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CHAPTER 1 INTRODUCTION

INTRODUCTION
Introduction:
Commodity Futures are contracts to buy specific quantity of a particular commodity at a future date. It is similar to the index futures and stock futures but the underlying happens to be commodities instead of stocks and indices. Commodity futures market has been in existence in India for centuries. The Government of India banned futures trading in certain commodities in 70s.However trading in commodity futures has banned permitted again by the government in order to help the commodity products ,traders, and investors. World-wide, commodity exchanges originated before the other financial exchanges. Infact most of the derivatives instruments had their birth in commodity exchanges. Commodity markets are markets where raw or primary products are exchanged. These raw commodities are traded on regulated exchanges, in which they are bought and sold in standardized Contracts. Commodity Future is a Derivative instrument where the underlying asset is a commodity. Commodity future are exchanges traded contracts to sell or buy standardized futures contract.

Participants of Commodities Market:


The participants who trade in the commodity derivatives markets can be classified as follows;

(a) Hedgers:
Hedgers are participants who use commodity derivative instruments to hedge / eliminate the price risk associated with the underlying commodity asset held them. Hedgers are those who protect themselves from the risk associated with the price of an asset by using derivatives. A person keeps a close watch upon the prices discovered in trading and when the comfortable price is reflected according to his wants, he sells futures contracts. In this way he gets an assured fixed price of his product . In general, hedgers use futures for protection against adverse future price movements in the underlying cash commodity. Hedgers are often businesses, or individuals, who at one point or another deal in the underlying cash commodity. Take an example: A Hedger pay more to the farmer or dealer of a produce if its prices go up. For protection against higher prices of the produce, he hedge the risk exposure by buying enough future contracts of the produce to cover the amount of produce he expects to buy. Since cash and futures prices do tend to move in tandem, the futures position will profit if the price of the produce rise enough to offset cash loss on the produce.

(b) Speculators : Speculators are participants who bet on future movements in the price of an asset i.e. I commodity to make short term gain from the price movements. Commodity future s give theme the leverage so to take risks on nominal margin payments and thereby increasing for bigger gains or losses.

Speculators are some what like a middle man. They are never interested in actual owing the commodity. They will just buy from one end and sell it to the other in anticipation of future price movements. They actually bet on the future movement in the price of an asset. They are the second major group of futures players. These participants include independent floor traders and investors. They handle trades for their personal clients or brokerage firms. Buying a futures contract in anticipation of price increases is known as going long. Selling a futures contract in anticipation of a price decrease is known as going short. Speculative participation in futures trading has increased with the availability of alternative methods of participation. Speculators have certain advantages over other investments they are as follows: If the traders judgement is good, he can make more money in the futures market faster because prices tend, on average, to change more quickly than real estate or stock prices. Futures are highly leveraged investments. The trader puts up a small fraction of the value of the underlying contract as margin, yet he can ride on the full value of the contract as it moves up and down. The money he puts up is not a down payment on the underlying contract, but a performance bond. The actual value of the contract is only exchanged on those rare occasions when delivery takes place.

(c) Arbitrageurs:
Arbitrageurs work at making profits by taking advantaged of existence of difference in prices of the same product across different markets (MCX and NCDEX).

(d) Investors :
Investors are participants having a longer term view as compared to speculators when they enter into trade in the commodes market. Eg Farmers, Producers, consumers ,etc.

Commodity Derivatives:
A commodity derivative derives its value from an underlying asset which is necessarily a commodity. To understand the commodity derivatives markets its necessary to clear about commodities. Commodities, in simple words are any goods that are common and unbranded. Gold, silver, rubber, pepper, jute, wheat, sugar, cotton etc., are some of the common commodities. For e.g. apple juice can be a commodity whereas the Real apple juice cannot be called a commodity. You may be surprised to know that in the US commodities markets there are futures available even on cattle. Another feature of commodities is that they are commonly available. Commodity markets represent the formal system for the interplay of demand for and supply of commodities. These markets can be broadly classified into spot market and futures market. Commodities for immediate delivery are traded through the spot market. The players in the spot market are the actual producers and the consumers of the commodities. The other type of market called the Futures market is for facilitating contracts for future delivery. (Please go through the material on Futures and Options to understand about futures) These markets make available for trading, the various derivatives based on commodities. Usually traded ones are the futures and options. However in India options on commodities are not available and are expected to be introduced soon. The players in the futures markets are Hedgers, Arbitragers and investors.

Hedgers are those who hold simultaneous positions in the spot market also. These are generally the actual consumers or the producers of the commodities. For eg: A wheat farmer who expects his harvest to be over in 3 months time may sell a futures contract with an expiry of three months, so that even if the prices happen to fall after three months, he can still manage to sell at the price at which the contract was struck. The large scale consumers of the products can also make use of the futures to secure their purchase. For eg: A cold drinks can manufacturing company may buy tin futures, so that even if the prices happen to rise later, thy can be assured of the supply of raw materials at the predetermined price.

The other major group of participants in the commodity futures market are the importers and the exporters. Since they have confirmed obligations to export/import fixed quantity of commodities at a particular period of time, they can take opposite positions in the futures market.

Arbitrage is a process of making profits using the price differences between two markets without exposing oneself to any risk. Arbitraging is a very profitable business. It is possible to arbitrage between two different futures markets or between the futures market and the spot market. However in an efficient market arbitraging is not possible, because any price gap is closed immediately as soon the arbitragers enter the market. Investors are those who participate in the market for profits and are ready to face the risk involved in the market. An investor can be anyone from an individual who has a small surplus income to the treasury desks of banks and corporate.

Most commonly traded derivatives around the world are futures, options and option futures. Some of the most popular commodity exchanges in the world are listed below: London Metals Exchange, London New York Mercantile Exchange, New York Chicago Mercantile Exchange, Chicago Chicago Board of Trade, Chicago London International Financial Futures and Options Exchange (LIFFE), London Tokyo Commodity Exchange, Tokyo Winnipeg Commodity Exchange, Canada

Commodity Market:
Markets where raw or primary products are exchanged. These raw commodities are traded on regulated commodities exchange, in which they are brought and sold in standardized contracts. Commodities Futures trading! in India have a long history. The first commodity futures market appeared in 1875. But the new standardized form of trading in the Indian capital market is an attractive package for all the people who earn money through speculation by trading into FUTURES. It is a well-known fact and should be remembered that the trading in commodities through futures exchanges is merely, old wine in a new bottle. The trading in commodities was started with the first transaction that took place between two individuals. We can relate this to the ancient method of trading i.e., BARTER SYSTEM. This method faced the initial hiccups due to the problems like: store of value, medium of

exchange, deferred payment, measure of wealth etc.. This led to the invention of MONEY. As the market started to expand, the problem of scarcity piled up. The farmers / traders then felt the need to protect themselves against the fluctuations in the price for their produce. In the ancient times, the commodities traded were the Agricultural Produce, which was exposed to higher risk i.e., the natural calamities and had to face the price uncertainty. It was certain that during the scarcity, the farmer, realized higher prices and during the oversupply he had to loose his profitability. On the other hand, the trader had to pay higher price during the scarcity and vice versa. It was at this time that both joined hands and entered into a contract for the trade i.e., delivery of the produce after the harvest, for a price decided earlier. By this both had reduced the future uncertainty.

Although in the 19th century only agricultural produce was traded as a futures contract, but now, the commodities of global or at least domestic importance are being traded over the commodity futures exchanges. This form of trading has proved useful as a device for HEDGING and SPECULATION. The commodities that are traded today are: Agro-Based Commodities Wheat, Corn, Cotton, Oils, Oilseeds etc.. Soft Commodities.. Coffee, Cocoa, Sugar etc Livestock. Live Cattle, Pork Bellies etc Energy.. Crude Oil, Natural Gas, Gasoline etc Precious Metals.. Gold, Silver, Platinum etc Other Metals Nickel, Aluminum, Copper etc.

THE COMMODITIES EXCHANGES:


A brief description of commodity exchanges are those which trade in particular commodities, neglecting the trade of securities, stock index futures and options etc., In the middle of 19th century in the United States, businessmen began organizing market forums to make the buying and selling of commodities easier. These central market places provided a place for buyers and sellers to meet, set quality and quantity standards, and establish rules of business. The major commodity markets are in the United Kingdom and in the USA. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities.

Major Commodity Exchanges:


The Government of India permitted establishment of National-level Multi-Commodity exchanges in the year 2002 and accordingly three exchanges have come into picture. Multi-Commodity Exchange of India Ltd, Mumbai.(MCX). National Commodity and Derivative Exchange of India, Mumbai (NCDEX). National Multi Commodity Exchange, Ahmadabad (NMCE). All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.

Structure of the commodity market

Multi Commodities Exchange Of India Ltd (MCX)

MCX an independent and de-mutilized multi commodity exchange has permanent recognition from Government of India for facilitating online trading, clearing and settlement operations for commodity futures markets across the country. Key shareholders of MCX are Financial Technologies (India) Ltd., State Bank of India, NABARD, NSE, HDFC Bank, State Bank of Indore, State Bank of Hyderabad, State Bank of Saurashtra, SBI Life Insurance Co. Ltd., Union Bank of India, Bank Of India, Bank Of Baroda, Canara Bank, Corporation Bank. Head quartered in Mumbai, MCX is led by an expert management team with deep domain knowledge of the commodity futures markets. Through the integration of dedicated resources, robust technology and scalable infrastructure, since inception MCX has recorded many first to its credit. Inaugurated in November 2003 by Mr. Mukesh Ambani, Chairman & Managing Director, Reliance Industries Ltd, MCX offers futures trading in the following commodity categories: Agri Commodities, Bullion, Metals- Ferrous & Non-ferrous, Pulses,

Oils & Oilseeds, Energy, Plantations, Spices MCX has built strategic alliances with some of the largest players in commodities ecosystem, namely, Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors'

Association of India, Pulses Importers Association, Shetkari Sanghatana, United Planters Association Today MCX is offering spectacular growth opportunities and advantages to a large cross section of the participants including Producers / Processors, Traders, Corporate, Regional Trading Centers, Importers, Exporters, Cooperatives, Industry Associations, amongst others MCX being nation-wide commodity exchange, offering multiple commodities for trading with wide reach and penetration and robust infrastructure, is well placed to tap this vast potential.

