Commodity Market Report ViNDHYA NEW

8/3/2019 Commodity Market Report ViNDHYA NEW

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A STUDY ON WORKING OF COMMODITIES

MARKET


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CONTENTS

TITLE PG.NO.

CHAPTER-1 04

INTRODUCTION

NEED OF THE STUDY

OBJECTIVES OF THE STUDY

SCOPE OF THE STUDY

RESEARCH METHODOLOGY

LIMITATIONS OF THE STUDY

CHAPTER-2 20

INDUSTRY PROFILE

COMPANY PROFILE

CHAPTER-3 43

REVIEW OF LITERATURE

CHAPTER-4 50

DATA ANALYSIS AND INTERPRETATION

CHAPTER-5 64

FINDINGS

SUGGESTIONS

CONCLUSIONS

BIBLIOGRAPHY 67


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ABSTRACT

A study has been conducted on the STUDY ON WORKING OF

COMMODITIES MARKET in the ANAND RATHI SECURITIES LTD, Hyderabad

Branch.

As we have stated earlier in the Executive summary 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 and was recently ranked by an Asia Money 2009 poll amongst South Asias top 5

wealth managers for the ultra-rich.

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.


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The basic objective of the study is the how much investors are preferred to invest in

the commodities market and to understand what are the reasons behind investing in the

commodities market.

The scope of the study is limited to preparing questionnaire, analysis survey and

survey is limited to Hyderabad city and even existing clients, who are investing in the

commodities market to understand the preferences towards commodities market.

This project report includes profile of the Anand Rathi securities ltd, it contains

brief introduction, nature of the business, and product profile .

This report includes the findings and conclusions of the study done in order

to give the better suggestions.

This study has done by conducting and analyzing the survey of the target clients in

the Hyderabad city.

For the analysis of data the SPSS package is used and using the simple bar graphs

shows the data.

Finally the study is helped to me in many ways to acquire the knowledge about the

trading in the stock exchanges and also customer behavior in doing the survey.


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CHAPTER-1

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 ex\changes. 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.


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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 produce.

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


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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:


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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 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.


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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 pre-determined 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


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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

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, Ahemdabad(NMCE).


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However there are regional commodity 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


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positions (mark to Market or MTM) so that the buyers and sellers do not carry a risk of

not more than one day.

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


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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.


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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, Groundnut Oil, Mustard Seed, Mustard Seed Oil, Cottonseed

Oilcake, 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

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


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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

Gold

Silver


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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.


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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 study the investors preference towards commodities market.

To identify the investment patterns of investors.

To know the how much people preferred to invest in the commodities

market

To know whether the investors opinion about international commodities

market

affects the national trading activity.

To identify the source of information about commodities market.

To profile the commodities investors.

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


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professionalism. The entire firm activities are divided across distinct client groups:


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 Intractions was carried with the

Commodities investors (customers).


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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 SOURCESI 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 :Questionnaire

Sampling Size :50 units

Sampling procedure : Direct

STATISTICAL TOOLS AND TECHNIQUES

To analysis the data we used bar graphs periodically.


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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.

The given time for the project is not sufficient.

Due to the busy work schedules getting the information was difficult.

The suggestion is based on the study on Fundamental and Technical Analysis such as

price movement, Relationship of gold with other factors, Volumes and Open Interest (OI).

This analysis will be holding good for a limited time period that is based on present

scenario and study conducted, future movement on gold price may or may not be similar

The investors in Hyderabad are not much aware of commodity market

and the commodities being traded in the commodity market. So, awareness about the

commodity market and the commodities being traded.


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CHAPTER-2

INDUSTRY PROFILE

Indian Commodit ies 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.


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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


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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


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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


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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.


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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.


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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


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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


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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.


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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:


The company is also maintaining an excellent relationship with the clients, the

brokers, the employees, and the bankers.


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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 GuptaVice 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


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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.


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Management TeamFirms 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 lessenthe 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.


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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.
http://opt/scribd/conversion/tmp/scratch21991/equity&derivatives.asp?pageOpt=1http://opt/scribd/conversion/tmp/scratch21991/mutualfunds.asp?pageOpt=2http://opt/scribd/conversion/tmp/scratch21991/depositoryservices.asp?pageOpt=3http://opt/scribd/conversion/tmp/scratch21991/commodities.asp?pageOpt=4http://opt/scribd/conversion/tmp/scratch21991/insurance.asp?pageOpt=5http://opt/scribd/conversion/tmp/scratch21991/ipos.asp?pageOpt=6http://opt/scribd/conversion/tmp/scratch21991/equity&derivatives.asp?pageOpt=1http://opt/scribd/conversion/tmp/scratch21991/mutualfunds.asp?pageOpt=2http://opt/scribd/conversion/tmp/scratch21991/depositoryservices.asp?pageOpt=3http://opt/scribd/conversion/tmp/scratch21991/commodities.asp?pageOpt=4http://opt/scribd/conversion/tmp/scratch21991/insurance.asp?pageOpt=5http://opt/scribd/conversion/tmp/scratch21991/ipos.asp?pageOpt=6


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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 believe in the importance of

selecting appropriate asset allocations based on the client's risk profile.


