REPORT ON ICEX

8/8/2019 REPORT ON ICEX

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INDIAN COMMODITY EXCHANGE , SUMMER INTERNSHIP PROJECT REPORT

1UDEY SINGH KATOCH -155 ITM BUSINESS SCHOOL 2010

INSTITUTE FOR TECHNOLOGY AND MANAGEMENT

SUMMER INTERNSHIP PROJECT-2010

A PROJECT REPORT

ON

STUDY OF GOLD AS A COMMODITY IN DOMESTIC MARKET

&

ASSISTING BUSINESS DEVELOPMENT TEAM

CARRIED UNDER THE GUIDANCE OF

MR. DHARMESH PANDYA

NATIONAL HEAD

ICEX

SUBMITTED BY:

UDEY SINGH KATOCH

KHR2009PGDMF155

SUBMITTED TO:

PROF. ARUN SAXENAFACULTY , ITM BUSINESS SCHOOL


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ACKNOWLEDGEMENT

This project is not my individual effort. There are many people to whom I

want to thank from the bottom of my heart. There are many who contributed to

best of their efforts for the completion of this project within the stipulated time. No

words can express my gratitude towards them. To begin with, I would like to

convey my regards and loads of thanks to PROF. ARUN SAXENA, FACULTY,

ITM BUSINESS SCHOOL for his guidance and kind support. He has always

been there in the time of need and has always guided me to the right path.

Thanks a lot to you Sir.

I am also thankful to MR. DHARMESH PANDYA, NATIONAL HEAD, ICEX

from the bottom of my heart for his precious time & proper guidance in the

preparation of my project. He has always been very calm and patient while

answering thousands of my queries. Thank a lot to you sir.

I would also like to thank two more people MR. PIYUSH AND MR.

SHUBHODEEP for providing their helping hands in the most crucial stages of

the project and answering all the queries with patience. I cannot thank both of

you enough for your co-operation and support.

Finally, I would like to thank my family & friendswho has always been there in

the time of need and in all my frustration periods during the preparation of the

report. Thank youfor your cooperation in completion & submission of the project.


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EXECUTIVE SUMMARY

Every business organization big or small has its own set of problems. Sometimesthey enjoy advantages over others. Sometimes they also have to bear the heat of

the competition. They are not above the ups and downs of the business.

ICEX being a very new exchange in the Indian market dominated by leaders like

MCX, NCDEX is facing a lot of challenge in spite of having a lot of offers and

value added services for its customers. Being no. 1 in the trade volumes for gold

the number of memberships is not increasing creating worries for the top

management. So as a summer trainee a combined project was allotted to me

catering to a lot of problems.

The purpose of the project was to study INDIAN COMMODITY MARKET on the

following parameters:-

HOW IMPORTANT IS GOLD FOR INTERNATIONAL MARKETS: -Gold

is primarily a monetary asset and partly a commodity. Gold is the world's

oldest international currency. It is an important element of global monetary

reserves. Central banks, and official international institutions, have been

major holders of gold for more than 100 years and are expected to retain

large stocks in future.

WHO ARE THE BIGGEST PLAYERS IN COMMODITY TRADING IN

INDIAN MARKETS:-This part helped in understanding the market share

of different exchanges that deal in Indian markets. Also it revealed out that

what are the major factors that are helping these exchanges to cater to the

needs of more and more customers.

WHAT REVOLUTION HAS ONLINE TRADING BOUGHT IN THECOMMODITY MARKET VIS--VIS SPOT MARKET OR WHOLESALE

MARKET:- In the history when most of the work was carried in the spot

markets, online exchanges/markets were a real innovation which helped

people to trade in bullions from their home.


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HOW MUCH IS THE SHARE OF INDIAN COMMODITY MARKET IN

GLOBAL TERMS AND ITS IMPACT ON INDIAN ECONOMY: -India is

arguably the largest bullion market in the world. It has been until now, theundisputed single-largest Gold bullion consumer, with its own final

demand outweighing the next largest market China by almost 57

percent.

