A Grand Project Report

On
INVESTOR PERCEPTION ABOUT COMMODITY MARKET
Submitted to:
Gujarat Technological University
Prepared by:
Sneha pankhania Kinjal patil
097030592083 097030592105

Under the Guidance of

Nishant dhruv

MBA Department
Atmiya Institute of Technology and Science, Rajkot
Batch 2009-2011
 DECLARATION

Miss Sneha Pankhania and Miss kinjal patil student of MBA SEM IV, hereby

declare that the project work presented in this report is our own work and has been carried out

under the supervision of Mr. Nishant dhruv lecturer of Atmiya Institute of Technology &

Science.

This work has not been submitted previously for examination or other purpose.

DATE: (Kinjal patil)

PLACE: RAJKOT

(Sneha pankhania)
 ACKNOWLEDGEMENT

I take this opportunity to extend my sincere gratitude to the respondents who gave all the
support and had been cooperative in providing all the valuable required information without
which I would not have completed my report.

I would also like to thank DR. vikas arrora dean of MBA department and our project
guied Mr. Nishant dhruv for their valuable guidance during project work.

I also thank my parents and friends for their co-operation, support and encouragement
extended throughout the study.

Date: (Kinjal patil)

Place: Rajkot
(Sneha pankhania)
 PREFACE

As prescribed by the Gujarat Technological University, the student of Master of Business

Administration Course has to prepare the Project on Research Study.

As a student of MBA, I have under taken grand project on commodity market. I have

observed perception of investor about commodity market.

Being a student, I have tried my level best to collect and include all necessary

information about research topic and included in the study report with my findings.

I hope that my sincere efforts in this field of study would be considered and my report is

accepted by the honorable authorities

SR. NO. TABLE OF CONTENT PAGE
NO.

Chapter:1 Introduction

1.1 overview of Indian financial system 01

1.2 overview of stock market 08

1.3 introduction to derivative market 12

Chapter:2 2.1 Theoretical framework 16

2.2 Literature Review 20

Chapter:3 Research Methodology

3.1 Research Problem 27

3.2 Research Objectives 28

3.3 Research design 29

3. 4 Hypothesis 30

Chapter:4 4.1 Data Analysis and Interpretation 32

4.2 Findings 51

Chapter:5 5.1 Conclusion 53

5.2 Scope for further study 55

5.3 Limitations 56

Chapter:6 6.1 References 57

6.2 Annexure 58
1.1 OVERVIEW OF INDIAN FINANCIAL SYSTEM

The Indian financial system consists of many institutions, instruments and markets.

Financial instruments range from the common coins, currency notes and cheques, to the more

exotic futures swaps of high finance.

The Indian financial system is broadly classified into 2 broad Groups:-

1. Organized Sector

2. Unorganized Sector

1. ORGANISED SECTOR

The organized sector consists of: -

I). Financial institutions

a) Regulatory

The regulatory institutions are the ones, which form the regulations, and control the

Indian financial system. The Reserve Bank of India is the regulatory body, which regulates,

guides controls and promotes the IFS.

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b) Financial intermediaries

They are the intermediaries who intermediate between the saver and investors. They lend

money as well mobilizes savings; their liabilities are towards ultimate savers, while their assets

are from the investors or borrowers.

They can be further classified into

• Banking: -

All banking institutions are intermediaries.

• Non-Banking: -

Some Non-Banking institutions also act as intermediaries, and when they do so

they are known as Non-Banking Financial Intermediaries.UTI, LIC, GIC & NABARD

are some of the NBFC’s in India.

c) Non intermediaries:-

Non-intermediaries institutions do the loan business but their resources are not directly

obtained from the saver.

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ii. Financial Markets

Financial Markets are the centers or arrangements that provide facilities for buying &

selling of financial claims and services. Financial markets can be classified into: -

• Organized markets

These markets comprise of corporations, financial institutions, individuals and

governments who trade in these markets either directly or indirectly through brokers on

organized exchanges or offices.

• Unorganized markets

The financial transactions, which take place outside the well-established

exchanges or without systematic and orderly structure or arrangements constitutes the

unorganized markets. They generally refer to the markets in the villages.

iii. Financial instruments

Financial instruments constitute of securities, assets and claims. Financial securities are

classified as primary and secondary securities.

The primary securities are issued by the companies directly to the ultimate savers as

ordinary shares and debentures. While the secondary securities are issued by the financial

intermediaries to the ultimate savers as bank deposits, insurance policies so and on.

3
iv. Financial services

The term financial service in a broad sense means “Mobilizing and allocating savings”.

Thus, it can also be offered as a process by which funds are mobilized from a large number of

savers and make them available to all those who are in need of it, particularly to the corporate

customers.

2. THE UNORGANIZED SECTOR

The unorganized financial system comprises of relatively less controlled money lenders,

indigenous bankers, lending pawn brokers, land lords, traders etc. This part of the financial

system is not directly controlled by RBI.

Legislations passed by the RBI Relating to Foreign Investments

The Reserve Bank of India through its circular RBI/2004/39 A.P.Dir series circular no

64/February 4 2004 has introduced a special scheme The Liberalized Remittance scheme of

USD 25,000 (per year) for Resident individuals.

The implications of this legislation:

Resident Indians can now freely invest in any overseas transaction; this opens the entire

gamut of the Indian Investment scenario to overseas instruments like forex markets, forex

derivatives, index futures, commodity future and options and all other alternative investments.

The legislation would eventually lead to complete liberalization in the areas of overseas

investments.

4
 Chart showing the Indian Financial System

The Indian Financial System

Organized sector Un-Organized Sector

Financial Financial Financial Financial

Markets Services Institutions Instruments

Money
Lenders

Land Lords
Others Non-Interme Interme Regulatory
Diaries Diaries Pawn Brokers

Traders

Indigenous
Bankers

Organized Un-organized Primary Secondary

Primary Secondary Short -Term Medium-Term Long-Term

Capital Money
Market Market
5
 Guidelines pertaining to commodity future

The guidelines are: -

These guidelines cover the Indian entities that are exposed to commodity price risk.

Name and address of the organization

I. A brief description of the hedging strategy proposed:

• Description of business activity and nature of risk.

• Instruments proposed to be used for hedging.
• Exchanges and brokers through whom the risk is proposed to be hedged and credit lines
proposed to be available. The name and address of the regulatory authority in the country
concerned may also be given.
• Size/average tenure of exposure/total turnover in a year expected.

II. Copy of the risk management policy approved by the Board of Directors covering:

• Risk identification
• Risk measurements
• Guidelines and procedures to be followed with respect to revaluation/monitoring of
positions.
• Names and designations of the officials authorized to undertake transactions and limits.

