1.1 INTRODUCTION

The vast geographical extent of India and huge population is aptly complemented by the size of market. The broadest classification of the Indian Market can be made in terms of the commodity market & the bond market. The commodity market in India comprises of all palpable markets that we come across in our daily lives. Such markets are social institutions that facilitate exchange of goods for money. The cost of goods is estimated in terms of domestic currency. Indian commodity market can be subdivided into the following two categories:

Wholesale Market. Retail Market.

The traditional wholesale market in India dealt with whole-sellersWho bought goods from the farmers and manufacturers and then sold them to the retailers after making a profit in the process. It was the retailers who finally sold the goods to the consumers. With the passage of time the importance of whole-sellers began to fade out for the following reasons:

The whole sellers in most situations, acted as mere parasites who did not add any value to the product but raised its price which was eventually faced by the consumers.

The improvement in transport facilities made the retailers directly interact with the producers and hence the need for whole-sellers was not felt.

In recent years, the extent of the retail market (both organizedAnd unorganized) has evolved in leaps and bounds. In fact, the success stories of the commodity market of India in recent years has mainly centered on the growth generated by the Retail Sector. Almost every commodity under the both agricultural and industrial is now being provided at well distributed retail outlets throughout the country.

Moreover, the retail outlets belong to both the organized as wellAs the unorganized sector. The unorganized retail outlets of the yesteryears consist of small shop owners who are price takers where consumers face a highly competitive price structure. The organized sector on the other hand is owned by various business houses like Pantaloons, Reliance, Tata and others. Such markets are usually selling a wide range of articles agricultural and

manufactured, edible and inedible, perishable and durable. Modern marketing strategies and other techniques of sales promotion enable such markets to draw customers from every section of the society. However the growth of such markets has still centered on the urban areas primarily due to infrastructural limitations.

A security that tracks an index, a commodity or a basket of assetsLike an index fund, but trades like a stock on an exchange. ETFs experience price changes throughout the day as they are bought and sold. Because itTrades like a stock, an ETF does not have its net asset value (NAV) calculated every day like a mutual fund does. By owning an ETF, you get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. Another advantage is that the expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, you have to pay the same commission to your broker that you'd pay on any regular order. One of the most widely known ETFs is called the Spider (SPDR), which tracks the S&P 500 index and trades under the symbol SPY.

Index fund is a type of mutual fund with a portfolio constructedto match or track the components of a market index, such as the Standard & Poor's 500 Index (S&P 500). An index mutual fund is said to provide broad market exposure, low operating expenses and low portfolio turnover. "Indexing" is a passive form of fund management that has been successful in outperforming most actively managed mutual funds. While the most popular index funds track the S&P 500, a number of other indexes, including the Russell 2000 (small companies), the DJ Wilshire 5000 (total stock market), the MSCI EAFE (foreign stocks in Europe, Australasia, Far East) and the Barclays Capital Aggregate Bond Index (total bond market) are widely used for index funds.

Investing in an index fund is a form of passive investing. The primary advantage to such a strategy is the lower management expense ratio on an index fund. Also, a majority of mutual funds fail to beat broad indexes, such as the S&P 500. Considering the present growth rate, the total valuation of the Indian Retail Market is estimated to cross Rs. 10,000 billion by the year 2015. Demand for commodities is likely to become four times by 2015 than what it presently is.

1.2 RESEARCH PROBLEM

Present scenario is full of competition, commodity market enables different

choices for investors & these choices are influenced by various preferences of

commodities. So to study the investors awareness and preference, in prospective

of findings whether it really affects or not in there thinking & investing criteria.

1.3 RESEARCH OBJECTIVES

As our research requires a thorough investigation on investors so our main

objective is to analyses the investor’s awareness and preference for commodity

market. Some other objectives of our research are:

To analyze the information and several factors with respect to commodity

market.

To determine investor’s preference for commodity market.

To study and ascertain the advantages of investing in commodity market.

CHAPTER TWO2.1 Literature Review.

2.1 LITERATURE REVIEW.

- MEANING OF COMMODITY.

Any product that can be used for commerce or an article of commerce which is traded on an authorized commodity exchange is known as commodity. The article should be movable of value, something which is bought or sold and which is produced or used as the subject or barter or sale. In short commodity includes all kinds of goods. Indian Forward Contracts (Regulation) Act (FCRA), 1952 defines “goods” as “every kind of movable property other than actionable claims, money and securities”. In current situation, all goods and products of agricultural (including plantation), mineral and fossil origin are allowed for commodity trading recognized under the FCRA. The national commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals, cereals and pulses, ginned and un-ginned cotton, oilseeds, oils and oilcakes, raw jute and jute goods, sugar and gur, potatoes and onions, coffee and tea, rubber and spices etc.

