Upload
pratik-khandelwal
View
209
Download
0
Tags:
Embed Size (px)
Citation preview
Commodity market
PRESENTED BYGAYATRI, MEENAKSHI
& VANDANA
GUIDED BY PROF. AMREEN SHAIKH
WHAT IS COMMODITY MARKET?
Commodity markets are markets where raw or primary products are exchanged.
It covers physical product (food, metals, electricity) markets.
Modern Commodity Market have their roots in the trading of agricultural products.
The trading of commodities includes physical trading of food items, Energy and Metals, etc.
CLASSIFICATION OF COMMODITIES
AgricultureGrainsPulses
Edible oils/seedsSpices etc
Base MetalsCopper
ZincAluminum
NickelTin
EnergyCrude oil
Heating oilNatural gasFurnace oil
Etc.
BullionGoldSilver
etc
Commodities
ENERGIES Crude Oil Petroleum
By Products Of Petroleum
Heating Oil
Natural Gas
Coal.
AGRICULTURAL PRODUCTS
1. Wheat
2. Rice
3. Corn
4. Oat
5. Soy bean
SOFT COMMODITIES:
1. Coffee
2. Cotton
3. Sugar
4. Orange Juice
5. Cocoa
PERFORMANCE OF THE MARKETReturns Across Various Commodities in 5 Yrs.
92.8662.54
3.83
-12.36-45.21
9.25
87.12
22.25 4.96 9.6551.16
142.80
94.21
485.86
23.60
-100
0
100
200
300
400
500
600
Gold
Silv
er
Cru
de o
il
Copper
Zin
c
Alu
min
ium
Lead
Guar
Seed
Guar
Gum
Soy O
il
Soybean
Pepper
Jeera
Turm
eric
Menth
a O
il
Source:Bloomberg,Way2Wealth Research
Types of Market For Commodity Trading
SpotTrading
Future Trading
Forward Trading
Option Trading
Swap Trading
SPOT TRADING
Instant cash is used to physically exchange the commodities, which pass from sellers hands to users.
FORWARD MARKETS AND FUTURE MARKETS
Forward markets and Future markets are derived for trading of commodities in markets, with a view of ascertaining a future value of the same commodity.
After keeping view of the demandClimatic conditionsFluctuation in currency Inflation
OPTIONS TRADING
These are contracts that give the owner the right, but not an obligation, to buy (call option) or sell (put option) an asset.
SWAPS TRADING
These are contracts exchange cash (flows) on / before a specified future date based on the underlying value of bonds/interest rates, currencies/exchange rates, stocks, commodities, or other assets.
REGULATING BODIES
The trading of commodity derivatives is regulated by Forward Markets Commission (FMC).
In terms of Section 15 of the Forward Contracts (Regulation) Act, 1952 (the Act)
Forward contracts in commodities notified under section 15 of the Act can be entered into only
a member of a recognized association.
The recognized associations/commodity exchanges are granted recognition under the Act by the Central Government
All the Exchanges, which permit forward contracts for trading, are required to obtain certificate of registration from the Central Government.
The other legislations which have relevance to commodity trading are the
Companies Act, Stamp Act, Contracts Act, Essential Commodities Act 1955, Prevention of Food Adulteration Act,1954 And various other legislations, which impact on
their working
BENEFITS OF INVESTING IN COMMODITY MARKET
Leverage Liquidity Diversification Inflation Hedge Assurance Of PurityTransparency Of RatesPreferential Tax Treatment Than Stocks
RISK ASSOCIATED WITH INVESTMENTS IN COMMODITY
MARKET Price risk
Quantity risk
Cost risk (Input price risk)
Political risk
PROCESS OF BUYING AND SELLING PRODUCTS
1.Market OrderThe customer chooses a specific
commodity or commodities that he / she wants to buy or to sell.
The customer chooses the number of contracts that will deliver monthly.
The contracts will not have a price on them.
Time is the priority, not price.
2.Buy Limit Order- This order is only filled at the specified price “or
better.” This order specifies a price limit for the order be filled.
The goal is to buy at the lowest price possible for the commodity or commodities.
3.Sell Limit Orders: This order is only executed at the current market
price or higher.
The goal is to sell the commodity or commodities at the highest price.
4.Stop order:
It becomes a market order when the stop level is reached in the specified commodity or commodities
INDIAN COMMODITY EXCHANGE
1) Precious Metals Gold
Silver
2) Metals Copper
Lead 3) Energy Crude Oil
Natural Gas
4)Oils & Oilseed Complex Mustard Seed Soya Bean
Soya Oil
5) Fibers Raw Jute
6) Other Agro product Mentha Oil
7) Minerals Iron Orez
TAX IMPLICATIONS
1. Futures contracts are in the nature of agreement to buy or sell at a future date and hence are not liable for payment of VAT/sales tax.
2. If the futures contract is closed out and settled between the Constituents prior to the settlement date without actually buying or selling the commodities, there is no liability for payment of VAT/sales tax.
3.When the futures contract fructifies into a sale and culminates into delivery, there would be liability for payment of sales tax. This liability will arise in the State in which the warehouse (into which the
4. Goods are lodged by the Constituent) is situated when the commodities are delivered to the buyer.
There are favourable tax rates for commodities as they are taxed at 60% long-term capital gains and 40% short-term capital gains.
Long-term gains are capped at 15% and short-term gains are taxed at your ordinary tax rate, which depends on your adjusted income.
Commodity exchange
INDIAN COMMODITY EXCHANGES The East India Cotton Association Surendra nagar Cotton oil & Oilseeds
Association Ltd The East India Jute & Hessian Exchange Ltd, The Spices and Oilseeds Exchange Ltd. Vijay Beopar Chamber Ltd., Muzaffarnagar Ahmadabad Commodity Exchange First Commodity Exchange of India Ltd, Kochi The Bikaner Commodities Exchange Limited Haryana Commodities Ltd., Hissar The Bombay Commodity Exchange Ltd The Indian Pepper and Spice Trade Association
Bhatinda Om & Oil Exchange Ltd., Bhatinda The Meerut Agro Commodities Exchange Co.
Ltd., Meerut The Central India Commercial Exchange Ltd,
Gwalior National Board of Trade Limited The Chamber of Commerce Rajdhani Oils and Oilseeds Exchange Ltd. , Delhi E-Commodities Ltd The Rajkot Seeds oil & Bullion Merchants`
Association Ltd