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III. Any other relevant information

The authorized dealers will forward the application to Reserve Bank along with copy of
the Memorandum on the risk management policy placed before the Board of Directors
with specific reference to hedging of commodity price exposure. .

i. All standard exchanges traded futures will be permitted.

ii. Tenure of exposure shall be limited to 6 months. Tenure beyond 6 months would
require Reserve Bank’s specific approval.

iii. Corporate who wish to hedge commodity price exposure shall have to ensure that there are no
restrictions on import/export of the commodity hedged under the Exim policy in force.

After grant of approval by Reserve Bank, the corporate concerned should negotiate with
off-shore exchange broker subject, inter alia, to the following:-

• Brokers must be clearing members of the exchanges, with good financial track record.
• Trading will only be in standard exchange- traded futures contract/options .

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1.2 OVEVIEW OF INDIAN STOCK MARKET

SECURITY AND EXCHANGE BOARD OF INDIA

SEBI was setup in April 12, 1988. To start with, SEBI was set up as a non-statutory
body.
It took 4 years for the government to bring about a separate legislation in the name of
securities and exchange board of India Act, 1992, conferring statutory powers over practically all
aspects of capital market operations.

Objectives of SEBI

• To protect the interest of investors so that there is a steady flow of savings into the capital
market.
• To regulate the securities market and ensure fair practices by the issuers of securities, so
that they can raise resources at minimum cost.
• To provide efficient services by brokers, merchant bankers and the other intermediaries,
so that they become competitive and professional.

Functions of SEBI

Sec 11 of the SEBI act specifies the functions as follows:-

• Regulation of the stock exchange and self-regulatory organizations.
• Registration and regulation of stock brokers, sub-brokers, registrar to all issue, merchant
bankers, underwriters, portfolio managers and such other intermediaries who are
associated with securities market.
• Regulation and registration of the working of collective investment schemes including
Mutual funds.
• Prohibition of fraudulent and unfair trade practices relating to security market.
• Prohibit insider trading in securities.

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SEBI guidelines for COMMODITY FUTURES TRADING

There are many regulatory authorities, which are monitoring commodity futures trading,
one of them is SEBI. The following Report is one of the regulatory frameworks for the
commodity futures trading.

Report of the committee appointed by the SEBI on participation by Securities

Brokers in Commodity Futures Markets under the chairmanship of Shri K.R.
Ramamurthy (February 5, 2003)

The following were the recommendations:-

I. Participation of Securities Brokers in Commodity Futures Market

• The committee was of the unanimous view that participation of intermediaries like
securities brokers in the commodity futures market is welcome as it could inter-alia
increase the number of quality players, infuse healthy competition, boost trading volumes
in commodities and in turn provide impetus to the overall growth
of the commodity market.

• Since the commodity market falls under the regulatory purview of a separate regulatory
authority viz., Forward Market Commission, to ensure effective regulatory oversight by
the Forward Market Commission, and to avoid any possible regulatory overlap, the pre-
condition for such entry by intending participating securities brokers in the commodity
futures market would be through a separate legal entity, either subsidiary or otherwise.
Such entity should conform from time to time to the regulatory prescription of Forward
Market Commission, with reference to capital adequacy, net worth, membership fee,
margins, etc.

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 • The committee took note of the fact that the existing provisions of the Securities
Contracts (Regulation) Rules, 1957 forbid a person to be elected as a member of a
recognized stock exchange if he is engaged as principal or employee in any business
other than that of securities, except as a broker or agent not involving any personal
financial liability. The Committee recommended that the above provisions in the
Securities Contract (Regulations) Rules be removed/amended suitably to facilitate
securities brokers participation/engagement in commodity futures.

• An important felt need was the necessity to improve market awareness of trading and
contracts in commodities. The committee therefore recommended the forward market
commission take appropriate initiatives in training the market participants.

II) Risk containment measures

In the background of the Forward Market Commission’s report on risk

containment measures currently obtaining in commodity markets and the committee’s
recommendation to permit security brokers’ participation in commodities markets only
through a separate legal entity, the committee considers that ensuring strict compliance of
the regulatory prescriptions like net worth, capital adequacy, margins, exposure norms,
etc., by the respective market regulators, and due oversight would be an adequate
safeguard to ensure that the risks are not transmitted from one market to the other.

III) Utilization of existing infrastructure of stock exchanges

On the issue of convergence/integration of the securities market and commodities

market, that is, of allowing stock exchanges to trade in commodity derivatives and vice
versa, the committee was of the view that in the current statutory and regulatory
framework and existence of two separate and established regulators, the issue of
integration of the two markets would require detailed examination, particularly for the
purpose of defining clearly the scope of regulatory purview and responsibility.

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 SEBI SIGNS MOU WITH COMMODITY FUTURE TRADING
COMMISSION, UNITED STATES

Securities and exchange Board of India (SEBI) signed a

memorandum of understanding (MOU) with United States Commodity Futures Trading
Commission (CFTC) in Washington on April 28, 2004. The MOU was signed by Mr. G. N.
Bajpal, Chairman, SEBI and Mr. James E.Newsome, Chairman, CFTC. The MOU aims to
strengthen communication channels and establish a framework for assistance and mutual
cooperation between the two organizations.

The MOU marks the beginning of greater collaboration between SEBI and CFTC to
effectively regulate and develop futures markets, in view of greater cross-border trade and cross-
market linkages brought about by the globalization of financial markets. The two authorities
mintend to consult periodically about matters of mutual interest in order to promote cooperation
and market integrity, and to further the protection of futures and options market participants. In
furtherance of the objective of promoting the development of sound futures and options
regulatory mechanisms, the CFTC would also provide technical assistance for development of
futures markets in India.

Regulatory framework in India

In India, the statutory, basis for regulating commodity futures’ trading is found in the
Forward Contracts (Regulation) Act, 1952, which (apart from being an enabling enactment,
laying down certain fundamental ground rules) created the permanent regulatory body known as
the mForwards Markets Commission. This commission holds overall charge of the regulation of
all forward contracts and carries out its functions through recognized association.

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1.3 INTRODUCTION TO DERIVATIVE MARKET

DERIVATIVE

A derivative is a security or contract designed in such a way that its price is

derived from the price of an underlying asset. For instance, the price of a gold futures contract

for October maturity is derived from the price of gold. Changes in the price of the underlying

asset affect the price of the derivative security in a predictable way.

Evolution of derivatives

In the 17th century, in Japan, the rice was been grown abundantly;

later the trade in rice grew and evolved to the stagewhere receipts for future delivery

were traded with a high degree of standardization. This led to forward trading In 1730,

the market received official recognition from the “Tokugawa Shogunate” (the ruling clan

of shoguns or feudallords). The Dojima rice market can thus be regarded as the first

futures market, in the sense of an organized exchange with standardized trading terms.

