087
Table 9 index
Following Chart shows the commodity average price of the future contract during a time period of first jan
to first Dec including the value of the index.
Chart 5 (index)
25000
GOLD
20000 SILVER
Copper
15000
ZINC
10000
CRUDEOIL
5000
NATURALGAS
0
Potato
Guar Seed
Constructed Commodity index.
Index
1400
1200
1000
800
600
Index
400
200
Chart 6(index)
Total return of the index over the period between 1st Jan to 1st dec
=(1086‐1000)/100=8.6%
Beta Calculation
RECOMMENDATIONS AND REMARKS:
• As this has been seen that market is immature and the composition of trade in market in just 6
months has entirely changed. Thus keeping the same weightage value over a long period of time is
not justified. Thus one should frequently re‐evaluate the weight.
• Since market is much distorted where one commodity contribute as much as 37% of market and in
other case one commodity have negligible contribution. Thus none of the index may be much useful
for investment decision making. One should very carefully understand the logic before using the
index to estimate the market sentiments.
• Unlike other commodities market in the world which are quite mature. Indian market need some
time to adapt. Until then any such index will be of little use.
• The sector specific index may be more useful
LIMITATION S OF STUDY:
The prices of exchange‐traded stocks are available on a continuous basis; hence, construction of index based
on this data is simple and possible real‐time. Contrarily, prices of commodities (of a particular quality) are
not readily available on a continuous basis. To have an index that reflects the fundamentals and is actively
tradeable, it would be best to construct an index using future, rather than cash, prices in the absence of
effective spot exchanges for commodities. However, futures contracts expire on the date of maturity. So in
order to have continuous futures prices, commodity indices are constructed such that the futures prices of
given maturities are considered and replaced with (rollover to) the subsequent month's contracts.
Since The commodity market is still immature and the volume and value of trade fluctuates very sharply.
Sharp contribution change is very much visible in earlier discussion. When we have seen in a time horizon
between jan‐dec, the contribution of agri was just 1%. All this may lead to a very erratic behavior of index.
APPENDICES
Dow Jones ‐The Rogers International Commodity Index ( RICI ® ):
INDEX CLOSE MULTIPLIER TRADATE
37.256479 0.00718434 03‐11‐08
36.942554 0.00718472 03‐10‐08
1.545055 0.00718587 03‐07‐08
37.150405 0.00718625 03‐06‐08
37.377723 0.00718663 03‐05‐08
36.451619 0.00718701 03‐04‐08
37.180296 0.00718739 03‐03‐08
36.735668 0.00718854 02/29/2008
36.95996 0.00718892 02/28/2008
36.390868 0.0071893 02/27/2008
36.314665 0.00718968 02/26/2008
35.735048 0.00719006 02/25/2008
35.400026 0.00719121 02/22/2008
35.252572 0.00719159 02/21/2008
35.162039 0.00719197 02/20/2008
35.154967 0.00719235 02/19/2008
34.086233 0.00719389 02/15/2008
34.125733 0.00719427 02/14/2008
33.460734 0.00719465 02/13/2008
33.404582 0.00719503 02‐12‐08
33.715487 0.00719541 02‐11‐08
33.494805 0.00719656 02‐08‐08
32.603343 0.00719694 02‐07‐08
32.316202 0.00719732 02‐06‐08
32.310306 0.0071977 02‐05‐08
32.655662 0.00719808 02‐04‐08
32.301793 0.00719923 02‐01‐08
32.693947 0.00719961 01/31/2008
32.548594 0.00719999 01/30/2008
32.560195 0.00720037 01/29/2008
32.309332 0.00720075 01/28/2008
32.03614 0.0072019 01/25/2008
31.593221 0.00720228 01/24/2008
0
5
10
15
20
25
30
35
40
3‐Nov‐08
Chart 7(RICI)
02/26/2008
2‐Nov‐08
01/28/2008
1‐Nov‐08
12/27/2007
12‐Dec‐07
11/28/2007
11/13/2007
10/30/2007
10/16/2007
10‐Feb‐07
09/18/2007
9‐Apr‐07
08/20/2007
8‐Jun‐07
07/23/2007
RICI
7‐Sep‐07
06/22/2007
6‐Aug‐07
05/24/2007
5‐Sep‐07
04/25/2007
4‐Nov‐07
03/27/2007
3‐Dec‐07
02/26/2007
2‐Sep‐07
01/26/2007
1‐Oct‐07
RICI
REFRENCES:
www.mcxindia.com
www.ncdex.com
http://www.thehindubusinessline.com/2007/01/04/stories/2007010400060800.htm ‐ 28k
http://www2.goldmansachs.com/gsci/
http://www.djindexes.com/mdsidx/index.cfm?event=trakrsRici
http://www.crbtrader.com/crbindex/
http://www.djindexes.com/mdsidx/?event=showAigHome
www.wikipedia.com
http://www.diapasoncm.com/indices/RICI/index.php
http://www.crbtrader.com/crbindex/futures_background.asp
GLOSSARY
Forward Market Commission : Commodity market regulator in India
RICI :The Rogers International Commodity Index
RICI‐A :The Rogers International Commodity Index Agriculture
RICI‐E :The Rogers International Commodity Index energy
RICI‐M :The Rogers International Commodity Index Metal
CCI: Continuous Commodity Index (CCI)
The S&P GSCI™:Goldman sachs Commodity Index