TO STUDY HOW THE CONSUMPTION PATTERN OF GOLD HAS

TAKEN A SHIFT WITH TIME AND HOW IT HAS IMPACTED INDIAN

ECONOMY:- India imports around 500-800 tonnes of gold on an average

every year. In 2008, Indias gold imports dipped by 45 per cent to touch

450 tons. However, buying of gold ornaments has fallen sharply.

To study the awareness level of ICEX in minds of consumer and how do

consumers perceive ICEX on the basis of transparency, accountability,

pricing policies and value added services.

To assist business development team in achieving their sales targets and

also in their latest MARCOMM project all over Mumbai for spreadingawareness about ICEX and bullion trading.


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TABLE OF CONTENTS

S.NO. TOPIC PAGE NO.1 INTRODUCTION TO INDIABULLS 6

2 INDIABULLS MARKET SHARE 9

3 INDIAN COMMODITY EXCHANGE 10

4 INDIAN COMMODITY MARKET 14

5 COMMODITY PROFILE - GOLD 19

6 INTERNATIONAL SENARIO 21

7 DOMESTIC SENARIO 27

8 LEARNINGS 33

9 PEST ANALYSSIS OF GOLD 3410 SWOT ANALYSIS 35

11 PORTERS FIVE FORCE MODEL 37

12 RECOMMENDATIONS 40

13 ASSIGNMENT NO 2 - MARCOMM

PROJECT : AN AWARENESS

CAMPAIGN

42

14 LEARNINGS AND RECOMMENDATIONS 46

15 ASSIGNMENT NO 3 WEBSITE

COMPARISION

47

16 CONCLUSION 50

17 RECOMMENDATIONS 51

17 ASSIGNMENT NO 4 MARKET SURVEY

: A CONSUMER BEHAVIOUR STUDY

52

18 BIBLIOGRAPHY 56


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access to all information and products. As we've expanded and developed to

serve the needs of all kinds of investors, we've been guided by one underlying

Philosophy: You come first.

Indiabulls1 2 FMS-IRM

We are proud to introduce to you Indiabulls Professional NetworkTM that

offers real-time prices, equity analysis, detailed data and news, intelligent

analytics, and electronic trading capabilities, right at your finger-tips. This

powerful technology is complemented by our knowledgeable and customer

focused Relationship Managers who are available to help with your financial

planning and investment needs.

About Founders: -

The fast paced growth, diversification and consolidation of the Group has been

possible due to the vision and leadership of the cofounders of Indiabulls.

Sameer Gehlaut is the Chairman, CEO and Whole Time Director of Indiabulls.

Sameer is an engineer from IIT, Delhi (1995) and has worked internationally with

Halliburton in its international services business in 1995. He has utilized his

experience with the international best practices and professional work culture at

Halliburton to lead Indiabulls successfully.

Rajiv Rattan is the President, CFO and Whole Time Director of Indiabulls. Rajivis an engineer from IIT, Delhi (1994) and has rich experience in the oil industry,

having worked extensively across the globe in highly responsible assignments

with Schlumberger. Rajiv has managed remote exploration projects providing

evaluation services for different clients in India as well as abroad.


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Saurabh Mittal is a Director at Indiabulls. Declared the best graduating student

in IIT, Delhiin (1995), Saurabh was also one of the engineers selected by

Schlumbergerto work for its international services business in 1995 and gained

experience of working in various global locations. He graduated as a Baker

Scholar with an MBA from the Harvard Business School. He has also

developed in-depth understanding of international financial markets.


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MARKET SHARE

The commodities futures market in India is only about 3 times the size of physical

market, whereas it is more than 10 times the size of physical market in other

developed countries. Therefore, the current state of commodities market in India

leaves lot of scope for growth in terms of depth and reach of the market as well

as attracting new players who are utilizing the services of overseas commodities

market due to various reasons like lack of depth in product category they wish to

trade in; inadequate warehousing facilities at strategic locations, etc.