The first futures markets in the Western hemisphere were developed in the United

States in Chicago. These markets had started as spot markets and gradually evolved into futures

trading. This evolution occurred in stages. The first stage was the starting of agreements to buy

grain in the future at a pre-determined price with the intension of actual delivery. Gradually these

contracts became transferable and over a period of time, particularly delivery of the physical

produce. Traders found that the agreements were easier to buy and sell if they were standardized

in terms of quality of grain, market lot and place of delivery. This is how modern futures

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contracts first came into being. The Chicago Board of Trade (CBOT) which opened in 1848 is, to

this day the largest futures market in the world.

Kinds of financial derivatives

1) Forwards

2) Futures

3) Options

4) Swaps

1) Forwards

A forward contract refers to an agreement between two parties, to exchange an agreed quantity

of an asset for cash at a certain date in future at a predetermined price specified in that

agreement. The promised asset may be currency, commodity, instrument etc, In a forward

contract, a user (holder) who promises to buy the specified asset at an agreed price at a future

date is said to be in the ‘long position’. On the other hand, the user who promises to sell at an

agreed price at a future date is said to be in ‘short position’.

2) Futures

A futures contract represents a contractual agreement to purchase or sell a specified asset in the

future for a specified price that is determined today. The underlying asset could be foreign

currency, a stock index, a treasury bill or any commodity. The specified price is known as the

future price. Each contract also specifies the delivery month, which may be nearby or more

deferred in time.

The undertaker in a future market can have two positions in the contract: -

a) Long position is when the buyer of a futures contract agrees to purchase the underlying asset.

b) Short position is when the seller agrees to sell the asset.

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Futures contract represents an institutionalized, standardized form of forward contracts. They are

traded on an organized exchange, which is a physical place of trading floor where listed contract

are traded face to face .A futures trade will result in a futures contract between 2 sides- someone

going long at a negotiated price and someone going short at that same price. Thus, if there were

no transaction costs, futures trading would represent a ‘Zero sum game’ what one side wins,

which exactly match what the other side loses.

3) Options

An option contract is a contract where it confers the buyer, the right to either buy or to sell an

underlying asset (stock, bond, currency, and commodity) etc. at a predetermined price, on or

before a specified date in the future. The price so predetermined is called the ‘Strike price’ or

‘Exercise price’ .Depending on the contract terms, an option may be exercisable on any date

during a specified period or it may be exercisable only on the final or expiration date of the

period covered by the option contract.

· Option instruments

a) Call Option

A Call Option is one, which gives the option holder the right to “buy” an underlying

asset at a pre-determined price.

b) Put Option

A put option is one, which gives the option holder the right to “sell” an underlying

asset at a pre-determined price on or before the specified date in the future.

c) Double Option

A Double Option is one, which gives the Option holder both the right to “buy” or

“sell” underlying asset at a pre-determined price on or before a specified date in the future.

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2) SWAPS

A SWAP transaction is one where two or more parties exchange (swap) one pre-

determined payment for another.

There are three main types of swaps:-

a) Interest Rate swap

An Interest Rate swap is an agreement between 2 parties to exchange interest

obligations or receipts in the same currency on an agreed amount of notional principal for an

agreed period of time.

b) Currency swap

A currency swap is an agreement between two parties to exchange payments or

receipts in one currency for payment or receipts of another.

c) Commodity swap

A commodity swap is an arrangement by which one party (a commodity user/buyer)

agrees to pay a fixed price for a designated quantity of a commodity to the counter party

(commodity producer/seller), who in turn pays the first party a price based on the prevailing

market price (or an accepted index thereof) for the same quantity.

15
2.1 THEORITCAL FRAMEWORK

COMMODITY FUTURES

What is a commodity?

Commodity includes all kinds of goods. FCRA defines “goods” as “every kind of moveable

property other than actionable claims, money and securities”. Futures trading are organized in

such goods or commodities as are permitted by the central government. The national commodity

exchanges have been recognized by the central government for organizing trading in all

permissible commodities which include precious (gold & silver) and non-ferrous metals; cereals

and pulses; oil seeds, raw jute and jute goods; sugar; potatoes and onions; coffee and tea; rubber

and spices, etc.

Growth of commodity futures in India

Investment in India has traditionally meant property, gold and bank deposits.
The more risks taking investors choose equity trading. But commodity trading never forms a part
of conventional investment instruments. As a matter of fact, future trading in commodities was
banned in India in mid1960’s due to excessive speculation.

In February 2003, the government revoked the ban and threw open futures
trading in 54 commodities in bullion and agriculture. It gave the go-ahead to four exchanges to
offer online trading in commodity derivative products. But it is only after almost two years, that
commodity trading is finding favour 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 times that of equities, trading in commodities cannot be ignored by Indian investors.

16
 The strong upward movement in commodities, such as gold, silver, copper, cotton and
oilseeds,presents the right opportunity to trade in commodities. Crude oil is at its highest level
since the beginning of the Iraq war in March 2003. Silver and soybean prices are touching new
highs since 1988, while gold is at its eight year high. Corn, wheat and copper, too, are witnessing
multiyear highs.

India has three national level multi commodity exchanges with electronic trading and
settlement systems.The National Commodity and Derivative Exchange (NCDEX). The Multi
Commodity Exchange of India (MCX) and the National Multi Commodity Exchange of India
(NMCE) the National Board of Trading in Derivatives (NBOT), offers trading on a national
level, but is not completely online. Currently, the annual value of all commodity futures traded in
India is $135 billion, far less than the potential $ 600 billion. What is significant, however, is the
speed at which the gap is being narrowed. Volumes in commodity futures have perked up from
Rs 20,000 crore to 30,000 crore per annum before the liberalization of futures trading to around
Rs 5.71 lakh crore per annum by the end of 2004.

Commodities’ trading is now one of the hottest games in town. Volumes grew by 900
percent between financial years 2002-2003 and 2004-2005. The growth of the commodities
business has been beyond what was originally projected.

With national level exchanges like Multi Commodity Exchange of India (MCX) and the
National Commodities Derivatives Exchange (NCDEX) yet to complete two years of full-
fledged commercial operations, the growth in commodities futures trading is almost as
spectacular as India’s success in business process outsourcing. A large potion of daily trading
volumes in commodity futures is concentrated in a handful of commodities like precious metals
(primarily gold and silver), Soya and its derivatives.