Vision and Mission of the Multi Commodities exchange of India:


The vision of MCX is to revolutionize the Indian commodity markets by empowering the market participants through innovative product offerings and business rules so that the benefits of futures markets can be fully realized. Offering 'unparalleled efficiencies', 'unlimited growth' and 'infinite opportunities' to all the market participants. At MCX we believe that performance excellence and affordability would be the key drivers in promoting and popularizing Commodities Futures trading in the country. Exchanges in the new economy will be driven by strong service availability backed by superior technology and MCX is well poised to emerge as the "Exchange of Choice" for the commodity futures trading community. However there are regional commodities exchanges functioning all over the country. AR commodities Broking Pvt.Ltd has got membership of both the premier commodity exchanges i.e. MCX and NCDEX. The two exchanges (NCEDX&MCX) have seen tremendous growth in less than two years. The daily average on these two exchanges put together has now grown to a healthy Rs.7800 Crores. It has been believed by experts that the volumes on these exchanges would the stock market in the days to come.

Commodity exchanges are regulated by Forwards Market Commission (FMC); Forwards Market Commission works under the purview of the ministry of Food, Agriculture and Public Distribution.

At NCDEX the contracts expire on 20th day of each month .if 20th happens to be a holiday the expiry day will be the previous working day. At MCX the expiry day is 15th of every month .if 15th happens to be a holiday the expiry day will be the previous day. The expiry day differs for different commodities in both the exchanges. Generally commodity futures require an initial margin between 5-10% of the contract value. The exchanges levy higher additional margin in case of excess volatility. The margin amount varies between exchanges and commodities.therfore they provide great benefits of leverage in comparison to the stock and index futures trade on the stock exchanges. The exchange also requires the daily profits and losses to be paid in/out on open positions (mark to Market or MTM) so that the buyers and sellers do not carry a risk of not more than one day.

Commodities traded in MCX


Gold, Gold M, Gold HNI, Silver, Silver M, Silver HNI Castor Seeds, Soy Seeds, Castor Oil, Refined Soy Oil, Soymeal, RBD Palmolein, Crude Palm Oil, Cottonseed Pepper, Red Chilli, Jeera, Turmeric Steel Long, Steel Flat, Copper, Nickel, Tin Kapas, Long Staple Cotton, Medium Staple Cotton Chana, Urad, Yellow Peas, Tur Rice, Basmati Rice, Wheat, Maize, Sarbati Rice Groundnut Oil, Mustard Seed, Mustard Seed Oil, Cottonseed Oilcake,

Crude Oil Rubber, Guar Seed, Gur, Guargum Bandhani, Guargum, Cashew Kernel, Guarseed Bandhani

Commodities traded in NCDEX.


Agro Products Arabica Coffee Cashew Castor Seed Chana Chilli Common Raw Rice Common Parboiled Rice Crude Palm Oil Cotton Seed Oilcake Expeller Mustard Oil Grade A Parboiled Rice Grade A Raw Rice Guar gum Guar Seeds Gur Jeera Jute sacking bags Lemon Tur Long Staple Cotton Maharashtra Lal Tur Medium Staple Cotton Mulberry Green Cocoons Mulberry Raw Silk Mustard Seed Pepper Raw Jute RBD Palmolein Refined Soy Oil Robusta Coffee Rubber Sesame Seeds Soyabean Yellow Soybean Meal Sugar Turmeric Urad Wheat Yellow Peas Yellow Red Maize Base Metals Mild Steel Ingots Precious Metals

Advantages of commodity trading:


Leverage Commodity futures operate on margin, meaning that to take a position only a fraction of the total value needs to be available in cash in the trading account. Commission Costs. It is a lot cheaper to buy/sell one futures contract than to buy/sell the underlying instrument. For example, one full size S&P500 contract is currently worth in excess off $250,000 and could be bought/sold for as little as $20. The expense of buying/selling $250,000 could be $2,500+.

Liquidity The involvement of speculators means that futures contracts are reasonably liquid. However, how liquid depends on the actual contract being traded. Electronically traded contracts, such as the e-mini's tend to be the most liquid whereas the pit traded commodities like corn, orange juice etc are not so readily available to the retail trader and are more expensive to trade in terms of commission and spread.

Ability to go short Futures contracts can be sold as easily as they are bought enabling a speculator to profit from falling markets as well as rising ones. There is no 'uptick rule' for example like there is with stocks. No 'Time Decay'

Options suffer from time decay because the closer they come to expiry the less time there is for the option to come into the money. Commodity futures do not suffer from this as they are not anticipating a particular strike price at expiry.

Disadvantages of commodity trading:


Leverage Can be a double edged sword. Low margin requirements can encourage poor money management, leading to excessive risk taking. Not only are profits enhanced but so are losses!

Speed of trading Traditionally commodities are pit traded and in order to trade a speculator would need to contact a broker by telephone to place the order who then transmits that order to the pit to be executed. Once the trade is filled the pit trader informs the broker who then then informs his client. This can take some take and the risk of slippage occurring can be high. Online futures trading can help to reduce this time by providing the client with a direct link to an electronic exchange. You might find a truck of corn on your doorstep! Actually, most futures contracts are not deliverable and are cash settled at expiry. However some, like corn, are deliverable although you will get plenty of warning and opportunity to close out a position before the truck turns up.

NEED FOR THE STUDY

The project report on STUDY ON WORKING OF COMMODITIES MARKET at Anand Rathi Securities, Hyderabad Branch for as a Major concurrent project.

The AnandRathi (AR) set up in 1994, is one of Indias fastest growing full-service securities firm with a presence in more than 300 locations across India and has offices in Dubai & Bangkok. AR provides wealth management services, investment banking, brokerage & distribution services in the areas of equities, commodities, mutual funds and insurance. The group caters to the financial needs of diversified group of clients, which include the well-reputed Corporate Groups, Institutions, Foreign Investors, Individuals as well as wealthy families.

The AR is customer focused stock broking unit, which is continuously strive to provide researched information and good services to meet its clients. The main goal of the company is to give full satisfaction by providing good service, researched information and efficiency being competitive.

STATEMENT OF PROBLEM
This project deals with the study about Working of the Commodities market and Investors preferences towards it in stock broking concern.

OBJECTIVES OF THE STUDY


To understand the workings of the commodities market. To know the how much people preferred to invest in the commodities market To know reasons beyond the investors investing in the commodities market\

SCOPE OF THE STUDY It is the study entitled working of the Commodities market and Investors preferences towards it in the Anand Rathi Securities Ltd, Hyderabad Branch

The firm is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporates and Institutions. The scopes of the study are: Analysis of activities of the commodities market Analysis of survey and this survey is limited to only Hyderabad city. Analysis questionnaire and suggestions for improvement.

RESEARCH METHODOLOGY
The methodology of data collection pertains to information to how the data is collected i.e. either from primary sources or secondary sources. It explains the methods utilized and the instruments used in data collection.

SOURCES OF DATA
The sources of data can be classified in two categories: Primary sources Secondary sources

PRIMARY SOURCES
The primary data are collected by the detailed discussion was conducted with the Branch Manager of AR Ltd and Interactions was carried with the Commodities investors (customers). And the discussion was carried out with the college internal guide, who helped in developing the objectives and validating their conformance to the ethical framework of the project.

SECONDARY SOURCES
I used secondary sources also for collecting the data. They are: Information from the text sources Information form the internet sources Information from the materials provided by the concern

SAMPLING DESIGN Sampling unit Sampling Size :Questionnaire :50 units

Sampling procedure : Direct STATISTICAL TOOLS AND TECHNIQUES:

LIMITATIONS OF THE STUDY

The all commodities investors were not easily available for the

conducting the survey.

Some of them they were not ready to fill the questionnaire.

The scope of the survey is limited to Hyderabad city only.

CHAPTER 2 INDUSTRY PROFILE COMPANY PROFILE

INDUSTRIAL PROFILE Indian Commodities Market:


In India commodity markets have been in existence for decades. However in 1975 the Government banned forward contracts on commodities. Later in 2003 the Government of India again allowed forward contracts in commodities. There have been over 20 exchanges existing for commodities all over the country. However these exchanges are commodity specific and have a strong regional focus. The Government, in order to make the commodities market more transparent and efficient, accorded approval for setting up of national level multi commodity exchanges. Accordingly three exchanges are there which deal in a wide variety of commodities and which allow nation-wide trading. The MCX is Mumbai-based and is promoted by Financial Technologies Pvt Ltd. MCX allows trading on a host of commodities ranging from bullion to grains. Please check the Commodities traded menu. MCX has become the first exchange in the world to launch futures on steel. Recently on 11th August 2004,MCX crossed a peak daily turnover of Rs.950 Crores.

National Commodity & Derivatives Exchange Limited (NCDX) Regulations for Spot and Derivatives Market
1 TITLE, EXTENT AND COMMENCEMENT The Regulations framed hereunder shall be known as National Commodity & Derivatives Exchange Limited, Regulations, 2003 (herein referred to as Regulations) and shall come into effect immediately on approval by the Forward Market Commission or any other authority appointed under the Forward Contracts (Regulation) Act, 1952 or any other applicable law.

These Regulations shall be in addition to the provisions of the Forward Contracts (Regulation) Act 1952 and Rules framed there under and Rules and Byelaws of National Commodity & Derivatives Exchange Limited (herein referred to as NCDEX or Exchange), as in force and any other applicable laws of India. The Regulations have been divided into two main divisions pertaining to Trading and Clearing for sake of convenience only and both the divisions shall be read together wherever and whenever the context requires. The titles of the clauses are only for convenience and may not read as subject for the contents of clauses. National Commodity & Derivatives Exchange Limited Regulations for Spot and Derivatives Market 10 / 152

2 JURISDICTION Unless specifically mentioned otherwise in these Regulations, Bye Laws or Rules of the Exchange, any matter arising out of or pertaining to these Regulations shall be Clearing Member subject to jurisdiction of the Courts of Mumbai irrespective of the place of business of Trading or Clearing Members and irrespective of place from where the transaction is entered Into National Commodity & Derivatives Exchange Limited Regulations for Spot and Derivatives Market

3 DEFINITIONS Unless in the context it is explicitly stated otherwise, all words and expressions used herein but not defined, and defined in the following, shall have the meanings respectively assigned to them therein in the following order of priority:

(i) Forward Contracts (Regulation) Act 1952 and Rules framed thereunder. (ii) Companies Act, 1956 (iii) Rules of National Commodity & Derivatives Exchange Ltd (iv) Byelaws of National Commodity & Derivatives Exchange Limited

Commodity futures and option contracts


A futures contract is a legally binding agreement between two parties to buy or sell in the future, on a designated exchange, a specific quantity of a commodity at a specific price. The buyer and seller of a futures contract agree now on a price for a product to be delivered, or paid, for at a set time in the future, known as the "settlement date." Although actual delivery of the commodity can take place in fulfillment of the contract, most futures contracts are actually closed out or "offset" prior to delivery. An option on a commodity futures contract is a legally binding agreement between two parties that gives the buyer, who pays a market determined price known as a "premium," the right (but not the obligation), within a specific time period, to exercise his option. Exercise of the option will result in the person being deemed to have entered into a futures contract at a specified price known as the "strike price." In some cases, an option may confer the right to buy or sell the underlying asset directly, and these options are known as options on the physical asset.

