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8/7/2019 Commodity Market Sas
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Commodity Market
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What is Commodity?
A commodity is anything for which there is
demand, but which is supplied withoutqualitative differentiation across a market.
In other words, copper is copper. Rice is rice.
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What is Market?
A market is where buyers and sellers:
meet to exchange goods and services
usually in exchange for money
The market may be in one specific placeor
not exist physically at all
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What is Commodity Market?
At Where raw or primary products exchanged,
in which they are bought and sold in
standardized contracts.
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History
1875 : Establishment of Bombay Cotton
Trade association.
1900 :Gujarat Vyapari Mandali
1919 : Calcutta Hessian Exchange
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Continue
1952 : forwards contracts (regulation) Act
1952
1953: Forward Market Commission
1960 : banned on most of future commodity
trading.
1980 : again permitted this future trading
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Commodity market in pre-independence
Cotton markets:
Bombay,Karachi,Ahmedabad,and Indore.
Wheat markets:Bombay, Hapur, Karachi, Lyallpur,Amritsar, Okara and Calcutta.
Groundnut markets:
Madras and Bombay;
Linseed markets:
Bombay and Calcutta;
Jute and Hessian markets:
Calcutta;
Bullion markets:
Bombay, Calcutta, Delhi and Amritsar
Sugar market:
Bombay, Calcutta, Kanpur and Muzaffarnagar.
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Reports and Policy
UNCTAD and World Bank joint MissionR
eport:" India: Managing Price Risk inIndias Liberalized Agriculture: Can FuturesMarket Help? (1996).
National Agricultural Policy, 2000,
Guru Committee: 2001
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Growth of Commodity Market
2003: Watershed year in the history of
commodity future market.
54 commodities were opened up for trading.
Establishment of three new nationalexchanges with online trading & professionalmanagement.
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Contd.
Starting with 7 commodities till 1999, trading
is available in95
commodities.
More than 3000 members registered withexchanges.
More than 20,000 terminals spread over800towns of the country.
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Contd.
Volume increased to Rs 33,753,36 crore in
2007 from Rs. 66,530 in 2002.
Various training programme and certified
coursed are also available.
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Ministry of consumer affairs
FMC
Commodity Exchange
National Exchange Regional Exchange
NCDEX MCX NMSE NBOT 20 OTERS
Structure of Commodity market
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Forward Market Commission
(FMC) headquartered at Mumbai, is a regulatoryauthority which is overseen by the Ministry ofConsumer Affairs, Food and Public Distribution,Govt. of India.
It is a statutory body set up in 1953 under theForward Contracts (Regulation) Act, 1952
Advises Central Govt regarding recognition ofassociations.
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Major Exchanges in India
National Commodity & Derivatives
Exch
angeL
imited (NCDEX)
Multi Commodity Exchange of IndiaLimited (MCX)
National Multi-Commodity Exchange ofIndia Limited (NMCEIL)
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Other Exchanges
Rajdhani Oils and Oilseeds Exchange Ltd.
Delhi Ahmedabad Commodity Exchange Ltd Bhatinda Om & Oil Exchange Ltd.,
Batinda.Bikaner Commodity Exchange Ltd
Bikaner First Commodity Exchange of IndiaLtd,Kochi
Haryana Commodities Ltd. Sirsa
India Pepper & Spice Trade Association.Kochi
National Board of Trade. Indore
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Contd..
Surendranagar Cotton oil &
Oilseeds Association Ltd,
The Bombay CommodityExchange Ltd.Mumbai
The Bullion Association Limited,
Jaipur
The Central India Commercial
Exchange Ltd, Gwaliar
The Chamber Of Commerce.,
Hapur
The Cotton Association of India
Mumbai
The East India Jute & HessianExchange Ltd, Kolkata
The Meerut Agro CommoditiesExchange Co. Ltd., Meerut
The Rajkot Commody ExchangeLtd.
The Spices and Oilseeds ExchangeLtd ,Sangli
Vijay Beopar Chamber Ltd.,Muzaffarnagar
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Commodities
Fibres and Manufacturers: e.g. Kapas,Silk
Spices: e.g. Turmeric,Pepper Edible Oilseeds and Oil: e.g. Sunflower oil
Pulses: e.g. Masoor, Urad
Energy Products: e.g. Crude Oil, Natural Gas
Vegetables : e.g. Potato Metals: e.g. Silver, Gold, Nickel
Others: e.g. Gur, Sugar, Rubber
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PERCENTAGE
34%
4%59%
3%
NCDEX
NM E
MCX
OTHER
REGIONAL
EXCHANGE
Indian commodity market share(in terms of turn over)
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Participants in Commodity FuturesParticipants in Commodity Futures
Farmers/ Producers
Merchandisers/ Traders
Importers
Exporters
Consumers/ Industry
Commodity Financers
Agriculture Credit
providing agencies
Corporate having price
risk exposure in
commodities
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Price discovery for commodity players
A farmer can plan his crop by looking at pricesprevailing in the futures market
Hedging against price risk
A farmers can sell in futures to ensure remunerativeprices
A processor/ manufacturing firm can buy in futures to
hedge against volatile raw material costs
Benefits of Commodity Trading
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Contd..
An exporter can commit to a price to his
foreign clients
A stockist can hedge his carrying risk to
ensure smooth prices of the seasonal
commodities round the year
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Volume
Year Rs (Crore) % Increase
2002 66,530 -2003 1,29,364 94%
2004 5,71,759 341%
2005 2,155,122 276%
2006 2,739,340 27%
2007 33,753,36 23%
2010 (E) 74,156,13 (E) 30% (E)
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Trading Volume
V o l u m e
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
1 2 3 4 5 6
Ye ar
R
ror
Rs. Crore
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Group-wise Value of Trade
Commodity
group
2004-05 2005-06 2006-07 2007-08
Bullion, metals 1.80 7.79 21.29 26.24
Agriculture 3.90 11.92 13.17 9.41
Energy 0.02 1.82 2.31 5.00
Others 0.00 0.02 0.001 0.00
Total 5.72 21.55 36.77 40.65
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Percentage to totalV
olume (2007-08)
% of Volume
64.55
23.15
12.3 0
Bullion, metal
AgricultureEnergy
Others
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Contribution of Agriculture commodity
in WPI and CPI Inflation
12 food grain items in WPI index with 5.01%
weight. (S
pecially Rice & Wheat)
High Inflation: Major part consists of
Gram & Urad: 30%Wheat: 14%
Rice -4.7%
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Contd.
Weight of Food grains is much higher in CPI.
That is 69.15%. It consists of:
Cereals: 40.94%
Pulses: 3.39%
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Conclusion
Good option to diversify portfolio.
Price prediction can easily be done for thefuture.
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Conclusion
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