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Value of commodity futures traded across all exchanges
Fiscal year Rs. In Crore
2002-03 66,530.74
2003-04 1,29,363.68
2004-05 5,71,759.56

With 45 percent of India’s GDP (or Rs. 11 lakh crore) coming from commodities, exchanges
hope that eventually everyone involved in commodities trade across the value chain-from the
farmer to the processor-will be hedging their positions using futures. With the stock markets
moving in a narrow trading range and even private bankers looking to diversify client portfolios
by incorporating commodities expect a lot more action ahead.

What makes commodity trading attractive?

· A good low-risk portfolio diversifier
· A highly liquid asset class, acting as a counterweight to stocks, bonds and real estate
· Less volatile, compared with, say, equities
· Investors can leverage their investments and multiply potential earnings
· Upfront margin requirement low
· Better risk- adjusted returns
· A good hedge against any downturn in equities or bonds as there is little correlation with equity
and bond markets
· High correlation with changes in inflation
· No securities transaction tax levied.

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Why commodities preferred to stocks?
· Prices predictable to their cyclical and seasonal patterns
· Less risk
· Real forces of supply and demand
· Small margin requirement
· Lesser investment requirement
· No insider trading
· Entry and exit guaranteed at any point of time
· Cash settlement according to Mark to Market Position
· Relatively small commission charges.

The commodity market is a market where forwards, futures and options contracts are traded on
commodities. Commodity markets have registered a remarkable growth in recent years. The
stage is now set for banks to trade in commodity futures. This could help producers of
agricultural products bankers and other participants of the commodity markets. Banks have
started acknowledging the commodity derivatives market. In this context the Punjab National
Bank and the Corporation Bank have sanctioned loans worth Rs 50 crore to commodity futures
traders over the past six months.

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2.2 LITERATURE REVIEW

Dr. Sushant Ngpal (2004) has discussed in his study that every individual investor must
follow three principles of investing: using a long-term investing approach, following the right
strategy to maximize the return on investment and proper allocation of investible funds. While
applying these three principles, an individual investor has to confront his/her demographics,
lifestyle and investment psychology. Whether the investor's age or occupation or family income
has a role of play in making choice of investment avenues? Is the investor choice affected by his
overconfidence, reference group and framing of the available alternatives? The knowledge of all
these aspects is imperative for all progressive investors, researchers, financial consultants,
academicians, students and the marketer of the financial products.

Dr. A.P. Dash (2006) in this study he discusses the basic of investment and need for
investment. Investment benefits both economy and the society. It is an outgrowth of economic
development and the maturation of modern capitalism. For the economy as a whole, aggregate
investment sanctioned in the current period is a major factor in determining aggregate demand
and, hence, the level of employment. In the long term, current investment determines the
economy’s future productive capacity and, ultimately, a growth in the standard of living. By
increasing personal wealth, investing can contribute to higher overall economic growth and
prosperity.

Quan (1992) examines the price discovery process for the crude oil market using monthly
data, and finds that futures prices do not play an important role in this process.

Using daily data from NYMEX closing futures prices, Schwartz and Szakmary
(1994)find that futures prices strongly dominate in the price discovery process relative to the
deliverable spots in all three petroleum markets.

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 Lin and Tamvakis (2001) investigate information transmission between NYMEX and
London’s International Petroleum Exchange. They find that NYMEX is a true leader in the crude
oil market. Hammoudeh et al (2003) also investigate information transmission among NYMEX
WTI crude prices, NYMEX gasoline prices, NYMEX heating oil prices, and among international
gasoline spot markets, including the Rotterdam and Singapore markets. They conclude that the
NYMEX gasoline market is the leader.

Kaur (2004) reports that few studies have examined the day-of-the-week effect in the
Indian stock market, and further notes the absence of studies that examine monthly seasonality in
the Indian stock market. Kaur utilized two Indian stock indexes, the Bombay Stock Exchange
(BSE) 30 index and the National Stock Exchange (NSE) S&P CNX Nifty stock index, to
examine the day-of-the-week effect and the monthly effect. Kaur did not find a January effect in
the Indian stock market, but did find that March and September generated substantially lower
returns, whereas February and December generated substantial positive returns.

Pratik Mcallister and John R. Manfield (2004) in his study on Derivatives has been an
expanding and controversial feature of the financial markets since the late 1980s. They are used
by a wide range of manufacturers and investors to manage risk. This paper analyses the role and
potential of financial derivatives investment property portfolio management. The limitations and
problems of direct investment in commercial property are briefly discussed and the main
principles and types of derivatives are analysed and explained. The potential of financial
derivatives to mitigate many of the problems associated with direct property investment is
examined.

Jennifer Reynolds said in his study aims to examine how market participants changed the
way they process earnings information after learning of the implementation of hedging activities.
Design/methodology/approach – Using a sample of derivative user and non-user firms, this
study empirically compares earnings predictability, forecast revision behavior, and the earnings
response coefficients before and after the disclosure of hedging activity. Findings – The findings
indicate that analysts’ forecast accuracy increased and that unexpected earnings were

21
incorporated into subsequent earnings forecasts to a greater extent subsequent to disclosure of
sustained hedging activity. Additionally, the findings indicate an increase in the earnings-return
relation in the hedging activity period.

Philip Gracia said that this paper provides a selected review of the research literature on
commodity futures and options markets, focusing primarily on empirical studies. The topics
featured include the development of intertemporal price relationships, hedging and basis
relationships, price behaviour, and discussion of the markets’ institutional issues. In each case
the recent contributions are recognised. Using this base of information as background, we focus
on identifying and motivating future research challenges for agricultural commodity futures and
options markets.

Newbold Paul (1999) said thatthe futures market and spot prices are cointegrated with a
long-run slope coefficient of unity. The inefficiency of any market may be measured based on
the ability of the futures price to predict future spot prices relative to the forecast generated by
the best fitting quasi-ECM. When this observation is applied to several futures markets, findings
reveal that the soybean market is efficient, the gasoil market is 1% inefficient, the DM/$ market
is 4% inefficient, the hogs market is 7% inefficient, the Brent crude market is 12% inefficient
and the cattle market is 47% inefficient.

John Baffes and Donald (2003) said that since the early 1980s, dramatic changes in
export commodity markets, shocks associated with resulting price declines, and changing views
on the role of the state have ushered in widespread reforms to agricultural commodity markets in
Africa. The reforms significantly reduced government participation in the marketing and pricing
of commodities. Akiyama, Baffes, Larson, and Varangis examine the background, causes,
process, and consequences of these reforms and derive lessons for successful reforms from
experiences in markets for four commodities important to Africa -cocoa, coffee, cotton, and
sugar. The authors' commodity focus highlights the special features associated with these
markets that affect the reform process. They complement the current literature on market reforms
in Africa, where grain-market studies are more common. The authors suggest that the types of
market interventions prior to reform are more easily classified by crop than by country.
Consequently, there are significant commodity-specific differences in the initial conditions and

22
in the outcomes of reforms related to these markets. But there are general lessons as well. The
authors find that the key consequences of reform have been significant changes in or emergence
of marketing institutions and a significant shift of political and economic power from the public
to the private sector. In cases where interventions were greatest and reforms most complete,
producers have benefited from receiving a larger share of export prices. Additionally, the authors
conclude that the adjustment costs of reform can be reduced in most cases by better
understanding the detailed and idiosyncratic relationships between the commodity subsector,
private markets, and public services. Finally, while there are significant costs to market-
dependent reforms, experiences suggest that they are a necessary step toward a dynamic
commodity sector based on private initiative. This is particularly true in countries and sectors
where interventions were greatest and market-supporting institutions the weakest.