Cash and Forward Markets


In the days before credit was readily accessible, some stores carried the sign, "cash and carry," meaning: pay your cash and carry away the merchandise you purchased. That, in its simplest form, is the cash market. The buyer finds the precise commodity that suits him--perhaps

an orange that has ripened to the proper degree--pays his money and becomes the owner of the merchandise. It's a time-tested market system, and the one most widely used in all forms of business to transfer title to goods.

Sometimes, cash markets can be modified and improved to serve a particular purpose. For example, a person who goes to the newsstand to buy a magazine may find it is more convenient to contract with the publisher for delivery at home. This modification is called a forward contract, and such contracts are widely used in many types of business. The buyer and the seller agree today on a description of the product that will be delivered in satisfaction of the contract. The buyer makes payments as agreed, and the seller will deliver the asset at a designated site on a specified date. The system works quite well when the cost of producing the commodity is known and the selling price is presently acceptable to a buyer. However, with commodities that compete in world or national markets, such as coffee, there are many relatively small producers scattered over a wide geographic area. These widely dispersed producers find it difficult to know what prices are available, and the opportunity for producer, processor, and merchandiser to ascertain their likely cost for coffee and develop long range plans is limited. Futures trading, used in the Midwest for grains and similar farm commodities since 1859, and adapted for coffee in 1955, provides the industry with a guide to what coffee is worth now as well as today's best estimate for the future.

Prices and Price Factors


In a competitive market system, buyers and sellers determine prices for commodities through their transactions in the marketplace. The prices at which sellers offer to sell their goods and buyers bid to buy them are based on their best current assessments of the supply and demand for the commodity. Usually, no one knows the exact total supply of a commodity. For example, in the United States most commodities are produced by many firms. Storage and ownership also are fragmented. The total supply available usually is an estimate, as is new production, and inventory figures are not precise. In addition, the quality of the commodity frequently is not known. Thus contributing to the complexity of determining an appropriate price.

Even with its problems, the U.S. commodity price reporting system generally is better and reports are more available publicly than commodity reports from many other countries. Since most commodities trade internationally and are affected by incompletely reported situations in other countries, U.S. markets must cope with such unknowns. Demand is even more difficult to measure, based as it is on what people may decide they wish to buy. Changing prices may alter consumers' intentions regarding the quantity of a close substitute commodity they want--or whether they want it at all. The availability of a substitute may change the demand picture for the original product as well as for the related one. However, prices for goods in the marketplace play a vital role in our economic system and help to efficiently allocate scarce resources.

Markets and prices play vital roles in our economy system and help to determine our standard of living. Markets are the nerve system of our decentralized economic system; prices are the impulses conveyed throughout the system, enabling us to respond stimuli and produce goods and services efficiently and changing prices force to adjust and moderate our consumption pattering. In other words, price influences production and consumption. Price is a rational; if the price is right, the supply of a commodity should balance the demand for it--production should match use.

If the price is too high, some who may have planned to use a product may decide to use less, go without, or they may select a substitute--eat chicken instead of beef, for example. If enough users are priced out of the market, price may turn down which may encourage more use and discourage production.

If the price is too low, users will deplete existing supply and a shortage may develop. Subsequently, prices may rise, which will tend to discourage marginal buying. Should price remain relatively high this would likely promote production or attract additional supply of good.

Processors and merchandisers are guided by the prices that people are willing to pay for their goods. Their marketing decisions are made independently, based on estimates of what consumers are willing to buy and how much they are willing to pay. Once in the marketing system, goods are channeled from point of production to processor and distributor and on to the consumer. Futures trading does not enter directly into these channels; it supplies information on

price which reflects buyers' and sellers' current view on a commodity's value and provides a means to transfer the price risk of holding these items in inventory for later sale.

Transferring Risk: Hedging


Commodity production and marketing involve sizable price risks, and risk represents a cost which affects the value of a commodity. While there is no way to eliminate uncertainty, futures markets provide a competitive way for commodity producers, merchandisers, processors, and others who may own the actual commodity to transfer some price risk to speculators who will willingly assume such risk in hopes of making a profit.

The process of hedging involves the concurrent use of both cash and futures markets. Since futures and cash prices tend to move together (that is, parallel to each other), and at contract expiration converge to one price, it is possible for a cotton merchant, for example, to hedge an unsold inventory of cotton with a sale of an equivalent amount of futures contracts. Since the merchant owns the commodity, he would have a loss if prices fell. To hedge, the merchant would sell futures contracts. Now if prices drop, the cash market loss will be at least partially offset by a gain on the futures contract. When the merchant sells his inventory at the lower cash market price, he will simultaneously lift his hedge by buying back his futures contracts at the lower price. The gain on his futures contracts should roughly equal the merchant's loss in the cash market.

Conversely, a cotton mill owner who wanted to sell a customer a quantity of cloth for delivery some months from now, but does not own enough cotton to produce the cloth, could

hedge by buying enough futures contracts to cover the forward sale of cloth. He now has a price for raw material to which operating and production costs can be added to arrive at a base price for cloth. Quoting such a price before buying the cotton would make him vulnerable to a price rise, but having bought futures in a quantity equivalent to his needs, he has some assurance that a rise in futures prices would lessen the impact of a rise in the cost of the actual cotton.

Here are three examples of how hedging helps the cash market work better:
Hedging stretches the marketing period. For instance, a livestock feeder does not have to wait until his cattle are ready to market before he can sell them. The futures market permits him to sell futures contracts to establish the approximate sale price at any time between the time he buys his calves for feeding and the time the fed cattle are ready to market, some four to six months later. He can take advantage of good prices even though the cattle are not ready for market. Hedging protects inventory values. A merchandiser with a large, unsold inventory can sell futures contracts that will protect the value of the inventory, even if the price of the commodity drops. Hedging permits forward pricing of products. A jewelry manufacturer can determine the cost for gold, silver or platinum by buying a futures contract, translate that to a price for the finished products, and make forward sales to stores at firm prices. Having made the forward sales, the manufacturer can use its capital to acquire only as much gold, silver, or platinum as may be needed to make the products that will fill its orders.

These are just a few ways that futures markets are used by commodity owners. Adapting basic principles to individual situations tests the ingenuity of hedgers and demonstrates the management flexibility provided by futures trading. But market users should be forewarned that hedging is not an academic exercise. It requires skill and knowledge acquired only by study and experience. Finally, while a hedge transfers price risk, it also denies the opportunity to gain from favorable price movements in the cash market. For this reason, options on the actual commodity and/or options on futures contracts are popular among people who seek price protection, but who do not wish to miss a favorable price movement. With the payment of a premium, the buyer of an option can acquire the right, but not the obligation, to buy or sell a futures contract at a specified price within a specified period of time (as stated in the option contract). In this way, for example, the holder of a put option can protect against a drop in the value of that inventory, but remain free to gain from an increase in the price of the commodity held in inventory.

There are many factors to consider in deciding whether to hedge with futures, buy or sell an option on a futures contract, or simply forward contract in the cash market. A detailed discussion of this topic goes beyond the scope of this brief publication. For more information, consult your library or contact the exchange which trades the commodity of interest.

PROFILE OF THE COMPANY

Introduction: AnandRathi (AR) is a leading full service securities firm providing the entire gamut of financial services. The firm, founded in 1994 by Mr. AnandRathi, today has a pan India presence as well as an international presence through offices in Dubai and Bangkok. AR provides a breadth of financial and advisory services including wealth management, investment banking, corporate advisory, brokerage & distribution of equities, commodities, mutual funds and insurance - all of which are supported by powerful research teams.

The firm's philosophy is entirely client centric, with a clear focus on providing long term value addition to clients, while maintaining the highest standards of excellence, ethics and professionalism. The entire firm activities are divided across distinct client groups: Individuals, Private Clients, Corporates and Institutions.

The company is also maintaining an excellent relationship with the clients, the brokers, the employees, and the bankers.

PROFILE
COMPANY HISTORY OF THE PLACE The Anand Rathi Securities LTD was established in the year of 1994 in Mumbai, Maharastra state. REGD.OFFICE (Head Office) 3rd Floor, J K Somani Building British Hotel Lane Mumbai Samachar Marg Mumbai - 400 023, India. Tel: 91-22-6637 7000 Fax: 91-22-6637 7070 MANAGEMENT TEAM OF THE COMPANY Mr. AnandRathi Group Chairman Mr. Pradeep Gupta Vice Chairman Mr. Amit Rathi Managing Director BRANCH OFFICE Sri Krishna Towers,2nd Floor, CTS NO. 14 Khanapur Road, Tilakwadi, Hyderabad AP Pin : 590006 Tel : 0831-4207300/ 3098234

FINANCIAL AND ADVISORY SERVICES Wealth management Investment banking Corporate Advisory Brokerage and Distribution of Equities, Commodities, Mutual Funds and Insurance

CLIENTS OR CUSTOMERS Individuals Private clients Corporates and Institutions

AR Core Strengths
Breadth of Services In line with its client-centric philosophy, the firm offers to its clients the entire spectrum of financial services ranging from brokerage services in equities and commodities, distribution of mutual funds, IPOs and insurance products, real estate, investment banking, merger and acquisitions, corporate finance and corporate advisory. Clients deal with a relationship manager who leverages and brings together the product specialists from across the firm to create an optimum solution to the client needs. Management Team AR brings together a highly professional core management team that comprises of individuals with extensive business as well as industry experience. In-Depth Research ARs research expertise is at the core of the value proposition that we offer to our clients. Research teams across the firm continuously track various markets and products. The aim is however common - to go far deeper than others, to deliver incisive insights and ideas and be accountable for results.

Management Team Firms senior Management comprises a diverse talent pool that brings together rich experience from across industry as well as financial services.

The products/services of the Anand Rathi are as follows: 1. Individuals


(a) Private wealth management
Introduction: Affluent individuals need sophisticated advice and strategic guidance to capitalize on opportunities to preserve, grow and transfer their wealth. In addition, a desire exists within wealthy families to simplify the management of multigenerational needs and lessen the profound emotional impact of wealth on family members.AR offers the most extensive platform of customized servicing, individual strategies and products to help meet the requirements of the affluent private investor. We provide comprehensive, integrated investment strategies to address your wealth management needs. Working closely with specialists across firm PWM offers an array of products & services, which includes AR's highly rated research. Philosophy: The Anand Rathi tries and understands clients financial needs; to offer them personal advice and expert analysis that they need to make their assets go the Extra mile. Firms ability to think far ahead and formulate a long-term strategy, coupled with long hours of practice and research are the key drivers, which make investors wealth work harder for them. The company believes that the key to build wealth lies in allocating assets across various markets, financial instruments and industry sectors. Keeping this in mind the firm leverage its expertise in scientific asset allocation, to help maximize returns and minimize risks.