13%

20%

30%

17%

7%

13%

SHARE KHAN

ICICI DIRECT

SURESH RATHI

INDIABULLS

INDIA

INFOLINE

OTHERS


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INDIAN COMMODITY EXCHANGE LIMITED (ICEX)

It is a screen based on-line derivatives exchange for commodities and has

established a reliable, time tested, and a transparent trading platform. It is also in

the process of putting in place robust assaying and warehousing facilities in order

to facilitate deliveries. It is jointly promoted by Indiabulls Financial Services Ltd

and MMTC Limited, and will have Indian Potash Ltd among others, as partners.

This exchange is ideally positioned to tap the huge scope for increasing the

depth and size of commodities' market and fill in the structural gaps existing in

the Indian market. Our head office is located in North India (Gurgaon), one of the

key regions in India's Agri belt, with a vision to encourage participation of

farmers, traders and actual users to hedge their positions against the wild price

fluctuations.

Corporatevision

Provide fair, transparent and efficient trading platform to all participants

Meet the international benchmarks for the Indian commodity market

Provide equal opportunity and access to investors all over the country through

the modern communication modes

Attract a wide array of end users, financial intermediaries and

hedgers

Become a major trading hub for most of the commodities

To provide product portfolio to suit the trading community needs in an

efficient manner .


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We will provide the widest range of benchmark future products available onany exchange, overing all major commodities. Our collective vision is global

growth, innovative product development, continually enhanced echnology and

the highest level of service available on any exchange. We offer future trading in

Agricultural commodities, bullions, base metals, and energy.

Our objective is to serve customers with a global product line,

virtuallyround-the-clock electronic trading and strategic alliances with other

leading players. We also offer a number of programs and products

designed specifically to appeal to a global audience.

Key differentiators

y Joint venture between Public/Private entities Well capitalized Rs. 100 Cr

initial capital Reputation of partners and pan India presence

y Key stake holders having rich experience in the domain viz. commodities,

warehousing, financial markets

y Professionally driven exchange with an entrepreneurial mindset

y Aim to remove discrepancy in the commodities market by building

transparency in the exchange

y Unprecedented price transparency and market depth


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MMTC Ltd, a Government of India enterprise, is the largest international trading

company of India having annual turnover of more than US$ 7Billion or Rs. 36000

Crore. It is among the leading international trading company of South Asia having

experience of more than 45 years in bulk trading of diverse commodities and

products. It is present in 56 locations in India through offices, warehouses, port

offices & retail outlets. It is the largest exporter of Minerals and single largest

importer/supplier or Bullion & Non-Ferrous Metals in India. MMTC is also leading

in trading of Agro products Fertilizers, Coal & Hydrocarbons textiles, chemicals

etc. MMTC Ltd has a fully owned subsidiary, MTPL in Singapore and also apromoter of NINL in Orissa, an Iron & Steel plant MMTC Limited, and Indias first

Super Star Trading House, continues to be the country's leader in mineral

exports for four decades now. During the last decade, MMTC could

withstand the stiff competition in the world market by its continuous and

persistent efforts in diversifying its markets, enlarging its product range,

expanding extensively its infrastructure facilities and expertise in mineral

operations, and by attaching utmost care and importance to its trade

commitments as also the quality of service and products.

MMTC has provided further fillip to value addition to minerals. The 1.1 million ton

Steel Plant consumes about 2 million tons of various types of minerals annually

being supplied by MMTC. The company has also taken an initiative to link import

of capital equipments required for modernizing mining activities in the country to

promote export of minerals. The import of the earthmoving equipments was

linked to export of Iron Ore under EPCG scheme.


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Itemsoftrade

IRON ORE

MANGANESE ORE

CHROME ORE

OTHERS

(Mud Chemicals, Barytes, Bentonite, Bauxite, Talc, Gypsum, Feldspar,

Quartz/Silica Sand, Garnet Sand, Kaolin (China Clay), Vermiculite)

Destination ofexports

MMTC exports Iron ore to Japan, South Korea, China, Middle East etc. The

export is both on the basis of long term and annual spot contracts.