Bose Shushmita (2009) said in her study that Persistent inflationary pressures in global
commodity prices in the recent past sparked a debate over its nature with speculation in
commodity markets being singled out as the primary factor behind rising prices, even leading to
a demand for a ban on futures trading for several important commodities. In recent times,
increased amounts of capital have been flowing into the commodity futures trade, and there is
thus a need to analyse the role futures market participants can possibly play in forming or
distorting prices in the market for the underlying commodity. Investigations carried out by the
US Commodity Futures Trading Commission and the Indian Expert Committee on Futures
Trading could establish no conclusive proof regarding the role of the futures market in
aggravating inflationary pressures. However, the task forces have again brought forward some
important issues, which can help form a guideline for improving infrastructure, surveillance and

efficiency in the commodity futures markets in India.

K. Logeshwari (2009) said in this study entitled “Investors preference in commodities

market” was conducted in Coimbatore KARVY STOCK BROKING LIMITED. The study was
undertaken to know the preference of the investors towards various Investment avenues in
relation to commodity market. The sample from the population is taken based on regular
customers to the Coimbatore Karvy. The expectations of the investors are quite high. Many
expect high rate of return for further investment through commodity market. The study also

23
examines the phenomenal growth in commodity market which is ten times greater than the share
market. The study reveals that the commodity market is in a nascent stage in Coimbatore.

V. Ramdevi (2009) said that the investment avenues of individual investors depend
mainly on annual income as well as risk taking capacity of the individuals. Regularity in
investing, percentage of savings also has a major impact in choosing the investments. The study
on investor’s preference in commodity market also gives an idea of the investor’s choice based
on returns, risk and their awareness in choosing the market particularly in conducting appropriate
training sessions and seminars frequently to the clients of Karvy Commodity market in
Coimbatore at Karvy Commodity Trade Limited.

K.Abdelkader and J. Broeckhove (2010) are investigated that the adoption of market-
based principles in resource management systems for computational infrastructures such as grids
and clusters allows for matching demand and supply for resources in a utility maximizing
manner. As such, they offer a promise of producing more efficient resource allocations,
compared to traditional system-centric approaches that do not allow consumers and providers to
express their valuations for computational resources. In this paper, we investigate the pricing of
resources in grids through the use of a computational commodity market of CPU resources,
where resource prices are determined through the computation of a supply-and-demand
equilibrium. In particular, we introduce several categories of CPUs characterized by their
execution speed. These differ in cost and performance but may be used interchangeably in
executing jobs and thus represent so-called substitutable resources. We investigate the
performance of the algorithms for computing the supply-and-demand equilibrium in this multi-
commodity setting under dynamically varying consumer and provider population

Harrison Hong and Motohiro Yogo (2010) are establish several new findings on the
relation between open interest in commodity markets and asset returns. High commodity market
activity, as measured by high open-interest growth, predicts high commodity returns and low
bond returns. Openinterest growth is a more powerful and robust predictor of commodity returns
than other known predictors such as the short rate, the yield spread, the basis, and hedging
pressure. Although positively correlated with commodity returns, open-interest growth contains
information for future asset returns beyond contemporaneous commodity prices. Open-interest

24
growth also predicts changes in inflation and inflation expectations. These findings suggest that
open-interest growth contains information about future inflation that gets priced into commodity
and bond markets with delay. Our findings are consistent with recent theories of gradual
information diffusion and have implications for macroeconomic forecasting models.

G Y Luo (1996) shows informational efficiency by applying the evolutionary idea of

natural selection. In a dynamic future market, speculators are assumed to merely act upon their
predetermined trading types, their predetermined fractions of wealth allocated for speculation
and their inherent abilities to predict to spot price, reflected in their distributions of prediction
errors with respect to the spot price. This study shows that the proportion of time that the future
price equals the spot price converges to one with probability 1.

Dr. J.M.E. Penning (2010) in this project we model the behavior of market participants in
futures and options markets, and based on these behavior models develop new exchange traded
risk management tools. In particularly we focus on modeling latent heterogeneity. In addition we
run experiments with market participants to elicit their utility functions and relate the shape of
the elicited utility functions to strategic risk management behavior.

Robert E. Markland and Robert J. Newett (1975) analyse that improvement of the
planning of commodity purchases remains a formidable problem in many agri-business firms.
This paper addresses this problem within the corn purchasing environment of a large American
food company. A time-horizon simulation model is developed for testing various commodity
purchasing plans. The model is used to analyze interactions between various hedging strategies,
profit-taking rules, and stop-loss rules, over an extended time period, under simulated market
conditions. Extensive test results are presented and discussed.

David Eliezer (2005) presents a review of those features of the commodities markets
which distinguish them from those of other financial assets. These features are, principally, the
cost, and in particular the physical limits on storage and transport, the fluctuations of the market
inventory of commodities, the inability to short the spot commodity, and the feedstock and
substitution relations between one commodity and another. These present novel challenges for
accurate stochastic modeling, which has not yet drawn attention enough from the academic
community to go beyond first attempts, often borrowed from other fields such as fixed income.

25
By elucidating those features which make commodities markets especially distinct, and far more
interesting than other financial fields, we hope to stimulate greater academic interest in the field.
We describe the terms of the fundamental instruments that trade in the markets, and give a sense
of order of magnitude of the numbers, especially storage limits and production rates. We do not
present any new results in this paper, nor any original work. There is very little mathematics, and
our primary focus is on the qualitative empirical facts from the point of view of a dealer who
wishes to calibrate a market to forward-looking market-implied data, rather than historical data.

26
3.1 Research problem

Research problem in general sense to decide general area of interest or aspect of a subject-
matter that a researcher would like to inquire into. Essentially two steps are involved in
formulating research problem viz., understanding the problem thoroughly, and rephrasing the
same into meaningful terms from an analytical point of view.

As mentioned above, the primary aim of the assignment is to analyze commodity market
and what investor perceived about the investment in commodity market as it is highly risky.
Hence a number of important aspects of commodity markets will be examined.