Process: The firm realize the need to simplify the complexities of the investment strategies and it achieve this by offering highly customized private wealth management .The firms Personalized Relationship Managers along with the expert team of analysts and advisors will assist to investors in analyzing all their investment needs and advice them on specialized solutions created exclusively for them. The firm has excellent research team, who constantly screens the market for investment prospects. The team provides support in fine-tuning the investment strategy & suggests how to capitalize on these opportunities.

Products: Equity & Derivatives Mutual Funds Depository Services Commodities Insurance Broking IPOs Research: Its research expertise is at the core of the value proposition that they offer to its clients. Research teams across the firm continuously track various markets and products. The aim is however common - to go far deeper than others, to deliver incisive insights and ideas and be accountable for results. AR research processes incorporate quantitative areas well as qualitative analyses. This multi-pronged approach helps us to provide superior risk- adjusted returns for our clients.

AR analysts provide objective and decisive research that is designed to enable clients to make informed investment decisions. The team covers entire spectrum of financial markets from equities, fixed income, and commodities to currencies. They also cover the global markets, to give clients an unparalleled macro-view of the investment opportunities across the globe.

b) Brokerage and distribution


Equity & Derivatives Brokerage:

AnandRathi provides end-to-end equity solutions to institutional and individual investors. Consistent delivery of high quality advice on individual stocks, sector trends and investment strategy has established us a competent and reliable research unit across the country. Clients can trade through us online on BSE and NSE for both equities and derivatives. They are supported by dedicated sales & trading teams in its trading desks across the country. Research and investment ideas can be accessed by clients either through their designated dealers, email, web or SMS
Mutual Funds:

AR is one of India's top mutual fund distribution houses. Its success lies in the firm philosophy of providing consistently superior, independent and unbiased advice to their clients backed by in-depth research. The AR team firmly believes in the importance of selecting appropriate asset allocations based on the client's risk profile

Depository Services:

AR Depository Services provides to investors with a secure and convenient way for holding their securities on both CDSL and NSDL.The firms depository services include settlement, clearing and custody of securities, registration of shares and dematerialization. It offer to the investors daily updated internet access to their holding statement and transaction summary.
Commodities:

Commodities broking - a whole new opportunity to hedge business risk and an attractive investment opportunity to deliver superior returns for investors. The firms commodities broking services include online futures trading through NCDEX and MCX and depository services through CDSL. Commodities broking is supported by a dedicated research cell that provides both technical as well as fundamental research. Its research covers a broad range of traded commodities including precious and base metals, Oils and Oilseeds, agri-commodities such as wheat, chana, guar, guar gum and spices such as sugar, jeera and cotton. In addition to transaction execution, the firm provides customized advice on hedging strategies, investment ideas and arbitrage opportunities to clients.
Insurance Broking:

As an insurance broker, AR provide to its clients comprehensive risk management techniques, both within the business as well as on the personal front. Risk management includes identification, measurement and assessment of the risk and handling of the risk, of which insurance is an integral part. The firm deals with both life insurance and general insurance products across all insurance companies. ARs guiding philosophy is to manage the clients'

entire risk set by providing the optimal level of cover at the least possible cost. The entire sales process and product selection is research oriented and customized to the client's needs. We lay strong emphasis on timely claim settlement and post sales services.
AR services:

Risk Management Due diligence and research on policies available Recommendation on a comprehensive insurance cover based on clients. Maintain proper records of client policies Assist client in paying premiums Continuous monitoring of client account Assist client in claim negotiation and settlement
IPOs:

The firm is a leading primary market distributor across the country. Its strong performance in IPOs has been a result of its vast experience in the Primary Market, a wide network of branches across India, strong distribution capabilities and a dedicated research team The firm has been consistently ranked among the top 10 distributors of IPOs on all major offerings. Its IPO research team provides clients with in-depth overviews of forthcoming IPOs as well as investment recommendations. Online filling of forms is also available.

( c) NRIs
Introduction:

AR is the perfect gateway to the wealth of investment opportunities in India for NonResident Indians. With it will dedicated NRI desk in India and Relationship Managers investors own country, investors get the best of both worlds - real understanding of their investment needs as well on-the-ground expertise. It provides the following services for NRIs. Superior understanding of the Indian economy & markets Ability to structure and manage your tax and regulatory compliances Dedicated relationship team Unparalleled product range - Indian and Global

2. Institutions (a) Institutional Equities


Introduction: The Institutional sales and trading team provides cutting edge market information and investment advice to clients, coupled with excellent execution capabilities. A highly experienced and reputed team of equity analysts supports the sales team. There is an extensive focus on research on companies, sectors and macro-economy. The institutional equity team tracks nearly 250 large and mid-sized companies to give clients an unparalleled breadth of ideas. It also provide Investment Advisory Services for institutional clients in India and overseas for investment in the Indian equity markets

(b) Managed Investment services


Portfolio Management Services (PMS): AR Portfolio Management Service is a discretionary investment service created to meet the demand for more targeted investment styles and opportunities. It offers a range of specialized investment strategies designed to capture opportunities across the market spectrum. The range of products varies from the highly defensive, capital-protected to the most aggressive strategies in the equities and derivatives markets. The firms investment process ensures that investors strategy and portfolio are built on solid foundations. Together clients and their relationship manager select the strategy in line with their individual goals. AR investment specialists then construct and manage clints portfolio in accordance with the chosen investment strategy.

Real Estate Opportunities Fund: AR Real Estate Opportunities Fund is a private equity fund for high net-worth individuals, corporate and institutions, to invest in equity-linked instruments in the Indian real estate and infrastructure sectors. As part of the structural reforms to further boost India's economic growth, the government has recognized the need for institutional finance in the real estate sector. In early 2005, the government has relaxed the FDI guidelines in real estate and also allowed the setting up of real estate investment funds under SEBI guidelines. These developments are expected to provide much needed capital to provide for the increasing demand for quality real estate in major urban centers across the country.To capture this opportunity, AR has brought together a team of

specialists and advisors to guide the fund's investments who bring together expertise in the areas of real estate consulting, development, legal and financial structuring.

3. Corporate
(a) Institutional wealth management Introduction: Corporate and Institutional treasuries need ever more sophisticated advice that is backed by serious and credible research. AR IWM provides its institutional clients integrated wealth management solutions across global markets, which are backed by proprietary global economic & investment research.

(b) Investment banking and corporate Finance Introduction Investment Banking: AR Investment Banking provides comprehensive services to clients including raising money in the equity capital markets to identifying strategic alliances, mergers and acquisition opportunities and debt financing & restructuring advisory. Corporate Finance: The AR Corporate Finance team helps clients manage their debt-financing needs by profiling business and cash-flow risks, defining the alternative sources of funding , building in multiple variables such as currencies, fixed-floating, tenure, collateral etc. in a comprehensive manner and finally negotiating with the prospective lenders / buyers. The team has also built an impressive track-record in debt restructuring based on its superior understanding of business needs and relationships with key lenders.

The Corporate Finance team has handled assignments in businesses like paper, hospitality, telecom, textiles and sugar. Services Investment Banking: Merchant Banking: A highly experienced equity capital markets team, a pan-India distribution presence and a high level of quality and integrity in executing client's transactions has enabled us to provide tangible value to the firms clients' businesses. The firm bring quality independent advice and excellent execution capabilities to create landmark transactions for clients. The firms track record of successfully lead managed IPOs includes Tips Industries, Emami, HCL Info systems and Provogue. M&A, Private Equity: The firms Mergers & Acquisition team works with clients in creating lasting stakeholder value through advice on mergers, acquisitions, divestitures and private equity financing. The team leverages on the firm's superior understanding of businesses and tax and regulatory environments as well as a deep network of relationships across the professional and corporate world. The firm has been worked extensively with clients in industries like cement, sugar, chemicals, power and textiles for mergers and acquisition deals, valuation and business restructuring.

(c) Corporate Advisory services


Introduction: AnandRathi Advisors assists companies in realizing tangible improvements in various facets of their businesses by providing a range of corporate advisory services that includes the

entire gamut from financial, organisational and operational restructuring, to profit improvement and business turnaround strategies. Highly qualified and thoroughly professional, its specialists, experts and associates assist to clients in conceptualising problems and devising effective solutions, whatever be clients need. Successful assignments undertaken for leading organisations in India as well as overseas bear ample testimony to our wide-ranging capabilities, utilizing firms unparalleled business know-how to give you the competitive edge.

Services Performance Improvement and Cost Reduction Business Strategy and Re-engineering Financial, Business & Organizational restructuring Business Turn-around Strategies Management Systems: MIS, Review & Control Mechanism

(d) Cross-Border Advisory


Introduction: Dynamic Orbits is the international interface of Anand Rathi Group, inter alia Dynamic Orbits is engaged in building strategic alliances, outsourcing contracts, contract manufacturing alliances, cross border joint ventures and cross border acquisitions.

CHAPTER-3 REVIEW OF LITERATURE

Indian Commodities Market


In India commodity markets have been in existence for decades. However in 1975 the Government banned forward contracts on commodities. Later in 2003 the Government of India again allowed forward contracts in commodities. There have been over 20 exchanges existing for commodities all over the country. However these exchanges are commodity specific and have a strong regional focus. The Government, in order to make the commodities market more transparent and efficient, accorded approval for setting up of national level multi commodity exchanges. Accordingly three exchanges are there which deal in a wide variety of commodities and which allow nation-wide trading. They are Multi Commodity Exchange (MCX) National Commodities Derivatives Exchange (NCDEX) National Multi Commodity Exchange (NMCE)

The MCX is Mumbai-based and is promoted by Financial Technologies Pvt Ltd. MCX allows trading on a host of commodities ranging from bullion to grains. Please check the Commodities traded menu. MCX has become the first exchange in the world to launch futures on steel. Recently on 11th August 2004, MCX crossed a peak daily turnover of Rs.950 Crores. NCDEX is promoted by an elite group of financial institutions including NSE, LIC, SBI, UBI etc., NCDEX also allows trading of futures on a host of commodities. National Commodities and Derivatives Exchange, NCDEX at Karvy Commodities, we are focused on taking commodities trading to new dimensions of reliability and profitability. We

have made commodities trading, an essentially age-old practice, into a sophisticated and scientific investment option. Here we enable trade in all goods and products of agricultural and mineral origin that include lucrative commodities like gold and silver and popular items like oil, pulses and cotton through a well-systematized trading platform. Our technological and infrastructural strengths and especially our street-smart skills make us an ideal broker. Our service matrix is holistic with a gamut of advantages, the first and foremost being our legacy of human resources, technology and infrastructure that comes from being part of the AR Group. Our wide national network, spanning the length and breadth of India, further supports these advantages. Regular trading workshops and seminars are conducted to hone trading strategies to perfection. Every move made is a calculated one, based on reliable research that is converted into valuable information through daily, weekly and monthly newsletters, calls and intraday alerts. Further, personalized service is provided here by a dedicated team committed to giving hassle-free service while the brokerage rates offered are extremely competitive. Our commitment to excel in this sector stems from the immense importance that commodities broking has to a cross-section of investors & dash; farmers, exporters, importers, manufacturers and the Government of India itself.