Leaderin mineralexportsMMTC's performance in mineral trade has been acknowledged by the CAPEXIL

(Chemicals and Allied Products Export Promotion Council) by conferring the

nation's highest award for excellence in mineral exports 13th time in succession.

Modeofsales

MMTC's mineral sales are on FOB basis only.


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INDIAN COMMODITY MARKET

India commodity market consists of both the retail and the wholesale market in

the country. The commodity market in India facilitates multi commodity exchange

within and outside the country based on requirements. Commodity trading is one

facility that investors can explore for investing their money. The India Commodity

market has undergone lots of changes due to the changing global economic

scenario; thus throwing up many opportunities in the process. Demand for

commodities both in the domestic and global market is estimated to grow by four

times than the demand currently is by the next five years.

Commodity Trading

Commodity trading is an interesting option for those who wish to diversify from

the traditional options like shares, bonds and portfolios. The Government has

made almost all commodities entitled for futures trading. Three multi commodity

exchanges have been set up in the country to facilitate this for the retail

investors. The four national exchanges in India are:

y Multi Commodity Exchange (MCX)

y National Commodity and Derivatives Exchange (NCDEX)

y Indian Commodity Exchange (ICEX)

y National Multi-Commodity Exchange (NMCE)

Commodity trading in India is still at its early days and thus requires an

aggressive growth plan with innovative ideas. Liberal policies in commodity

trading will definitely boost the commodity trading. The commodities and future

market in the country is regulated by Forward Markets commission (FMC).


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Wholesale Market

The wholesale market in India, an important component of the India commodity

market, traditionally dealt with framers and manufacturers of goods. However, in

the present scenario, their roles have changed to a large extent due to the

enormous growth that the economy has witnessed. The lengthy process of

wholesalers buying from manufacturers; then selling it to retailers who in turn

sold it to consumers does not seem feasible today. An improvement in the

transport facility has made the interaction between the retailer and manufacturer

easier; the need for a wholesale market is gradually diminishing.

Retail Market

The retail market in India is currently witnessing a boom. The growth in the India

commodity market is largely attributed to this boom in the retail market. Policy

reforms and liberal government policies have ensured that this sector is growing

at a good pace. Some of the reasons attributed to the growth of retail sector in

India include the large population of the country who has an increased

purchasing power in their hand. Another factor is the heavy inflow of foreign

direct investment in this sector. More than 80% of the retail industry in the

country is concentrated in large cities.


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India Commodity Market- Global Scenario

Despite having a robust economy, India's share in the global commodity market

is not as big as estimated. Except gold the share in other sectors of the

commodity market is not very significant. India accounts for 3% of the global oil

demands and 2% of global copper demands. In agriculture India's contribution to

international trade volume is rather less compared to the huge production base

available. Various infrastructure development projects that are being undertaken

in India are being seen as a key growth driver in the coming days.

Indian Bullion Market

The bullion reserve of a country is the indicator of the amount of wealth a country

possesses. Bullion is defined as a bulk quantity of precious metals consisting of

gold, silver and others that can be assessed by weight and cast as a lump.

Bullion is valued by its purity and mass rather than its face value which is

applicable in the case of money. India Bullion Market is a recognizable index that

highlights the economic growth of the nation.

Bullion Purchaseand Forex

In 2009, the government of India purchased 200 metric ton of gold from the

International Monetary Fund (IMF) at $6.7 billion. This purchase has propelled

the India Bullion Market to the tenth position among the top global gold holders.

This purchase signals that the economy of the country has come full circle and is

also a way of spreading its assets. The current foreign exchange or forex reserve

of India is nearly $285 billion. The share of foreign currency in the forex is $268.3

billion, followed by gold at $10.3 billion, IMFs special drawing rights accounts for

$5.2 billion while the reserve position in the IMF accounts for $1.59 billion.


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Bullion in India

Trading of gold is known as bullion trading. India is the leading consumer and

importer of gold in the world. Due to this, the potential of the India bullion market

is very promising. Owing to the weak price of Dollar in the global market, the

price of bullion is soaring. The gem and jewelry industry of India is one of the

fastest growing sectors of the economy at an approximate rate of 15%. The India

Bullion market is under the strict supervision of the Government as bullion is one

of the major indicators of the wealth of the country.