27
3.2 Research objectives

• To study the perception of investors of commodity market

• To study the growth of commodity markets

• To find out the investment pattern of investors in commodity market on the basis of
income, age, occupation, etc.

28
3.3 Research Design

Sample Design

In this study convenient random sampling method is used to select the respondents. The
sample size is 100 respondents.

Source of Data

Primary Sources, which includes questionnaire.

Tools for Data Collection

The questionnaire is the tool used for data collection.

Analyses and Interpretation

The various tools for analysis used are graphs, charts, percentage growth, and secondary data.

29
 3.4 Hypothesis

Hypothesis is usually considered as the principal instrument in Research. Its main function is
to suggest new experiments and observations. In fact, many experiments are carried out with the
deliberate object of testing hypothesis.

TEST OF HYPOTHESIS

1) Education

Ho: Education level influence investor preference in investing activity.

H1: Education level do not influence investor preference in investing activity.

Here out of 100 investors 45 investors are post graduate

Table value of on 5 d.f. and at 5% level of significance = 5.99

Hence cal > tab

Therefore Ho is rejected, so education level does not influence investor preference in investing

activity.

30
2) Occupation

Ho: Businessmen are more investing in commodity market.

H1: Businessmen are not investing more in commodity market.

Table value of on 5 d.f. and at 5% level of significance = 9.49

Hence, cal > tab

Therefore Ho is rejected. So businessmen are not investing more in commodity market

3) Income

Ho: People having income between 4 lakh to 10 lakh are trading more in commodity market.

H1: People having income between 4 akh to 10 lakh are not trading more in commodity market.

Table value of on 5 d.f. and at 5% level of significance = 7.81

Hence, cal > tab

Therefore Ho is rejected. So people having income between 4 lakh to 10 lakh are not trading
more in commodity market.

31
 4.1 ANALYISIS AND INTERPRETATION

QUESTIONERE ANALYSES

In this section the data obtained through the questionnaire from the investors in
commodity futures is analyzed

SECTION A:

Sex profile
Sex No of Respondent
Male 80
Female 20

Column Chart Showing Sex Profile

Of The Respondents
100%
80%
Percentage

60%
40%
20%
0%
Male Female
Sex
Column1

Findings

From the above table and chart, it can be seen that 80% of the respondents were
male, and 20% were female.

Interpretation
It can be concluded that mainly males invest in commodity futures

32
Age Profile

Age Group No.of Respondents

20-30 years 45
30-40 years 24
40-50 years 19
50 years and above 12

Pie Chart Showing Age Profile Of

The Respondents

12%
20-30 Years
45% 30-40 Years
19%
40-50 Years
50 Year and above
24%

Findings

From the above table and chart, it can be seen that 43% of the respondents were in
the age group of 20-30 years, 30% were in the age group of 30-40 years, and 17% were in
the age group of 40-50 years and 10% in the age group of 50 years and above.

Interpretation
It can be concluded that mainly the young people have invested commodity
futures.

33
Education profile:

Educational No.of
Qualification respondent

Higher Secondary 20
Graduate 45
Post Graduate 35

Pie Chart Showing Educational

Profile Of The Respondents

20%
35% Higher Secondary
Graduate
Post Graduate
45%

Findings

From the above table and chart, it can be seen that 50% of the respondents were
graduates, 40% were post graduates and only 10 percent were studied up to higher
secondary.

Interpretation

It can be concluded that mainly the young graduates have invested commodity
futures. But in real market this doesn’t stand true.

34
Occupation Profile

Occupation No. of Respondents

Government Employee 25
Private Sector 6
Employee
Businessmen 21
Commodity Futures 38
Advisor

Others 8

Pie Chart Showing Occupational Profile Of The

Respondents

8%
25% Government Employee
Private Sector
businessmen20
40% 6%
commodity Futures

21% others

Findings

From the above table and chart, it can be seen that 3% of the respondents were
government employees, 30% were private sector employee, 17% were Self-Employed
and 33% were businessmen, 17% were Commodity futures advisors.

Interpretation It can be concluded that mainly businessmen and private sector

employees invest in commodities.

35
 Income Profile

Income Group No. of

Respondents
Below Rs. 4 Lakh 45
Rs. 4 – 10 Lakh 24
Rs. 10 – 25 Lakh 19
Above Rs. 25 Lakh 12

No. of Respondents

12%

Below Rs. 4 Lakh

19% 45% Rs. 4 – 10 Lakh
Rs. 10 – 25 Lakh
Above Rs. 25 Lakh

24%

Findings

From the above table and chart, it can be seen that 37% of the respondents were in
the income group of below Rs. 4 lakh, 60% were in the income group of Rs. 4-10 lakh,
and 3% were in the income group of Rs. 10-25 lakh.

Interpretation

It can be concluded that most of the people who have invested commodity futures
are in the income group of Rs.4-10 lakh.

36
SECTION B

1) Have you invested in commodity futures?

Particulars No. Of
Respondents
Yes 67

No 33

Column Chart Showing The Percentage

of Respondents who have Invested In
Comodity Future
80%
70%
60%
Percentage

50%
40%
30%
20%
10%
0%
Yes No
Particular

Column1

Findings
From the above table and chart, it can be seen that 67% of the respondents have
invested in commodity futures, and 33% have not invested in commodity futures

Interpretation
It can be concluded that most of the respondents have invested in commodity
futures.

37
2) Which are the investments avenues in which you are making investment?

Particulars No. of
Respondents
Shares 30
Mutual Funds 33
Bonds 10
Bank Deposits 7
Real Estate 12
commodity 8
Insurance 3

Pie Chart Showing Various Investment Made By

Respondents

3%

8% Shares
Mutual Funds
29%
11% Bonds
Bank Deposits
7%
Real Estate
10% commodity
Insurance
32%

Findings

It can be seen that, out of the respondents who have invested in other securities,
30% of them have invested in shares, 33% Mutual funds, 10% in Bonds, 7% have
invested in bank deposits. 10% in real estate, 3% have invested in jewellery and the rest
7% have invested in insurance.

Interpretation
It can be concluded that other than commodity futures, most of the respondents
have invested in shares and mutual funds.
38
3) How often do you trade in Commodity futures?

Particulars No. Of
Respondents

Everyday 40

Once a Week 60

Column Chart Showing The

Experience of Respondents in Their
Previous Investment
70%

60%

50%
Percentage

40%

30%

20%

10%

0%
Everyday Once a Week
Particular

Column1

Findings

It can be seen that out of the investors in commodity futures, 20% of them trade

everyday, 20% of them traded once a week and 60% traded only when there is good

price.

Interpretation

It can be concluded that most of the investors trade in commodity futures only
when there is a good price.