Commodities market essentially represents another kind of organised market just like the stock market and the debt market. However, commodities market, because of its unique nature lends to the benefits of a wide spectrum of people like investors, importers, exporters, producers, corporate etc.

What can commodity market offer?


If you are an investor, commodities futures represent a good form of investment because of the following reasons.. High Leverage The margins in the commodity futures market are less than the

F&O section of the equity market. Less Manipulations - Commodities markets, as they are governed by

international price movements are less prone to rigging or price manipulations. Diversification The returns from commodities market are free from the direct

influence of the equity and debt market, which means that they are capable of being used as effective hedging instruments providing better diversification. If you are an importer or an exporter, commodities futures can help you in the following ways Hedge against price fluctuations Wide fluctuations in the prices of import or

export products can directly affect your bottom-line as the price at which you import/export is fixed before-hand. Commodity futures help you to procure or sell the commodities at a price decided months before the actual transaction, thereby ironing out any change in prices that happen subsequently. If you are a producer of a commodity, futures can help you as follows: Lock-in the price for your produce If you are a farmer, there is every chance

that the price of your produce may come down drastically at the time of harvest. By taking positions in commodity futures you can effectively lock-in the price at which you wish to sell your produce

Assured demand Any glut in the market can make you wait unendingly for a

buyer. Selling commodity futures contract can give you assured demand at the time of harvest. If you are a large scale consumer of a product, here is how this market can help you: Control your cost If you are an industrialist, the raw material cost dictates the

final price of your output. Any sudden rise in the price of raw materials can compel you to pass on the hike to your customers and make your products unattractive in the market. By buying commodity futures, you can fix the price of your raw material. Ensure continuous supply Any shortfall in the supply of raw materials can

stall your production and make you default on your sale obligations. You can avoid this risk by buying a commodity futures contract by which you are assured of supply of a fixed quantity of materials at a pre-decided price at the appointed time.

The effective mechanism of settlement and delivery procedures adopted and employed by MCX has once again undergone rigorous tests and have come out extremely successful. This is signified with the surging trading volume in bullion contracts and high open interest entering the settlement period resulting in healthy quantities getting physically delivered. This whole process underscores the efficacy & transparency of the complete trading, settlement and delivery process employed by MCX. The complete delivery procedure right from getting the possession of the precious metal from the sellers, necessary quality certifications, consignment movement, handing over the precious metal to the buyers, etc was completed in flat 5 days period. The complete process has been worked out at a very optimal cost and on an average each participant involved in the delivery process had incurred only Rs. 350/- per transaction.

In all the previous settlements also MCX platform has always seen appropriate percentage of open interest position resulting in physical delivery. Gold has seen a cumulative physical delivery of 245 kgs and Silver 2190 kgs across all the settlements completed before the current settlement. Gold & silver futures contracts are getting recognized as the most reliable & dependable investment options that are today available to traders and investors who are looking to widen their portfolio beyond equity instruments. This is because of the credibility that these commodities have enjoyed globally and the technical & fundamental analysis that has gone in arriving at various trading strategies. India is the largest importer for Gold in the world, around 800 tons per year, realizing this potential of Gold; Government of India has set up a committee to examine the regulatory structure of the gold industry to make India a gold trading hub. This committee is constituted under the Chairmanship of Secretary, Department of Commerce, Ministry of Commerce & Industry. MCX is a member of the committee and looks forward to contributing suggestions on the role that Futures market can play in making India a global gold trading hub. The first meeting for the Gold Committee is being held under the Chairmanship of Commerce Secretary on 10th December 2004.

About Multi Commodity Exchange of India Ltd. (MCX)


Multi Commodity Exchange of India Ltd, (MCX) an independent and de-mutualised multi commodity exchange, has permanent recognition from the Government of India. MCX, a state-of-the-art nationwide, digital exchange facilitates online trading, clearing and settlement operations for a commodities futures trading. Key shareholders of MCX are Financial Technologies (India) Ltd, State Bank of India, Union Bank of India, Bank of India, Corporation Bank & Canara Bank. Headquartered in Mumbai, MCX is led by an expert management team with deep domain knowledge of the commodity futures markets and has successfully established a thriving digital market for trading in Gold, Silver, Steel, Kapas, Cotton, Rubber, Black Pepper, Oil & Oil Seeds, Wheat and Rice, Ferrous and Non-Ferrous Metals, Agri Commodities, Pulses and Soft commodities.

The collapse of equity markets and the arrival of low interest rates have increased the investor presence in alternative investments such as gold. In India, gold has traditionally played a multi-faceted role. Apart from being used for adornment purpose, it has also served as an asset of the last resort and a hedge against inflation and currency depreciation. But most importantly, it has most often been treated as an investment. Gold supply primarily comes from mine production, official sector sales of global central banks, old gold scrap and net disinvestments of invested gold. Out of the total supply of 3870 tons last year, 66% was from mine production, 20 % from old gold scrap and 14% from official sector sales. Demand globally emanates from fabrication (jewellery and other fabrication), Bar hoarding, Net producer hedging and Implied investment.

Gold continues to occupy a prominent part in rural Indian economy and a significant part of the rural credit market revolves around bullion as security. India is the largest consumer of gold in the world accounting for more than 23% of the total world demand annually. According to unofficial estimates, India has more than 13,000 tonnes of hoarded gold, which translates to around Rs 6,50,000 crore. Inspite of its predominant position, especially in the gold market where India is the largest importer, India has traditionally been a price seeker in the global bullion market.

Bullion trading in India received a major fillip. Following the changes in the Gold Policy announced by the Government of India, in 1997 under export-import Policy 1997-2002. As per the policy, scheduled commercial banks are authorized by the Reserve Bank of India (RBI) to import gold and silver for sale in domestic market without an Import license or surrendering the Special Import License (SIL). Bullion is imported into India by banks and four designated trading agencies acting as canalizing agents and consignees for overseas suppliers, who in turn sell to domestic wholesale traders, fabricators, etc. The price risk is borne either by the fabricator or the retail consumer. The wholesale traders, fabricators and investors do not have any effective tool to hedge their price risk in gold / silver. NCDEX is promoted by an elite group of financial institutions including NSE, LIC, SBI, UBI etc., NCDEX also allows trading of futures on a host of commodities.

The following tables indicate the various commodities traded in both exchanges and also the critical information regarding the various contracts.

HISTORY OF GOLD

Gold has a history of more than 7000 years in India, which can be find in religious book of Hindu, where it is considered as a metal of immense value. But looking at the history of world, gold is found at the Egypt at 2000B.C., which is the first metal used by the humans value for ornament and rituals. Gold has long been considered one of the most precious metals, and its value has been used as the standard for many currencies (known as the gold standard) in history. Gold has been used as a symbol for purity, value, royalty, and particularly roles that combine these properties. As a tangible investment gold is held as part of a portfolio by the countries as a reserves because over the long period gold has an extensive history of maintaining its value. It has in gained ground in relation to currencies owing to inflation. However, gold does become particularly desirable in times of extremely weak confidence and during hyperinflation because gold maintains its value even as fiat money becomes worthless. When the value of currency depreciate. But above all comment, it has a special role in India and in certain countries, gold Jewelry is worn for ornamental value on all social functions, festivals and celebrations. It is the popular form of investment in rural areas between the farmers after having bumper crop or after harvesting, this all factor makes India as largest consumer (18.7% of world total demand in 2004) and importer of gold due to its low production, which is negligible, and untapped gold reserves. This is due to lack of new technology in finding gold reserves and low interest shown by government in financing, encouraging for exploration programs in gold mines.

HISTORY OF GOLD TRADING: Gold future trading debuted first at Winnipeg Commodity Exchange (know is Comex) in Canada in 1972. The gold contract gain popularity among traders, led to many countries had too started gold future trading. Which include London gold future, Sydney future exchange, Singapore International Monetary Exchange (Simex), Tokyo Commodity Exchange (Tocom), Chicago Mercantile Exchange, Chicago Board of Trade (CBOT), Shanghai Gold Exchange, Dubai Gold and Commodity Exchange

are some of the world Top recognized exchange, and in India, National Commodity and Derivative Exchange (NCDEX) and Multi-Commodity Exchange (MCX), and National Board of Trade (NBOT) are some Indian exchanges where Gold are traded. History of gold trading in India is dates back to 1948 with Bombay Bullion Association, which is formed by the group of Merchants.

GOLD CONSUMPTION IN INDIA


India consumed around 18% of world Gold produced. Even though it only contribute 1.6% of Global GDP. Traditionally, Gold has been a good safety net for Indian households. However, the sharp rise in gold imports over the last three years when the rupee has started appreciating, inflation is relatively low, banking facilities are improving And economic can confidence has picked up, is surprising say Market watchers.
(Source: -Economic Times, Article, Forget sensex, the Gold rush is on, July 18 05)

SILVER:
A soft white precious univalent metallic element having the highest electrical and thermal conductivity of any metal occurs in argentite and in free form; used in coins and jewelry and tableware and photography coins made of silver. Uses of Silver Silvers unique properties include its strength, malleability, ductility, electrical and thermal conductivity, sensitivity to high reflectance of light and despite it being classified as a precious metal, its reactivity which is the basis for its use in catalysts and photography. World Markets In 2002, up by close to 200% year-on-year to 150 tons.

Around 50% of Indias silver requirements last year were met through imports of Chinese silver and other important sources of supply being UK, CIS, Australia and Dubai. London Bullion Market is the global hub of OTC (Over-The-Counter) trading in silver.

Comex futures in New York is where most fund activity is focused.