- COMMODITY EXCHANGE.

A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority.

- COMMODITY FUTURES.

A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange.

- COMMODITY MARKET.

Commodity market is an important constituent of the financial markets of any country. It is the market where a wide range of products, viz., precious metals, base metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market.

- SPOT TRADING.

Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.

- FORWARD CONTRACTS.

A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.

- FUTURES CONTRACTS.

A futures contract has the same general features as a forward contract but is transacted through a futures exchange.

Commodity and Futures contracts are based on what’s termed "Forward" Contracts. Early on these "forward" contracts (agreements to buy now, pay and deliver later) were used as a way of getting products from producer to the consumer. These typically were only for food and agricultural Products. Forward contracts have evolved and have been standardized into what we know today as futures contracts. Although more complex today, early “Forward” contracts for example, were used for rice in seventeenth century Japan. Modern "forward", or futures agreements, began in Chicago in the 1840s, with the appearance of the railroads. Chicago, being centrally located, emerged as the hub between Midwestern farmers and producers and the east coast consumer population centers.

1. HEDGING.

"Hedging", a common (and sometimes mandatory practice of farming cooperatives, insures against a poor harvest by purchasing futures contracts in the same commodity. If the cooperative has significantly less of its product to sell due to weather or insects, it makes up for that loss with a profit on the markets, since the overall supply of the crop is short everywhere that suffered the same conditions.

2. SPECULATORS.

Speculators are participants who wish to bet on future movements in the price of an asset. Futures and options contracts can give them leverage; that is, by putting in small amounts of money upfront, they can take large positions on the market. As a result of this leveraged speculative position, they increase the potential for large gains as well as large losses.

3. ARBITRATORS.

Arbitrators work at making profits by taking advantage of discrepancy between prices of the same product across different markets. If, for example, they see the future price of an asset getting out of line with the cash price,they would take offsetting positions in the two markets to lock in the profit.

STRUCTURE OF COMMODITY MARKET

Ministry of consumer

afairs

FMC(Forward Market

Commission)

Commodity exchange

National Exchange

NCDEX MCX NMCE

Regional Exchange

NBOT20 other regional

exchanges

In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX-23rd April 2003) Mumbai, Multi Commodity Exchange of India Limited (MCX- 20th November 2003) Mumbai. There are other regional commodity exchanges situated in different parts of India.

DIFFERENT TYPES OF COMMODITIES TRADED.

World-over one will find that a market exits for almost all the commodities known to us. These commodities can be broadly classified into the following:

METAL Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, Zinc.

BULLION Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI, SilverM

FIBER Cotton L Staple, Cotton M Staple, Cotton S Staple, Cotton Yarn, Kapas

ENERGY Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M. E. Sour Crude Oil

SPICES Cardamom, Jeera, Pepper, Red Chilli

PLANTATIONS Arecanut, Cashew Kernel, Coffee (Robusta), Rubber

PULSES Chana, Masur, Yellow Peas

PETROCHEMICALS

OIL & OIL SEEDS

HDPE, Polypropylene(PP), PVC

Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil,Sesame Seed, Soymeal, Soy Bean, Soy Seeds.

CEREALS Maize

OTHERS Guargum, Guar Seed, Gurchaku, Mentha Oil, Potato (Agra), Potato (Tarkeshwar), Sugar M-30, Sugar S-30.

Following diagram gives a fair idea about working of the Commodity Market.

Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots.

CHAPTER THREE

3.1 Methodology

3.2 Research Design

3.3 Participants (Sampling)

3.4 Methods Procedures

3.5 Data collection

3.6 Statistical Technique

3.1 RESEARCH METHODOLOGY.

Research methodology may be understood as the science of study how

research is done significantly. The objective of this section is to describe the

research procedure and methods that have been adopted for the achievement

of the project objectives.

Research Methodology is a scientific and systematic way to solve

research problem. A researcher has to design his research methodology i.e , in

addition to the knowledge of methods/techniques he has to apply the

methodology as well. The methodology may differ from problem to problem.

Thus, the scope of research methodology is wider then research methods. In a

way, research methodology deals with the research methods and takes into

consideration the logic behind the methods, we use.

3.2 RESEARCH DESIGN.“A research design or strategy is a general plan of how to go about answering

the research questions. It contains the clear objectives, derived from the

research questions and specify the sources of data collection" Research design

also means the structuring of investigation aimed at identifying variables and

their relationships to one another. This is used for the purpose of obtaining data

to enable the researcher test hypotheses or answer research questions. It is an

outline or a scheme that serves as a useful guide to the researcher in his efforts

to generate data for his study.