39
4) What is your objective for trading in commodity futures?
Particulars No. Of
Respondents
Less Risky 33
Investment
Diversification of 20
Portfolio
Very Good Returns 40
Others 7

Column chart showing the objective

of the investor to invest in
commodity futures
45%
40%
35%
30%
Percentage

25%
20%
15%
10%
5%
0%
Less Risky Diversification of Very Good Others
Investment Portfolio Returns
Particular

Column1

Findings
It can be seen that out of the investors in commodity futures, 33% of them have
invested with the objective a less risky investment, 40% of them invested with the
objective of diversifying hid portfolio and 20% of them due to the expectation of very
good returns and 7% have invested due to other reasons.
Interpretation
It can be concluded that most of the investors in commodity futures, have invested
with the objective of diversifying their portfolio and to reduce risk.

40
5) What is the amount you have invested in commodity futures?

Amount(Rupees) No. Of
Respondents
Rs. 2 lakh 27

Rs. 2-3 lakh 50

Rs. 3-5 lakh 20

Above Rs.5lakh 3

Pie chart showing the amount invested in

commodity futures

3%

20% 27%
Rs. 2 lakh
Rs. 2-3 lakh
Rs. 3-5 lakh
Above Rs.5lakh

50%

Findings

It can be seen that out of the investors, 27% of them had invested Rs. 2 lakhs, 50%
of them had invested between Rs. 2-3 lakhs, 20% had invested between Rs. 3-5 lakhs and
3% had invested above Rs. 5 lakhs.
Interpretation
It can be concluded that most of the investors had invested between Rs. 2-3 lakhs in,
commodity futures.

41
6) What type of trade do you prefer the most?

Particulars No. Of
Respondents
Short Term Positions 50

Medium term 30

Long term positions 20

Column chart showing the type of

positions the
investors preference
60%

50%

40%
Percentage

30%

20%

10%

0%
Short Term Positions Medium term loan Long term positions

Column1

Findings

It can be seen that out of the investors in commodity futures, 50% of them prefer
short-term positions, 30% of them preferred medium term positions and 20% preferred
long-term positions.
Interpretation

It can be concluded that most of the investors trading in commodity futures prefer
short-term positions.
42
7) Which commodities have you traded in, the most?

Commodity No. Of
Respondents
Crude oil 23

Cotton 25

Gold 30
Others 22

Pie chart showing the mostly traded commodities

by the investors

22% 23%

Coffee
Cotton
Wheat
Soybean
25%
30%

Findings
It can be seen that out of the investors in commodity futures, 30% of them have
traded mostly in coffee, 17% of them traded in cotton, 20% in wheat, 13% in soybean
and 10% each in copper and silver, .

Interpretation
It can be concluded that the mostly traded commodity is coffee, followed by wheat
and cotton. Copper is the least traded commodity.

43
9) Which commodity do you think is the most volatile?

Commodity No. Of
Respondents
Cotton 65

Bullions 12

Metal 18
Others 5

Pie Chart showing the investors Perception of the

most volatile commodity

5%

18%
cotton
bullions
metals
12%
others
65%

Findings

It can be seen that 47% of the investors feel that soybean is the most volatile
commodity, 30% feel silver is the most volatile, 20% feel Coffee is the most volatile
while 3% feel that copper is the most volatile commodity.

Interpretation
It can be concluded that soybean is the most volatile commodity.

44
10) What percentage of savings have you invested in commodity futures?

Particulars No. Of Respondents

0-10% 10

10-20% 30

20-30% 40
30-50% 10
50% and above 10

Pie chart showing the percentage of savings the

investors has made in commodity futures

10% 10%

10% 0-10%
10-20%
30% 20-30%
30-50%
50% and above
40%

Findings
It can be seen that, 40% of the investors have invested between 20-30% of their
savings in commodity futures, 30% of them have invested between 10-20% of their
savings and total 20% of them have invested above 30% of their saving in commodity
futures.
Interpretation
It can be concluded that most of the investors have invested between 20-30% of
their savings in commodity futures.

45
11) How did you get to know about commodity futures trading?

Particulars No. Of
Respondents
Friends 30

Media 50

Self-Research 20
Others 0

Column chart showing the means

through which the investors got to
know about commodity futures
60%
50%
40%
30%
20%
10%
0%
Friends Media Self-Research Others

Column1

Findings

It can be seen that, 50% of the investors got to know about commodity futures
through different media, 30% got to know through their friends and family and 20% of
the investors got to know through self-research.

Interpretations

It can be concluded that most of the investors got to know about commodity
futures through Media.

46
12) What do think about the felicitation fee charged by your company?

Particulars No. Of
Respondents
Very High 13

High 37

Reasonable 28
Low 2

Column chart showing the investors

perception towards the facility fee
charged by their company
60%
50%
40%
30%
20%
10%
0%
Very High High Reasonable Low

Column1

Findings
It can be seen that, 50% of the investors feel that the facility fee charged by their
company is reasonable, 37% of them feel that the facility fee charged by their company is
high and 13% of the investors feel that it is very high.

Interpretations

It can be concluded that most of the investors feel that the facility fee charged by their
company is reasonable. But there are people who are not satisfied with fees also.

47
13) What do you think of the return derived from commodity futures?

Particulars No. Of
Respondents
Good 60

Reasonable 27

Bad 13

Column chart showing the extent of

returns derived by the investors from
commodity futures
70%

60%

50%

40%

30%

20%

10%

0%
Good Reasonable Bad

Column1

Findings

It can be seen that, 60% of the investors feel that they got good returns from
commodity futures trading, 27% of them feel that they got reasonable returns commodity
futures, 13% of the investors felt they got bad returns from commodity futures.
Interpretations
It can be concluded that most of the investors got good returns from commodity
futures.

48
14) Which type of trader you are?

Particulars No. Of
Respondents
Hedgers 43

Speculator 20

Arbitrager 37

Findings
From the above table and chart, it can be seen that most of respondents are hedger
and arbitrager

Interpretation
It can be concluded that most of the respondents are hedgers

49
 15)Which are the limitations that you found while investing in commodity
market?
Particulars No. Of
Respondents
High transaction 13
cost
Lack of awareness 7

High volatility 47

Others 33

Factor that affect investor decision

regarding commodity market
High transaction cost Lack of awareness High volitality others

7%
33% 13%

47%

Interpretation

In commodity market, some limitations are also there. Out of 30 investors 47% are said that

commodity market is more complicated, 7% are said that it has fixed expiration date so it create problem

sometimes, 13% are said that because of brokerage cost they cannot invest properly and 33% are said that

due to lake of information the investment is less in commodity market.

50
4.2 FINDINGS

From the analysis made in the previous chapter the following findings can be derived:

 There is awareness of commodity market in the eyes of investors.