Indian Scenario Silver imports into India for domestic consumption in 2002 was 3,400 tons down 25% from record 4,540 tons in 2001. Open General License (OGL) imports are the only significant source of supply to the Indian market. Non-duty paid silver for the export

CRUDE OIL:
A mineral oil consisting of a mixture of hydrocarbons of natural origin, yellow to black in color/ of variable specific gravity and viscosity; often referred to simply as crude. VARIETIES OF CRUDE OIL. The petroleum industry often characterizes crude oils according to their geographical source. E.g. / Alaska North Slope Crude. Oils from different geographical areas have unique properties; they can vary in consistency from a light volatile fluid to a semi-solid. The classification scheme provided below is more useful in a response scenario. Class A : Light /Volatile Oils These oils are highly fluid, often clear/spread rapidly on solid or water surfaces/have a strong odor/ a high evaporation rate/sand/ and may be persistent in such a matrix. They do not tend to adhere to surfaces; flushing with water generally removes them. Class A oils may be highly toxic to humans/fish/and other biota. Most refined products and many of the highest quality light crude can be included in this class.

Class B: Non-Sticky Oils These oils have a waxy or oily feel. Class B oils are less toxic and adhere more firmly to surfaces than Class A oils/although they can be removed from surfaces by vigorous flushing. As temperatures rise/their tendency to penetrate porous substrates increases and they can be persistent. Evaporation of volatilize may lead to a Class C or D residue. Medium to heavy paraffin-based oils fall into this class. Class C: Heavy/Sticky Oils Class C oils are characteristically viscous/sticky or tarry/and brown or black. Flushing with water will not readily remove this material from surfaces/but the oil does not readily penetrate porous surfaces. The density of Class C oils may be near that of water and they often sink. Weathering or evaporation of volatilize may produce solid or tarry Class D oil. Toxicity is low/ but wildlife can be smothered or drowned when contaminated. This class includes residual fuel oils and medium to heavy crudes. Class D: No fluid Oils Class D oils are relatively non-toxic/do not penetrate porous substrates and are usually black or dark brown in color. When heated, Class D oils may melt and coat surfaces making cleanup very difficult. Residual oils, heavy crude oils/some high paraffin oils/and some weathered oils fall into this class. These classification are dynamic for spilled oils, weather conditions and water temperature greatly influence the behavior of oil and refined petroleum products in the environment. For example, as volatiles evaporate from as Class B oil, it may become a Class C oil. If a significant temperature drop occurs (e.g., at night), a Class C oil may solidify and resemble a Class D oil. Upon warming the Class D oil may revert back to a Class C oil. Categories of Crude Oil West Texas Intermediate (WTI) crude oil is of very high quality. Its API gravity is 39.6 degrees (making it a light crude oil). WTI is generally priced at about a $2-4 per-barrel premium to OPEC Basket price and about #1-2 per barrel premium to Brent, although on a daily basis the pricing relationships between these can very greatly. Brent Crude Oil stands as a benchmark for Europe.

CHAPTER-4

INTERPRETATION OF THE DATA

Analysis & Interpretation of gold -I Commodity Date Symbol Close(Rs)


18695 18663 18691 18651 18479 18501 18481 18560 18571 18518 18629 18531 18565 18479 260014 18572.42857

returns
_ -0.002 0.002 -0.002 -0.009 0.001 -0.001 0.004 0.001 -0.003 0.006 -0.005 0.002 -0.005 sd 0.004

1-Dec-10 GOLD 2-Dec-10 GOLD 3-Dec-10 GOLD 5-Dec-10 GOLD 6-Dec-10 GOLD 7-Dec-10 GOLD 8-Dec-10 GOLD 9-Dec-10 GOLD 10-Dec10 12-Dec10 13-Dec10 14-Dec10 15-Dec10 16-Dec10 GOLD GOLD GOLD GOLD GOLD GOLD total avg

Commodity Channel Index analysis: CCI = price-MA 0.15*D Price = Closing price MA = Moving avg of the security D = Mean Deviation of moving avg

.015 =constant

Gold: Analysis of 14 days From Ist DECEMBER TO 6th DECEMBER. Price MA CCI = _________________ 0.015*D

___(260014-18571.43)_ (0.015*18602.36)

2414242.57 279.0354

865.2757

GRAPHICAL REPRESENTATION OF GOLD

GOLD

GOLD
18750 18700 18650 18600 18550 18500 18450 18400 18350

RETURNS

Close(Rs)

1-2-3-5-6-7-8-9- 12- 14- 1610- 13- 15DecDecDecDecDecDecDec Jul- Jul- DecJul- Jul- Jul- Dec DATE

INTREPRETATION
o The above graph shows the Analysis of Gold for 14 days. o Deviation is constant compared to moving avg. o On DECEMBER 1st the closing price high compared with other dates. o The lowest price is DECEMBER 6th

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD

ANALYSIS AND INTERPRETATION OF GOLD- II


COMMODITY DATE 17-Dec10 19-Dec10 20-Dec10 21-Dec10 22-Dec10 23-Dec10 24-Dec10 26-Dec10 27-Dec10 28-Dec10 29-Dec10 30-Dec10 31-Dec10 2-Jan-11 SYMBOL GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD CLOSE(RS) 18495 18419 18504 18516 18452 18419 18404 18322 17948 17938 17929 18049 18025 17952 RETURNS 0.000865848 -0.004109219 0.0046148 0.000648508 -0.00345647 -0.001788424 -0.000814376 -0.004455553 -0.020412619 -0.000557165 -0.000501728 0.006693067 -0.001329714 -0.004049931

total avg

255372 0.0061 18240.85714 sd 8

Gold : Analysis of 14 days From 17th December to 2nd January.


Price MA _________________ 0.015*D 255372 18240.85714 _____________________ 0.015 * 18602.36 237131.1428 _________________ 279.0354 849.8245

CCI

GOLD
returns
18600 18400 18200 18000 17800 17600

Series1

17- 20- 22- 24- 27- 29- 31-219- 21- 23- 26- 28- 30Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Jan date

Interpretation:

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD

o The above graph shows the Analysis of Gold for 14 days. o Based on same Deviation the CCI value was decreased. o Compared to above 1st & 2nd. o The highest Closing price is 21st & lowest is 29th December.

ANALYSIS AND INTERPRETATION OF GOLD III.

DATE

COMMODITY SYMBOL

CLOSE(RS)

RETURNS

6-Jan-11 7-Jan-11 9-Jan-11 10-Jan11 11-Jan11 12-Jan11 13-Jan11 14-Jan11 16-Jan11 17-Jan11 18-Jan11 19-Jan11 20-Jan11 21-Jan11

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD total avg

18287 18283 18256 18293 18475 18647 18650 18662 18773 18759 18787 18884 18834 18843 260433 18602.35714

0.018660873 -0.000218735 -0.001476782 0.002026731 0.009949161 0.009309878 0.000160884 0.000643432 0.005947916 -0.000745752 0.001492617 0.005163145 -0.002647744 0.000477859 Sd 0.00583 8

Gold : Analysis of 14 days From 6TH aug to 21st January.

CCI

Price MA _________________ 0.015*D 260433-18602.35714 _____________________ 0.015 * 18602.36 237131.1429 ________________ 279.0354 849.8245742

GOLD
19000 18800 18600 18400 18200 18000 17800

return

Series1

6- 7- 9-10- 12- 14- 17- 19- 2111- 13- 16- 18- 20Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan date

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD

Interpretation:
o The above graph shows the Analysis of Gold for 14 days. o Based on same Deviation the CCI value was decreased. o Compared to above 2nd & 3rd. o The highest Closing price is 18TH January & lowest is 9th January.

ANALYSIS AND INTERPRETATION OF GOLD IV.


COMMODITY DATE SYMBOL CLOSE(RS) RETURNS

23-Jan11 24-Jan11 25-Jan11 26-Jan11 27-Jan11 28-Jan11 29-Jan11 30-Jan11 31-Jan11 1-Feb-11 2-Feb-11 3-Feb-11 4-Feb-11 5-Feb-11

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD total avg

18823 18929 19078 18988 18989 19008 19042 19236 19090 19133 19057 19065 19124 19260 266822 19058.71429

-0.001061402 0.005631408 0.00787152 -0.004717476 5.26648E-05 0.001000579 0.001788721 0.010188005 -0.007589936 0.002252488 -0.003972195 0.000419793 0.003094676 0.007111483 sd 0.00503 1

Gold :

Analysis

of 14 days From

23rd aug to 5th February..


CCI = Price MA _________________ 0.015*D 266822-19058.71429 _____________________ 0.015*18602.36 247763.28571 _________________ 279.0354 887.924

= =

GOLD
19300 19200 19100 19000 18900 18800 18700 18600

returns

Series1

23- 25- 27- 30- 1- 2- 3- 4- 6- 724- 26- 28- 31Jan Jan Jan Jan Feb Feb Feb Jan Jan AugJan Feb SepFeb date

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD

Interpretation:
o The above graph shows the Analysis of Gold for 14 days. o Based on same Deviation the CCI value was increased. o Compared to above 3rd & 4th. o The highest Closing price is 7TH February & lowest is 23rd January.

ANALYSIS AND INTERPRETATION OF GOLD V.


DATE COMMODITY SYMBOL CLOSE(RS) RETURNS

8-Feb-11 9-Feb-11 10-Feb11 13-Feb11 14-Feb11 15-Feb11 16-Feb11 17-Feb11 18-Feb11 20-Feb11 21-Feb11 22-Feb11 23-Feb11 24-Feb11

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD total avg

19205 19075 18967 18963 19284 19232 19263 19246 19251 19206 19134 19303 19309 19258 268696 19192.57143

-0.002855659 -0.006769071 -0.005661861 -0.000210893 0.004113512 0.008230668 0.015606053 0.014923799 -0.001711263 -0.001351913 -0.006696776 0.002961654 0.003012831 0.002707487 sd 0.00713 8

Gold : Analysis of 14 days From 8TH February to 24th February.


CCI = Price MA _________________ 0.015*D 268696-19192.57 _____________________ 0.015 * 18062.36

= =

249503.4286 ________________ 279.0354 894.1640738

GOLD
19400 19300 19200 19100 19000 18900 18800 18700

returns

Series1

8- 9-10- 14- 16- 18- 21- 2313- 15- 17- 20- 22- 24-

Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb Feb
date

Interpretation:
o The above graph shows the Analysis of Gold for 14 days. o Based on same Deviation the CCI value was increased. o Compared to above 4th & 5th. o The highest Closing price is 23rd February & lowest is 13th February.

Analysis of silver ANALYSIS AND INTERPRETATION OF SILVER I.