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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.


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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.


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( c) NRIs

Introduction:

AR is the perfect gateway to the wealth of investment opportunities in India for

Non-Resident 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.


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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


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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


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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 Infosystems 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


42/99

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, utilising 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


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(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.


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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.


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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 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


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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 aproducerof 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


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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


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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.


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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


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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.


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CHAPTER-4

INTERPRETATION OF THE DATA


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Analysis & Interpretation of gold -I

Date

Commodity

Symbol Close(Rs) returns

1-Dec-10 GOLD 18695 _

2-Dec-10 GOLD 18663 -0.002

3-Dec-10 GOLD 18691 0.002

5-Dec-10 GOLD 18651 -0.002

6-Dec-10 GOLD 18479 -0.009

7-Dec-10 GOLD 18501 0.001

8-Dec-10 GOLD 18481 -0.001

9-Dec-10 GOLD 18560 0.00410-Dec-

10 GOLD 18571 0.00112-Dec-

10 GOLD 18518 -0.00313-Dec-

10 GOLD 18629 0.00614-Dec-

10 GOLD 18531 -0.00515-Dec-

10 GOLD 18565 0.00216-Dec-

10 GOLD 18479 -0.005total 260014

avg 18572.42857 sd 0.004

Commodity Channel Index analysis:


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CCI = price-MA

0.15*D

Price = Closing price

MA = Moving avg of the security

D = Mean Deviation of moving avg

.015 =constant


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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

GOLDS


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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

18350184001845018500185501860018650

1870018750

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

1-

Dec

2-

Jul-

3-

Dec

5-

Jul-

6-

Dec

7-

Dec

8-

Dec

9-

Jul-

10-

Dec

12-

Jul-

13-

Dec

14-

Jul-

15-

Dec

16-

Dec

DATE

RET

URNS

Close(Rs)


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ANALYSIS AND INTERPRETATION OF GOLD- II

DATE

COMMODITY

SYMBOL CLOSE(RS) RETURNS17-Dec-

10 GOLD 18495 0.00086584819-Dec-

10 GOLD 18419 -0.00410921920-Dec-

10 GOLD 18504 0.004614821-Dec-

10 GOLD 18516 0.00064850822-Dec-

10 GOLD 18452 -0.0034564723-Dec-

10 GOLD 18419 -0.00178842424-Dec-

10 GOLD 18404 -0.00081437626-Dec-

10 GOLD 18322 -0.00445555327-Dec-

10 GOLD 17948 -0.02041261928-Dec-

10 GOLD 17938 -0.00055716529-Dec-

10 GOLD 17929 -0.000501728

30-Dec-

10 GOLD 18049 0.00669306731-Dec-

10 GOLD 18025 -0.0013297142-Jan-11 GOLD 17952 -0.004049931

total 255372


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avg 18240.85714 sd

0.0061

8

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

Price MACCI = _________________

0.015*D

255372 18240.85714= _____________________

0.015 * 18602.36

237131.1428= _________________

279.0354

= 849.8245

Interpretation:

GOLD

176001780018000182001840018600

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

17-

Dec

19-

Dec

20-

Dec

21-

Dec

22-

Dec

23-

Dec

24-

Dec

26-

Dec

27-

Dec

28-

Dec

29-

Dec

30-

Dec

31-

Dec

2-

Jan

date

re

turns

Series1


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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.


59/99

ANALYSIS AND INTERPRETATION OF GOLD III.