Investors consider factor like global economy, availability of commodity and
others things during investing in commodity and earn money by doing technical
and fundamental analysis from their brokers.

 Persons between age of 20-40 years are more active player in the commodity
trading and 10-30 % of their income are invested in market. Most of them believe
that returns derived from commodity are good and reasonable.

 It has been observed that most of private sector employees and business person
invests in commodity market. Media and friends are powerful communicating
networks for expansion.

 It has been that, respondents are investing their income in diversified portfolio and
less risky assets and 50% of respondent takes short position in the market.

 It has been seen that about 67% investor are doing fundamental technical analyses.

 There has been seen that coffee, wheat and cotton are more dealing commodity
and investor believe that commodity market have good opportunist market in
future and most of investor invest when there is favorable price in market.

 Respondent also invest in share and mutual fund etc. other then commodity market
to diversified their investment risk and most of investor have mix experience

51
 (good and bad) in commodity market and respondent view that coffee, silver and
soybean are most volatile commodity.

 The commodity futures markets are experiencing a good growth in the recent past.

 This can be emphasized by the fact that the trading volume of most commodities is
increasing.

52
5.1 CONCLUSION

The prime objective of this study is to attempt to prove that commodity futures can be
efficiently used to reduce risks of a person who is directly involved with the trading of the
commodity. Another objective was to prove that it was a sound investment opportunity.

In order to prove both the objectives, a few sub objectives were earmarked and analyzed.
The first being the trading system of commodity futures. The trading system included the
exchange, where the trade takes place, the clearinghouse, which ensures that the money is
transferred to the right person at the right time.

The trading system also includes trading and intermediary participants, who ensure the
correct price discovery. Thus, the trading system is one of the factors, which reduce the risk in
commodity futures. Another objective was to analyze the risks involved in commodity futures.
As in any market there are various types of risk. But by using the various risk management
techniques, a person can reduce the risks.

Commodity futures trading included the intermediary and trading participants likes
brokers who make use of the various technical analysis tools in order to make predictions of the
price movement’s they also take in to consideration the fundamental analysis. Thus with the help
of the various analysis tools, efficient price Predictions can be made, where the investors in
commodity futures can benefit from the price movements. There was also an objective to analyze
the growth of commodity future. From the analysis, it can be concluded that, commodity futures
trading are experiencing tremendous growth. .

This can be emphasized by the fact that there has been an increasing trend in the volume
traded in most of the commodities. Thus, commodity futures area growing market. To find out
the investors perception towards commodity futures, questionnaire survey was conducted,
wherein various parameters were taken into consideration. From the questionnaire, it could be
concluded that most of the respondents felt that risk could be reduced through commodity futures
and that it was a sound investment opportunity.

53
 Thus from all the above conclusions of the sub-objectives, it can be concluded,
“commodity futures can be used as a risk reduction and a sound investment instrument”

54
5.2 LIMITATIONS OF THE STUDY:-

The limitations of this study are as follows:

Personal Bias

People may have personal bias towards particular investment option so they may not give
correct information and due to which conclusion may be derived.

Time limit

The time duration of the research is short that’s why the information is not covered fully.

Sample area

The area was limited to Rajkot city only.

55
5.3 SCOPE FOR FUTURE RESEARCH:-

Apart from that one can also undertake the research work on literacy of commodity
market. We can also undertake the research work on investors’ outlook on the Indian commodity
market. One can expand its research work at national level on the investors’ preference towards
commodity market.

A research work on impact of inflation in commodity market can also be done. A

research work on how rapidly grown the commodity market as compare to equity and what will
the situation after some years can also be done.

56
6.1 REFERENCES

Kaur, (2008) Effects of Indian stock market, International Business & Economics Research
Journal volume-7

Philip Garcia(2004),Review of agriculture commodity, Oxford Journal volume-31

John Baffes (2003),Commodity market reform, World bank policy research paper no. 2995

Bose Shushimita(2009), The role of future commodity market, Indian journal, volume- 4

K. Logeshwari, V. Ramadevi(2009), Investors preference in commodity

Neabold, Paul(1999), The relative efficiency of commodity market, Journal of future market, Iss-
0270-7314

K. Abdelkader, J. Broekhove (2010), Resource pricing in a dynamic Multi Commodity markey,

International journal

Harrison Hong , Matahiro yogo (2010), Commodity market interest and asset return.

G Y Luo (1996), Market efficiency and natural selection in a commodity future market, Oxford
journal, Volume-11

Dr. J.M.E. Penning (2010), Research in commodity futures and options markets

David Elizer (2005), Structure and behavior of commodities market

Robert E. Markland, Robert J. Newett (1975), Analyzing commodity market trading strategies
within a corporate environment, Elsevier science Ltd., Volume-2

57
6.2 ANNEXURE

INVESTORS’ PREFERENCE TOWARDS COMMODITY MARKET

PART – A

1) Name:

2) Sex:

Male Female

3) Age:

20-30 Years 30-40 years

40-50 years Above 50 years

4) Education:

Higher secondary Graduation

Post-graduation

5) Occupation:

Government employee Self-employee

Commodity futures analyst Private sector employee

Businessman Others ____________

6) Income:

Below 4 lakh 4,00,001 – 10,00,000

10,00,001 – 25,00,000 Above 25,00,000

58
PART – B

1) Have you invested in commodity futures?

Yes No

2) Which of the following investment avenues in which you are making investment ?

Shares Equity market

Mutual funds Bank deposits

Real estate commodity

Others ___________

3) How often do you trade in commodity futures?

Everyday Once a week

4) What is your objective when trading in commodity futures?

Less risky investment Diversification of portfolio

Very good returns Others ______________

5) What is the amount you have invested in commodity futures?

2,00,000 2,00,001-3,00,000

3,00,001-5,00,000 5,00,000 and above

59
6) What type of trade do you prefer the most?

Short Term Position Medium Term Position

Long Term Position

7) Which commodities have you traded in the most?

Crude oil Gold

Cotton Others

8) Which commodity do you think is the most volatile?

Bullions Metals
Cotton Others

9) What percentage of savings have you invested in commodity futures?

0-10% 1 10-20%

20-30% 30-50%

50% and above

10) How did you get to know about commodity futures trading?

Friends/family Self-research

Media Others ______________

60
11) What do think about the felicitation fee charged by your company?

Very high High

Reasonable Low

12) What do you think about the margin requirement charged by your company?

Very high High

Reasonable Low

13) What do you think of the return derived from commodity futures?

Good Reasonable Bad

14) Which type of trader you are?

Hedger speculator arbitrage

15) Factors you take into consider while invest in commodities?

High transaction cost Lack of awareness

High volatility others

61