DATE 1-Dec10 2-Dec10 3-Dec10 COMMODITY CLOSING(RS) returns SILVER SILVER SILVER 28926 28798 28900 _ -0.004425085 0.003541913

GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD GOLD

5-Dec10 6-Dec10 7-Dec10 8-Dec10 9-Dec10 10Dec-10 12Dec-10 13Dec-10 14Dec-10 15Dec-10 16Dec-10

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER total avg

28834 28883 29014 28847 28941 29013 28930 29156 29234 29272 28902 405650 28975

-0.002283737 0.001699383 0.00453554 -0.005755842 0.003258571 0.00248782 -0.002860787 0.00781196 0.002675264 0.001299856 -0.012640066 sd 0.00538 9

Commodity Channel Index analysis :


CCI = Price-MA ___________________ 0.15*D

Price = Closing price MA = Moving avg of the security D = Mean Deviation of moving avg .015 =constant

Silver : Analysis From 1ST DECEMBER to 16th December.


Price MA _________________ 0.015*D (405650-28975) _____________________ 0.015 * 29227.29 376675 _________________ 438.4093 859.185599

CCI

= =

SILVER
29400 29300 29200 29100 29000 28900 28800 28700 28600 28500

RETURNS

Series1

1- 2- 3- 5- 6- 7- 8- 9- 12- 14- 1610- 13- 15Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec DATE

Interpretation:
o The above graph shows the Analysis of Silver 14 days. o Deviation is constant compared to moving avg. o On 15th December the closing price high compared with other dates. o The lowest price is 2nd December.

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER

ANALYSIS AND INTERPRETATION OF SILVER I.


COMMODITY DATE 17Dec-10 19Dec-10 20Dec-10 21Dec-10 22Dec-10 23Dec-10 24Dec-10 26Dec-10 27Dec-10 28Dec-10 29Dec-10 30Dec-10 31Dec-10 2-Jan11 SYMBOL CLOSE(RS) RETURNS

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER total avg

28904 28689 28744 28906 29128 29218 29239 29260 28588 28395 28404 28764 28750 29088 404077 28862.64

6.91994E-05 -0.007438417 0.001917111 0.005635959 0.007680066 0.00308981 0.000718735 0.000718219 -0.022966507 -0.006751084 0.000316957 0.012674271 -0.00048672 0.011756522 Sd 0.008897

Silver : Analysis of 14 days From 17th December to 2nd January.


CCI = Price MA _________________ 0.015*D (404077-28862.64) _____________________ 0.015 * 29227.29 376675 _________________ 438.4093 859.185599

= =

siver
29400 29200 29000 28800 28600 28400 28200 28000 27800

returns

Series1

17- 20- 22- 24- 27- 29- 3119- 21- 23- 26- 28- 30- 2Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Jan

Interpretation:
o o o o The above graph shows the Analysis of Silver for 14 days. Based on same Deviation the CCI value was decreased. Compared to above 1st & 2nd. The highest Closing price is 26th December & lowest is 28th December.

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER
date

ANALYSIS AND INTERPRETATION OF SILVER III.

DATE

COMMODITY CLOSING(RS) returns 0.00546617 3-Jan-11 SILVER 29247 2 4-Jan-11 SILVER 29085 -0.00553903 0.00165033 5-Jan-11 SILVER 29133 5 0.00367281 6-Jan-11 SILVER 29240 1 7-Jan-11 SILVER 29241 3.41997E-05 0.00536917 9-Jan-11 SILVER 29084 3 10-Jan-11 SILVER 29122 0.00130656 0.00480736 11-Jan-11 SILVER 28982 2 0.00410599 12-Jan-11 SILVER 29101 7 0.00233668 13-Jan-11 SILVER 29169 9 0.00085707 14-Jan-11 SILVER 29194 4 0.01065287 16-Jan-11 SILVER 29505 4 0.00481274 17-Jan-11 SILVER 29647 4 0.00725199 18-Jan-11 SILVER 29432 9 total 409182 avg 29227.29 sd 0.005058

Silver : Analysis of 14 days From 3rd January to 18th January.


CCI = Price MA _________________ 0.015*D 409182 - 29227.29 _____________________ 0.015 *29227.29

= =

379954.71 _________________ 438.4093 866.6665396

SIVER
Interpretation: 29600
29800

o Compared to above 2nd & 3rd.

o The highest Closing price is 17th January and lowest is 17th January.

3- 4- 5- 6- 7- 9- 10- 12- 14- 1711- 13- 16- 18DATE

Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan Jan

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER

29400 29200 o The above graph shows the Analysis of Silver for 14 days. 29000 28800 28600 o Based on same Deviation the CCI value was decreased.

RETURNS

Series1

ANALYSIS AND INTERPRETATION OF SILVER IV


DATE COMMODITY CLOSING(RS) returns 19-Jan-11 SILVER 29405 -0.000917369 20-Jan-11 SILVER 29033 -0.01265091 21-Jan-11 SILVER 29070 0.001274412 23-Jan-11 SILVER 29033 -0.00127279 24-Jan-11 SILVER 29557 0.018048428 25-Jan-11 SILVER 30285 0.024630375 26-Jan-11 SILVER 30232 -0.001750041 27-Jan-11 SILVER 30344 0.003704684 28-Jan-11 SILVER 30435 0.002998945 30-Jan-11 SILVER 30368 -0.002201413 31-Jan-11 SILVER 30887 0.017090358 1-Feb-11 SILVER 30748 -0.004500275 2-Feb-11 SILVER 31056 0.010016912 3-Feb-11 SILVER 31376 0.010303967 total 421829 avg 30130.64 sd

0.010177

Silver : Analysis of 14 days From 19th January to 3rd February.


Price MA CCI = _________________ 0.015*D 366484 26177.43 = _____________________ 0.015 * 24822.93 366413.695 = _________________ 372.343 = 984.07

GOLD
32000 31500 31000 30500 30000 29500 29000 28500 28000 27500

returns

Series1

19- 21- 24- 26- 28- 31-1- 2- 320- 23- 25- 27- 30Jan Jan Jan Jan Jan Jan Feb Jan Jan Jan Jan Jan Feb Feb DATE Aug-

Interpretation:
o The above graph shows the Analysis of Silver for 14 days. o Based on same Deviation the CCI value was increased. o Compared to above 3rd & 4th. o The highest Closing price is 3rd February & lowest is 20th January.

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER

ANALYSIS AND INTERPRETATION OF SILVER V


DATE COMMODITY CLOSING(RS) returns 4-Feb-11 SILVER 31323 -0.00169 6-Feb-11 SILVER 31463 0.00447 7-Feb-11 SILVER 31457 -0.00019 0.00174 8-Feb-11 SILVER 31512 8 9-Feb-11 SILVER 31315 -0.00625 10-Feb-11 SILVER 31234 -0.00259 13-Feb-11 SILVER 31586 0.01127 0.01196 14-Feb-11 SILVER 31964 7 0.00450 15-Feb-11 SILVER 32108 5 16-Feb-11 SILVER 32344 0.00735 0.99687 17-Feb-11 SILVER 32269 7 18-Feb-11 SILVER 32256 -0.0004 20-Feb-11 SILVER 32144 -0.00347 21-Feb-11 SILVER 31937 -0.00644 TOTAL 444912 AVG 31779.42857 SD 0.26607 3

Silver : Analysis of 14 days From 4th septo 21st sep..


CCI = Price MA _________________ 0.015*D = 444912 -31779.42857 0.015 * 24822.93 347522.5 _________________ 372.343 933.339

= =

gold
returns
32500 32000 31500 31000 30500

CLOSING(RS)

4-6-7-8-9- 13- 15- 17- 2010- 14- 16- 18- 21FebFebFebFebFebSep- Feb FebFebSep- FebFeb Feb Feb dates

Interpretation:
o The above graph shows the Analysis of Silver for 14 days. o Based on same Deviation the CCI value was increased. o Compared to above 4th & 5th. o The highest Closing price is & lowest .

SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER SILVER

Relative Strength Axe Formula:

Average Positive Price change over period* periods RSI = ___________________________________________ Average Positive Price change over period* periods

Gold
Average
18572.43------------29.93 18240.86------------

--------------------------Posit ive

361.5

18602.36--------- Deviation =(0) 19058.71------------ 456.35-------------19192.5-----590.21--------------Neg a

tive

29.93 +361.5 =391.43(gain) 456.35+590.21 =1046.56(loss) RSI = 391.43*14 5480.02 _____________ = _____________ 1046.56*14 14651.84 = 0.37401

100 100 - _______________ 1+( 391.43\1046.56)

100 100 - _______________ 1+(0.37401)

100 = 100 - _______________ 1.37401 = 100 77.77 = 22.23

Relative Strength Index Formula:

RSI =

Average Positive Price change over period* periods ___________________________________________ Average Positive Price change over period* periods

Silver :
Average 28070.93 ------------ 3248.0 -------------26842.07 ------------ 2019.4 -------------24822.93 ------------ Deviation 26177.43 ----------- (-1354.5) -------------26732.5 ----------- (-1909.57) ----------3248.0+2019.4 = 5267.4 (Gain) (-1354.5)+ (-1909.57) = 3264.07(Loss) RSI = 5267.4 *14 _____________ 3264.07 *14 = 100 73743.6 = _____________ 45696.98 Positive Negative

1.6137

= 100 - _______________ 1+(5267.4/3264.07) 100 = 100 - _______________ 1+(1.6131)

100 = 100 - _______________ 2.6131 = 100 38.2687 = 61.7313

1) OCCUPATION
Frequency Businessmen Profession Retired House wife Employees Others Total 13 11 8 5 9 4 50 Percent 26.0 22.0 16.0 10.0 18.0 8.0 100.0 Valid Percent 26.0 22.0 16.0 10.0 18.0 8.0 100.0 Cumulative Percent 26.0 48.0 64.0 74.0 92.0 100.0

GRAPH
OCCUPATI
30

26 22 18 16

20

10

10 8

Percent

0 businessm en profession R etired house wife em polyee others

OCCUPATI

ANALYSIS From the above graph it has been observed that out of 50 clients 26% are Businessmen, 22% are Professional, 16% are Retired clients, 10% are House wives, 18% are Employees and 8% are others i.e. students.

2) Which commodities do you preferred to invest in the commodities?


PREFERRED COMMODITIES Frequency Valid Gold Silver Crudeoilo Copper Maize Chana Chilly Total 17 8 13 3 5 2 2 50 Percent 34.0 16.0 26.0 6.0 10.0 4.0 4.0 100.0 Valid Cumulative Percent Percent 34.0 34.0 16.0 50.0 26.0 76.0 6.0 82.0 10.0 92.0 4.0 96.0 4.0 100.0 100.0

PRECOMMO
40

34 30 26 20 16 10

10 6

Percent

0 Gold Silver Crudeoilo Copper Maize

4 Chana

4 Chilly

PRECOMMO

ANALYSIS
From the above graph it has been observed that 34% investors are investing in the Gold, 16% are in the Silver, 26% are in the Crude oil, 6% clients are in the copper, 10% are in the Maize, 4%are in the Chana and 4% investors are investing in the Chilly commodities.