DATECOMMODITY

SYMBOL CLOSE(RS) RETURNS

6-Jan-11 GOLD 18287 0.0186608737-Jan-11 GOLD 18283 -0.000218735

9-Jan-11 GOLD 18256 -0.00147678210-Jan-11 GOLD 18293 0.002026731

11-Jan-11 GOLD 18475 0.009949161

12-Jan-11 GOLD 18647 0.009309878

13-Jan-11 GOLD 18650 0.000160884

14-Jan-11 GOLD 18662 0.000643432

16-Jan-11 GOLD 18773 0.00594791617-Jan-

11 GOLD 18759 -0.00074575218-Jan-

11 GOLD 18787 0.00149261719-Jan-

11 GOLD 18884 0.00516314520-Jan-

11 GOLD 18834 -0.00264774421-Jan-

11 GOLD 18843 0.000477859total 260433

avg 18602.35714 Sd

0.00583

8

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


60/99

Price MACCI = _________________

0.015*D

260433-18602.35714= _____________________

0.015 * 18602.36

237131.1429= ________________

279.0354

= 849.8245742

GOLD

17800180001820018400186001880019000

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

6-Jan

7-Jan

9-Jan

10-Jan

11-Jan

12-Jan

13-Jan

14-Jan

16-Jan

17-Jan

18-Jan

19-Jan

20-Jan

21-Jan

date

re

turn

Series1


61/99

Interpretation:



o Compared to above 2nd & 3rd.

o The highest Closing price is 18TH January & lowest is 9th January.

ANALYSIS AND INTERPRETATION OF GOLD IV.

DATE

COMMODITY


Gold :

Analysis of 14

days From

23-Jan-11 GOLD 18823 -0.00106140224-Jan-

11 GOLD 18929 0.00563140825-Jan-11 GOLD 19078 0.0078715226-Jan-11 GOLD 18988 -0.00471747627-Jan-11 GOLD 18989 5.26648E-0528-Jan-11 GOLD 19008 0.00100057929-Jan-11 GOLD 19042 0.001788721

30-Jan-11 GOLD 19236 0.01018800531-Jan-11 GOLD 19090 -0.007589936

1-Feb-11 GOLD 19133 0.002252488

2-Feb-11 GOLD 19057 -0.003972195

3-Feb-11 GOLD 19065 0.000419793

4-Feb-11 GOLD 19124 0.003094676

5-Feb-11 GOLD 19260 0.007111483

total 266822

avg 19058.71429 sd

0.00503

1


62/99

23rd aug to 5th February..

Price MACCI = _________________

0.015*D

266822-19058.71429= _____________________

0.015*18602.36

247763.28571= _________________

279.0354 = 887.924

GOLD

1860018700188001890019000191001920019300

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

23-

Jan

24-

Jan

25-

Jan

26-

Jan

27-

Jan

28-

Aug-

30-

Jan

31-

Jan

1-

Feb

2-

Feb

3-

Feb

4-

Sep-

6-

Feb

7-

Feb

date

re

turns

Series1


63/99

Interpretation:


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


8-Feb-11 GOLD 19205 -0.0028556599-Feb-11 GOLD 19075 -0.00676907110-Feb-11 GOLD 18967 -0.005661861

13-Feb-11 GOLD 18963 -0.00021089314-Feb-11 GOLD 19284 0.00411351215-Feb-11 GOLD 19232 0.00823066816-Feb-11 GOLD 19263 0.01560605317-Feb-11 GOLD 19246 0.01492379918-Feb-

11 GOLD 19251 -0.00171126320-Feb-11 GOLD 19206 -0.00135191321-Feb-11 GOLD 19134 -0.00669677622-Feb-11 GOLD 19303 0.00296165423-Feb-11 GOLD 19309 0.00301283124-Feb-11 GOLD 19258 0.002707487

total 268696 sd 0.007138

avg 19192.57143


64/99

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

Price MACCI = _________________

0.015*D

268696-19192.57= _____________________

0.015 * 18062.36

249503.4286= ________________

279.0354

= 894.1640738


65/99

Interpretation:


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 COMMODITY CLOSING(RS) returns1-Dec-10 SILVER 28926 _ 2-Dec-10 SILVER 28798 -0.0044250853-Dec-10 SILVER 28900 0.0035419135-Dec-10 SILVER 28834 -0.002283737

GOLD

187001880018900190001910019200

1930019400

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

GO

LD

8-

Feb

9-

Feb

10-

Feb

13-

Feb

14-

Feb

15-

Feb

16-

Feb

17-

Feb

18-

Feb

20-

Feb

21-

Feb

22-

Feb

23-

Feb

24-

Feb

date

returns

Series1


66/99

6-Dec-10 SILVER 28883 0.0016993837-Dec-10 SILVER 29014 0.004535548-Dec-10 SILVER 28847 -0.005755842

9-Dec-10 SILVER 28941 0.00325857110-Dec-10 SILVER 29013 0.0024878212-Dec-10 SILVER 28930 -0.00286078713-Dec-10 SILVER 29156 0.0078119614-Dec-10 SILVER 29234 0.00267526415-