India is the largest investor in gold jewelry as a large number of people believe

that investing in gold is beneficial. The domestic consumption of gold depends on

factors like the wedding season, festive season, the performance of the harvest

and the monsoon of the country.

Country Bullion (in tons)

United States 8133.5

France 2445.1

Germany 3408.5

Italy 2451.8

Netherlands 612.5

Switzerland 1041.5

ECB 501.4

India 557.7

Russia 568.4

Japan 765.2

China 1054.0


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Indian Bullion Market Association

IBMA or the Indian Bullion Market Association is a national level body that

represents the Indian Bullion Trade and Industry. This body is an association of

all leading bullion dealers and jewelry merchants who have tied up with the

National Spot Exchange Limited. The idea of this association is to promote a

professional organizational dedication towards the development and growth of

the bullion industry in India.

Problemsofthe Bullion Industry

There are a number of restrictions imposed on the import and export of gold as

compared to any other commodities. The bullion market of the country is very

fragmented and unorganized. The price of bullion varies very much in different

parts of the country. The main reason for this is the lack of a benchmark that is

valid throughout the country.


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ASSIGNMENT NO. 1

COMMODITY PROFILE - GOLD

Gold is primarily a monetary asset and partly a commodity. Gold is the world's

oldest international currency. It is an important element of global monetary

reserves. Central banks, and official international institutions, have been major

holders of gold for more than 100 years and are expected to retain large stocksin future.

Gold has maintained its purchasing power throughout its 5,000-year track record,

as the worlds only monetary metal. It is considered as a commodity as it can be

acquired and stored in the form of Jewellery, Bars, Coins and Gold Deposits. It is

also called precious metal, which means it does not rust (oxidise) at normal

conditions. It is resistant against many acids and a good electric conductor,

which makes it useful for electronic circuits. It is useful for jewelry because of its

inertness.

Importanceand Uses

Gold has mainly three types of uses: Jewellery Demand, Investment Demand

and Industrial uses.

Jewellery Demand- Jewellery consistently accounts for around three-quarters of

golddemand. In terms of retail value, the USA is the largest market for gold

jewellery, whereas India is the largest consumer in volume terms, accounting for

25% of demand in 2007.


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Investment demand- Investment demand in gold has increased considerably in

recent years. Since 2003, investment has representing the strongest source of

growth in demand, with an increase in value terms to the end of 2007 of around280%.

The value of gold is a result of its rareness and also of its interesting physical

characteristics.

Pure gold is too soft for ordinary use and is typically hardened by alloying with

copper or other base metals. The gold content of gold alloys is measured in

carats (k), pure gold being designated as 24k.

Gold market is highly liquid and gold held by Central Banks, other major

institutions and retail jewellers keep coming back to the market.

Due to large stocks of gold as against its demand, it is argued that the core driver

of the real price of gold is stock equilibrium rather than flow equilibrium.

It is effective portfolio diversifier, which summarizes the usefulness of gold in

terms of modern portfolio management.

Gold is effective diversifier during economic stress periods or instability.

Over 60 countries including South Africa, US, Australia and Russia mine gold.

Although gold mining industry is enjoying higher prices in recent years, theysuffer because of higher input costs. Global mining output is also declining as

quality and easily accessible ore has been mined at most of producing countries.


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INTERNATIONAL SCENARIO

South Africa, the United States and Australia are the three largest gold producing

countries. Other major producers are Canada, China, Indonesia, and Russia. But if we

measure only the current years production, China has become the worlds largest

producer of gold, overtaking South Africas top position in 2007.

As gold has been considered as a proxy currency, its reserves are held by

Governments i.e., Central Banks/ institutions of various countries. The survey carriedout in 2005 revealed that US, Germany, France, Italy, Switzerland, Netherlands, Japan,

Portugal, Spain and China were the countries where official gold holdings stood over

500 tons.