For the purpose of this study, the descriptive research design has been

employed which is geared towards the collection of data for hypotheses

testing. Descriptive research design is collected data here related to the

demographic or the behavioural variables of the respondents under study.

3.3 SAMPLE DESIGN.

A sample design is a definite plan for obtaining a sample from a given

population. It refers to the technique or the procedure the research would

adopt in selecting items from the sample. Sample design may as well lay down

the number of items to be included in the sample i.e. the size of sample.

Sample design is determined before data are collected. There are many sample

design from which a researcher can choose. A sample design is a definite plan

for obtaining a sample from a given population. It refers to the technique that

researcher adopts in selecting items from sample. It should be ensured in

sampling process itself that sample selected is representative of population.

We have chosen sample design for our research is non-probability sample

design. NON-PROBABILITY SAMPLE DESIGN is a sampling procedure which does

not afford any basis for estimating the probability that each item in the

population has of being included in the sample.

JUSTIFICATION FOR SAMPLE DESIGN

1. In non-probability sampling,items for the sample are selected deliberately

by the researcher,his choice concerning the item remain supreme.

2. Its results are not too harmful.

3. Under this process, simple statistics is used for analysing data.

4. There is no possibility of existence of selecting any member in this process.

5. There is a very easy method of selecting this type sampling.

3.3.1 SAMPLE SIZE

By sample size we mean number of people to from population to make a

sample. A sample size should be sufficient enough that serve our purpose. It

should have efficiency, flexibility & reliability. We have taken sample size of 50

people living in Bhilai city.

JUSTIFICATION FOR SAMPLE SIZE

We have taken sample size of 50 because according to central limit theorem,

sample size of 50 is proved as standard size for solving all statistical analysis

like mean, standard deviation, chi square and Z- Test easily & correctly.

3.4 RESEARCH INSTRUMENT.

The basic research instrument used in this study is the questionnaire. This

involves the administration of well-structured questionnaires to respondents

who are investing in stock market. The responses were analyzed and used to

test the hypotheses from which valid decisions and conclusions were drawn.

Questionnaire method is method of Primary data collection in which we

directly interact with respondents to solve the research question.

Questionnaire is much broader range of information on. Various

characteristics, attitudes, opinion, Questioning is usually faster cheaper than

any other observation.

JUSTIFICATION FOR RESEARCH INSTRUMENT

The research instrument we chose is questionnaire method:

1. This describe the characteristics of certain groups, e.g. investors with

different age, gender, education, etc.

2. It allows the collection of a large amount of data from a sizable population

in a highly economic way.

3. The survey method is perceived as authoritative by people in general.

4. Based on the questionnaires, the data are standardized.

3.5 DATA COLLECTION.

Depending upon the sources utilized, whether the data has come from actual

observation or from records that are kept for normal purposes ,statistical data

can be classified into two categories, primary and secondary data :

3.5.1 Primary Sources -Structured Questionnaire:

Primary data is the data which is new. We use primary source to collect

the primary data. Primary source include personal meeting or

interviewing method. As a primary source of data we have filled

questionnaires from different investors.

3.5.2 Secondary Sources- Desk Research: This aspect involves the collection of secondary data through

publications, magazines, news papers, and internet etc.

.

3.6 STATISTICAL TECHNIQUE.

According to our questionnaire, contain 11 questions with demographic factors

& likert scale in which different option is there in which Z-test & chi square

testing is used. Descriptive or quantifiable data can be summarized as a two-

way contingency table for further analysis. Using the chi-square (X²), one can

use this method of statistical technique to do this analysis. The chi-square (X²)

enables a researcher to find out if the values of the variables are independent or

associated. It is based on a comparison of the observed values in the table with

what might be expected if the distributions were entirely independent.

I apply Z-test to test the hypothesis, certain value when population is normal

population and sample size is more than 30 i.e., 50 in our research.

The formula for the Z-test is a ratio. The top part of the ratio is just the

difference between the two means or averages. The bottom part is a measure of

the Standard Deviation & its Square & Square root.. The top part of the formula

is easy to compute, just find the difference between the means. The bottom part

is called the SQRT of STDEV. The Z-test assesses whether the means of two

groups are statistically different from each other. This analysis is appropriate

whenever you want to compare the means of two groups.

CHAPTER FOUR4.1 Data Interpretation &Analysis

4.2 Findings

4.1 DATA INTERPRETATION AND ANALYSIS

In this chapter, the responses of respondents under this research are

presented and analysed. The bio-data of respondents were also presented.

The responses have been analysed using tables and graphs to and the

responses to each research question and presented the sample for

generalization of the population.

1. Gender

Table 4.1.1

MALE 30FEMALE 20

60%

40%

No.of respondentMale Female

DATA INTERPRETATION

There are 30 male and 20 female respondent taking interests in our Research.