Dec-10 SILVER 29272 0.00129985616-Dec-10 SILVER 28902 -0.012640066

total 405650

avg 28975 sd

0.00538

9


67/99

Commodity Channel Index analysis :

Price-MACCI = ___________________

0.15*D

Price = Closing priceMA = Moving avg of the securityD = Mean Deviation of moving avg.015 =constant

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

Price MA

CCI = _________________0.015*D

(405650-28975)= _____________________

0.015 * 29227.29

376675= _________________

438.4093

= 859.185599


68/99

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

28500286002870028800289002900029100292002930029400

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

1-Dec

2-Dec

3-Dec

5-Dec

6-Dec

7-Dec

8-Dec

9-Dec

10-Dec

12-Dec

13-Dec

14-Dec

15-Dec

16-Dec

DATE

RETURNS

Series1


69/99

ANALYSIS AND INTERPRETATION OF SILVER I.

DATE

COMMODITY


17-Dec-10 SILVER 28904 6.91994E-0519-Dec-10 SILVER 28689 -0.00743841720-Dec-10 SILVER 28744 0.00191711121-Dec-10 SILVER 28906 0.00563595922-Dec-10 SILVER 29128 0.007680066

23-Dec-10 SILVER 29218 0.0030898124-Dec-10 SILVER 29239 0.00071873526-Dec-10 SILVER 29260 0.00071821927-Dec-10 SILVER 28588 -0.02296650728-Dec-10 SILVER 28395 -0.00675108429-

Dec-10 SILVER 28404 0.00031695730-Dec-10 SILVER 28764 0.01267427131-Dec-10 SILVER 28750 -0.000486722-Jan-11 SILVER 29088 0.011756522

total 404077

avg 28862.64 Sd 0.008897


70/99

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

Price MACCI = _________________

0.015*D

(404077-28862.64)= _____________________

0.015 * 29227.29

376675= _________________

438.4093= 859.185599

Interpretation:o The above graph shows the Analysis of Silver for 14 days.


o Compared to above 1st & 2nd.

o The highest Closing price is 26th December & lowest is 28th December.

ANALYSIS AND INTERPRETATION OF SILVER III.

siver

278002800028200284002860028800290002920029400

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

17-Dec

19-Dec

20-Dec

21-Dec

22-Dec

23-Dec

24-Dec

26-Dec

27-Dec

28-Dec

29-Dec

30-Dec

31-Dec

2-Jan

date

re

turns

Series1


71/99

DATE COMMODITY CLOSING(RS) returns

3-Jan-11 SILVER 292470.005466172

4-Jan-11 SILVER 29085 -0.00553903

5-Jan-11 SILVER 291330.001650335

6-Jan-11 SILVER 292400.003672811

7-Jan-11 SILVER 29241 3.41997E-05

9-Jan-11 SILVER 29084

-0.005369173

10-Jan-11 SILVER 29122 0.00130656


-0.004807362

12-Jan-11 SILVER 291010.004105997

13-Jan-11 SILVER 291690.002336689

14-Jan-11 SILVER 291940.000857074

16-Jan-11 SILVER 295050.010652874

17-Jan-11 SILVER 296470.004812744


-0.007251999

total 409182

avg 29227.29 sd 0.005058

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

CCI = _________________0.015*D

409182 - 29227.29= _____________________

0.015 *29227.29

379954.71


72/99

= _________________438.4093

= 866.6665396

Interpretation:

o The above graph shows the Analysis of Silver for 14 days.


o Compared to above 2nd & 3rd.

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

SIVER

28600288002900029200294002960029800

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

SILVER

3-Jan

4-Jan

5-Jan

6-Jan

7-Jan

9-Jan

10-Jan

11-Jan

12-Jan

13-Jan

14-Jan

16-Jan

17-Jan

18-Jan

DATE

RETURNS

Series1


73/99

ANALYSIS AND INTERPRETATION OF SILVER IVDATE COMMODITY CLOSING(RS) returns19-Jan-11 SILVER 29405 -0.00091736920-Jan-11 SILVER 29033 -0.0126509121-Jan-11 SILVER 29070 0.001274412

23-Jan-11 SILVER 29033 -0.0012727924-Jan-11 SILVER 29557 0.01804842825-Jan-11 SILVER 30285 0.02463037526-Jan-11 SILVER 30232 -0.00175004127-Jan-11 SILVER 30344 0.00370468428-Jan-11 SILVER 30435 0.00299894530-Ja

Documents

Commodity Market Report ViNDHYA NEW