World Gold Demand & Supply

Table 1: Gold Supplyand Demand Balance (in tonnes)

Year

Mine

Production TotalsupplyTotal demand

2006 2486 3574 3409

2007 2473 3488 3526

2008 2407 3468 3659

Source: GFMS


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Global demand ruling higher compared with supply (including mine output and old

gold scrap) in recent years and as a result the market has witnessed price

escalation. According to World Gold Council, gold mine production has declined to2407 tons in 2008 compared with 2486 and 2473 tons in 2006 and 2007

respectively. The total gold supply including old gold scrap has been declining and

stood at 3468 tonnes in 2008 as compared to previous years gold supply of 3488

tonnes.

World Gold Supply

Mineproduction

Gold is produced from mines on every continent except Antarctica, where mining is

forbidden. According to data of year 2007, there are around 400 operating gold mines

worldwide. Depending on the geologic situation, the mining is very different. However,

the overall level of global mine production is relatively stable, averaging approximately

2,525 tonnes per year over the last five years.

The most important gold producer of the world is South Africa. The mines in South

Africa can provide several superlatives. The Kruger Rand gold coins are world

famous.

y The East Rand Mine is the world's deepest mine, 3585 m below surface.

y The Free Gold Mine was the world's most productive gold mine with the

output of 115 tons per year.

y Driefontein Consolidated Mine has produced more gold than any other gold

mine, about 2292 tons.


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y Deepest single-drop mining shaft in the world has been sunk at South Deep

Gold Mine.

Scrap

However, although gold mine production is relatively inelastic, recycled gold (or scrap)

ensures there is easily traded supply when needed, and this helps to stabilise the gold

price. Between 2003 and 2007, recycled gold contributed an average 26% to annual

supply flows.

Central BanksCentral banks and supranational organisations (such as the International Monetary

Fund) currently hold gold as reserve assets amounting to around 29,000 tonnes,

dispersed across 110 organisations. On average, governments hold around 10% of

their official reserves as gold. However, the proportion varies country-by-country.

Although a number of central banks have increased their gold reserves in the past

decade, the sector as a whole has been a net seller since 1989, contributing an average

of 520 tonnes to annual supply flows in 2003-2007. Net central bank sales amounted to

just 486 tonnes in 2007 and it decreased to 279 tonnes in 2008. China, United States,

South Africa and Australia were the major producers of gold in 2008. These countries

contributed over 40% of the total global mine production.


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World Gold Demand

Demand for gold is widely spread around the world. East Asia, the Indian sub-continent

and the Middle East accounted for 72% of world demand in 2007. 55% of demand is

attributable to just five countries - India, Italy, Turkey, USA and China. Gold demand

mainly comes from Jewellery consumption, Industrial and investment uses.

Jewellery Demand

Jewellery consistently accounts for around three-quarters of gold demand. In the

12 months to December 2007, this amounted to US$54 billion, making jewellery one of

the world's largest categories of consumer goods. In terms of retail value, the USA isthe largest market for gold jewellery, whereas India is the largest consumer in volume

terms, accounting for 25% of demand in 2007.

Investment Demand

Investment demand in gold has increased considerably in recent years. Since 2003,

investment has representing the strongest source of growth in demand, with an

increase in value terms to the end of 2007 of around 280%. Investment attracted net

inflows of approximately $15bn in 2007.

Industrial Demand

Industrial and dental uses account for around 13% of gold demand (an annual average

of over 425 tonnes from 2003 to 2007 inclusive).

East Asia, the Indian sub-continent and the Middle East accounted for 72% of world

demand in 2007. 55% of demand is attributable to just five countries - India, Italy,Turkey, USA and China. India is the worlds largest gold consumer, followed by China.

Demand for gold, including jewellery, industrial, and investment demand has broadened

in recent years. In China, which has overtaken the US as the second largest retail


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market, jewellery demand ruled strong in 2007. In 2007, the total demand has

overtaken the total supply.

World Gold Markets

London: London Bullion Market Association (LBMA). It is worlds biggest market major

clearing house of gold.