ANALYSIS OF DATA

Q.8 In which commodity exchange you will prefer for investment.

Table 4.1.2

S.No. Commodity Exchange Response

1 MCX 15

2 NCDEX 20

3 NBOT 15

DATA INTERPRETATION

Majority of people uses NCDEX. After this majority is MCX & NBOT while minority or Zero is for NMCE.

Q.9 In which commodity you will prefer to invest.

Table 4.1.3

S.No. Commodities Response

1 Agricultural 10

2 Metals 10

3 Bullions 30

DATA INTERPRETATION

Most Preferred is Bullions (Gold & Silver). Average preferred is Agricultural & Metals and Lowest Preferred is fossils-energy.

Q.10 Rate the Factors, Commodity Market are explanatory enough to give needed useful information with the specified factors below:-

Table 4.1.4

Factors Male (n=30) Female (n=20)

Tangibles 43 24

Assurance 61 40

Responsiveness 61 38

Reliability 73 45

DATA INTERPRETATION

Reliability & Assurance are the two factors which highly influence &

Responsiveness has also high impact, Reliability has Average impact on

information related to commodity market.

4.2 FINDINGS

By the above analysis we came to know some facts which are as follows:

Gender has no much influence on with respect to several factors.

Gender does not influence the preference for commodities.

Type of commodity exchange & preference for commodities has no

significant association with respect to investors.

Awareness among farmers must be generated with respect to future

markets.

We found that the investors are not more concentrated on any particular

commodity exchange. They have different choices. We found that the

Demographic factors of investors and market of commodity has no association.

Chapter five 5.1 Conclusion

5.2 Suggestion & Recommendation

5.1 CONCLUSION

After almost two years that commodity trading is finding favour with Indian investors and is been seen as a separate asset class with good growth opportunities. For diversification of portfolio beyond shares, fixed deposits and mutual funds, commodity trading offers a good option for long-term investors and arbitrageurs and speculators. And, now, with daily global volumes in commodity trading touching three times that of equities, trading in commodities cannot be ignored by Indian investors.

Online commodity exchanges need to revamp certain laws governing futures in commodities to make the markets more attractive. The national multi-commodity exchanges have unitedly proposed to the government that in view of the growth of the commodities market, foreign institutional investors should be given the go-ahead to invest in commodity futures in India. Their entry will deepen and broad base the commodity futures market. As a matter of fact, derivative instruments, such as futures, can help India become a global trading hub for select commodities.

5.2 SUGGESTION & RECOMMENDATION

⋟ Creation of awareness among farmers and other rural participants to use the futures trading platform for risk mitigation.

⋟ Development of warehousing and facilities to use the warehouse receipt as a financial instrument to encourage participation farmers.

⋟ Only about 1% to 5% of total commodity derivatives traded in country are settled in physical delivery due to insufficiencies in present warehousing system. As good delivery system is the back bone of any Commodity trade, warehousing problem has to be handled on a war footing.

BIBLIOGRAPHY

Website:

www.sharekhan.com

www.nseindia.com

www.bseindia.com

www.moneycotrol.com

www.investopedia.com

www.ncdex.com

www.mcxindia.com

www.commoditiescontrol.com

BOOKS“ Financial Markets & Services ”, Gordan & Natrajan.

QuestionnaireDear Respondent,

I am student of BIT, Durg. Through this Questionnaire I am trying to STUDY ON INVESTORS AWARENESS AND PREFERENCE FOR COMMODITY

MARKET IN BHILAI CITY. This purpose needs your valuable contribution. So kindly fill this Questionnaire with proper information.

SECTION – ‘A’

Personal Information:-

1. Name :

2. Gender:- Male Female

3. Age category you belong:-

18-23 23-28

28-33 Above 33

4. Qualification :-

High school Higher secondary Graduate Post Graduate

5. Your yearly Income:-

Less than 4,00, 000 More than 4,00,000

6. Marital status:- Married Unmarried

7. What is your occupation?

Student Employee Businessman

Professional House-wife

SECTION – ‘B’

Technical Questions:-

8. In which Commodity Exchange you will prefer for investment:-MCX NCDEXNMCE NBOT

9. In which Commodity you will prefer to Invest:-BULLIONS AGRICULTURALMETALS FOSSILS / ENERGY

10. What is your perception about Commodity Market ?VERY RISKY RISKYLESS RISKY NO RISK

11. What you think, Commodity Market are explanatory enough to give needed useful information with the specified factors below:-

Strongly Agree Neutral Disagree Strongly Agree Disagree 1 2 3 4 5

RELIABILITYASSURANCERESPONSIVENESS TANGIBLES