3) Since how long are you trade with the commodities?


T R A D IN G F re q u e n cy P e rce n t V a lid le s s th a n 1 y e a r 16 3 2 .0 b e t.1 & 3 y e a r s 24 4 8 .0 a b o ve 3 ye a rs 10 2 0 .0 T o ta l 50 1 0 0 .0 C u m u la tiv e V a lid P e r c e n t P e r c e n t 3 2 .0 3 2 .0 4 8 .0 8 0 .0 2 0 .0 1 0 0 .0 1 0 0 .0

TR D G A IN
50 48 40

30

32

20

20

Percent

10

0 less than 1 year bet.1 & years 3 above 3 years

TR D G A IN

ANALYSIS
From the above graph it has been observed that 32% clients from less than one year, 48% clients for between 2 and 3 years and rest 20% investors are from the above 3 years investing in the commodities market.

4) Do you prefer to invest in the other commodities?


Frequenc Percent y Valid Yes No Total 19 31 50 38.0 62.0 100.0 Valid Cumulativ Percent e Percent 38.0 62.0 100.0 38.0 100.0

OTHECOMM
70 60 50 40 38 30 20 62

Percent

10 0 Yes no

OTHECOMM

ANALYSIS
We have concluded that 38% investors are going to invest in the other commodities and remaining 62% people are not investing in the other commodities in the Hyderabad city.

5) If Yes which Commodities?

Frequency Percent Zinc Jeera Not invested Total 11 8 31 50 22.0 16.0 62.0 100.0

Valid Percent 22.0 16.0 62.0 100.0

Cumulative Percent 22.0 38.0 100.0

WHICOMMO
70 60 50 40 30 20 62

22 16

Percent

10 0 Zinc Jeera not invested

WHICOMMO

ANALYSIS

In the above analysis out of 19 people 11 (22%) investors are investing in the Zinc and rest 8 people (16%) investors are investing in the Jeera. And remaining 31 clients (62%) clients are not investing in the other commodities.

7) What would be your risk appetite for invested in the commodities?

Frequency Percent Low Risk Medium Risk High Risk Total 11 23 16 50 22.0 46.0 32.0 100.0

Valid Percent 22.0 46.0 32.0 100.0

Cumulativ e Percent 22.0 68.0 100.0

RISK
50 46 40

30

32

20

22

Percent

10

0 Low Risk Medium Risk High Risk

RISK

ANALYSIS
The above graph indicates the Risk appetite for investing in the commodities market. Here out of 50 samples 22% investors seeking low risk, 46% are medium risk and 32% investors have the high-risk period.

8) Reasons and Ratings for the investment decisions


(a) RETURN Frequency Percent Maximum Average Minimum Total 26 20 4 50 52.0 40.0 8.0 100.0 Valid Cumulative Percent Percent 52.0 40.0 8.0 100.0 52.0 92.0 100.0

RETURN
60

50

52

40

40

30

20

Percent

10 8 0 Maximum Average Mimnimum

RETURN

ANALYSIS

From the above graph 52% investors are investing in the commodities market to get a high return, 40% are medium return and rest 8% investors are invest for the purpose of low return.

(b) TRANSEPERANCY
FREQUENCY Frequency Percent Valid Cumulative Percent Percent 44.0 46.0 10.0 100.0 44.0 90.0 100.0

Valid

Maximum Average Minimum Total

22 23 5 50

44.0 46.0 10.0 100.0

TRANSPER
50 46 44

40

30

20

10

Percent

10

0 Maximum Average Minimum

TRANSPER

ANALYSIS From the above graph, out of 50 samples 44% investors intention is for the high transparency level when investing in the commodities market, 46% investors investing for medium transparency level and about 10% investors are investing for the minimum transparency level.

(c) LIQUIDITY Frequency Maximum Average Minimum Total 25 22 3 50 Percent 50.0 44.0 6.0 100.0 Valid Cumulative Percent Percent 50.0 44.0 6.0 100.0 50.0 94.0 100.0

LIQUIDIT
60

50

50 44

40

30

20

Percent

10 6 maximum Average Minimum

LIQUIDIT

ANALYSIS From the above graph, out of 50 samples 50% people investing in the commodities for high liquidity purpose, 44% are medium liquidity and rest 6% investors are investing in the commodities for minimum liquidity.

(d) SAFETY Frequency Percent Valid Cumulative Percent Percent 44.0 48.0 8.0 100.0 44.0 92.0 100.0

Maximum Average Minimum Total

22 24 4 50

44.0 48.0 8.0 100.0

SAFETY
60

50 48 40 44

30

20

Percent

10 8 0 Maximum Average Minimum

SAFETY

ANALYSIS From the above graph out of 50 samples 44% investors are investing for the safety purpose, 48% are medium safety and rest 8% are investing to get a minimum safety.

9) Annual investment in the commodities


Frequency Less than 2 Lakh 2 to 5 Lakh 5 to 8Lakh Total 5 29 16 50 Percent 12.0 56.0 32.0 100.0 Valid Percent 10.0 58.0 32.0 100.0 Cumulative Percent 10.0 68.0 100.0

INVESTME
60 56 50

40

30

32

20

Percent

10

12

0 Less than 2 Lakh 2 to 5 Lakh 5 to 8Lakh

INVESTME

ANALYSIS In the above graph out 50 investors 12% people are less than 2 lakh investing in the commodities market annually. 56% people are investing between 2 to 5 lakh annually and rest 32% investors are investing above 8 lakh annually in the commodities market and in the Hyderabad city.

10) Services excepted by the service provider


Frequency Researche d Information Less Brokerage 27 Percent 54.0 Valid Percent 54.0 Cumulative Percent 54.0

15

30.0

30.0

84.0

Good Service Total

8 50

16.0 100.0

16.0 100.0

100.0

SEREXPEC
60 54

50

40

30

30

20 16

Percent

10

0 Researched Informati Less Brokerage Good Service

SEREXPEC

ANALYSIS From the above graph represents that, 54% clients are expected to more researched information, 30% are expected Less brokerage and rest 16% are expected good service from the service provider.

11) Consult before investment


Frequency Rely on your own 12 Percent 24.0 Valid Percent 24.0 Cumulative Percent 24.0

Financial Consultants Business Channels News papers/ Magazines Total

24

48.0

48.0

72.0

5 9

10.0 18.0

10.0 18.0

82.0 100.0

50

100.0

100.0

CONSULT
60 50 48 40

30 24 18

20

Percent

10 0 Rely on your ow n

10

Business Channels New s papers/ Magazin

Financial Consultant

CONSULT

ANALYSIS The above graph represents, about 48% investors are consult to the financial consultant before investment in the commodities, 24% are invested rely on their own decisions, 10% investors investing on the basis of business channels and rest 18% people are consult news papers or magazines before investing in the commodities market.

CHAPTER-5 FINDING &SUGGESTIONS

FINDINGS
The findings from the survey analysis can be summarized as follows: From the analysis, out of 50 samples 26% are business people and investing in the commodities. 32% investors (clients) preferred to invest in the gold and 28% crude oil respectively. Most of the investors i.e. 48% trading with commodities since from the last 1 to 3 years. 46% clients are interested to bear the medium risk in the Hyderabad city. From the survey analysis, 52% investors are investing for high return, 44% investors for transparency, 50% for high liquidity and 48% investors are investing in commodities for their safety. The 56% investors are investing Rs. 2 to 5 lakh annually in the commodities. From the survey analysis, 54% clients are expected

SUGGESTIONS

It is seen that most of the investors are businessmen and professionals. So company has to target these businessmen and professionals. And make awareness of the commodities so that it attracts investors.

Majority of the respondents prefer to amounts invest ranging between 2 to 3 lakh with medium risk so grate potential market for medium returns in Hyderabad so company should concentrate on it. .

Hyderabad investors are seeking to invest in gold and crude oil because of medium risk so company create awareness within grain merchants and other traders to invest in agri commodities.

Transparency and returns is the basic parameters considered by investors while deleing with brokers so company maintain transference and possible as much as possible returns to satisfy investors.

The company should provide update information of the commodity market.

It

will be help full to create goodwill in minds of investors and attract new investors with less brokerage.

CONCLUSION
This project report entitled with investors preferences towards commodities market undergone on the stock broking concern is not merely a work of the project, but a brief knowledge and experience of that how to trade in the stock market. The research undertaken has brought into the light of the following conclusions. The preferences towards commodities in Hyderabad, for gold and crude oil are high but for some other commodities it is too low. In the Hyderabad city the investors investment in the commodities is very low.

BIBLIOGRAPHY
BIBLIOGRAPHY: TEXT BOOKS

Financial management, published by Tata McGraw Hill, 1998. Khan & Jain Financial Management, published by Vikas Publishing House Pvt. Ltd., New Delhi, 1995. I.M.Pandey Financial Management theory & Practice, published by Tata McGraw Hill, 1998 Prasanna Chandra

MAGAZINES

Business World Business Today India Today NEWS PAPER

Business Line WEB SITES

www.anandrathi.com www.google.com www.ncdexindia.com www.mcxindia.com

Questionnaire
Name: Address: Phone/Cell No: 1) Occupation: a) Businessmen d) House wife b) Profession e) Employee c) Retired f) others ______________________ ______________________ ______________________

2) Which commodities do you prefer to invest in the commodities market? a) Gold d) Copper g) Chilly 3) Since how long are you trading with commodities? a) Less than One Year b) Between 1 and 3 Years c) Above 3 Years 4) Do you prefer to invest in other commodities? (a) Yes 5) If yes which commodities? a) Gold d) Copper g) Chilly b) Silver e) Maize h) Others (Specify) c) Crude oil f) Chana (b) No b) Silver e) Maize c) Crude oil f) Chana

6) If no why?

7) What would be your Risk appetite for invest in the commodities? a) Low risk b) Medium Risk c) High Risk 8) Assign weightages to the parameters on which you base your investment decisions. Particulars Return Transparency Liquidity Safety Maximum Average Minimum

7) How much do you prefer to invest annually in the commodities? a) Less than 2 Lakh b) 2 to 5 Lakh c) 5 to 8 Lakh d) Above 8 Lakh

8) Which facilities do you expect from service provider regarding commodities trading? a) Researched information

b) Less Brokerage c) Good service d) Others (specify)

9) Whom do you consult before investing in the commodities market? a) Rely on your own b) Financial consultants c) Business Channels d) News papers/magazines e) Others (Specify)

10) Your valuable suggestions

THANK YOU