New York: New York Mercantile Exchange Commex Division (NYMEX) begins

trading on 31st December 1974. It is mainly considered as home ofFuturestrading.

Zurich: It is also one of the major spot and future market in Europe mainly known as a

Physical Turntable.

Istanbul: Istanbul Gold Exchange begins trading on 26th July 1995. Major gold spot and

futures market are in Turkey and Middle East.

Dubai: Dubai Gold & Commodities Exchange (DGCX) begins trading in June 2005.

Major spot gold market for Saudi and gulf countries. It is also one of the famous

jewelers market.

Singapore: It is doorway to South East Asian consuming countries major spot and future

market.

Hong Kong: It is doorway to China, now one of the major gold consuming country in the

world.

Tokyo: Tokyo Commodities Exchange (TOCOM) begins trading on 23rd March 1982,

major spot and future market in Japan.


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Shanghai: began trading on 26th July 1995. It is one of the major future centers in

China.

Turkey has become an important net exporter. Vietnam, usually a large buyer; and

Thailand are also exporting gold now.


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DOMESTIC SCENARIO

India is arguably the largest bullion market in the world. It has been until now, the

undisputed single-largest Gold bullion consumer, with its own final demand outweighing

the next largest market China by almost 57 percent. But it seems now, that the

Chinese Gold buyers have caught up during 2008 as Chinese demand is surging rapidly

(up by 15 percent year-on-year). Indian demand fell as Indian Gold sales collapsed by

about 65 percent in the year 2008. In spite of being the largest consumer of gold, India

plays no major role globally in influencing this precious metal's pricing, output or quality

issues.

Indias total gold holdings are between 10,000 tonnes and 15,000 tonnes of which the

Reserve Bank of India has only around 400 tonnes. India has the largest number of gold

Jewellery shops in the world.

Production ofgold in India

y Gold holdings in India are estimated to be in the range of 10000-13000 tonnes

and are predominantly private.

y Indias gold consumption is 25% of worlds total gold production.

y India has a very limited gold production of around 9 tonnes in 2002The domestic

production of the gold is very limited which is around 9 tonnes in 2002 including

2.940 tonnes from mines and 6.203 tonnes from Birla Copper

y More than 60% of Indian consumption is met through imports

y The availability of recycled Gold is price sensitive and the fabricated old Goldscraps is price elastic and was estimated to be near 450 tonnes in 2002 rose

almost more than 40%.


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Gold Production in India

Table 3:Production in recentyears (in tons):

State 2005-06 2006-07 2007-08*

Karnataka 2.846 2.334 2.831

Jharkhand 0.201 0.154 0.027

Gujarat (by-product) 6.710 10.335 9.135

Total 9.757 12.823 11.993

* p- provisional

As given in the above table, gold production in India is ruling lower in recent years.Karnataka was the leading producer of this precious metal with the output ranging from

2 to 3 tons per annum during 2005-06 and 2007-08. Jharkhand also produces small

quantity of gold.


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Gold Demand in India

Gold, the ultimate safe haven in troubled times, remained the hot commodity throughout

the year. It scaled new heights in the global markets and in India, which is the largest

buyer of the metal.

Table 4: Gold Demand in Indiavs World (Tonnes)

Year India World

% Shareof

World Demand

2004 617.7 2961.5 20.86

2005 721.6 3091.9 23.34

2006 721.9 2681.9 26.92

2007 769.2 2810.9 27.36

2008p 660.2 2906.8 22.71

Source: GFMS * provisional

Indian demand for Gold accounts for on an avg. 25% share of world gold demand. In

2008, demand for gold has decreased in India because of high price amid global

financial crisis.

Gold Importsin India

India imports around 500-800 tonnes of gold on an average every year. In 2008, Indias

gold imports dipped by 45 per cent to touch 450 tons. However, buying of gold

Jewellery has fallen sharply in January, February & March month of the year 2009,

leading to a slump in the yellow metals imports.


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Gold Prices

There are many factors, which affect the gold prices in domestic as well as international

market. However, it is highly correlated with the US dollar, the world's main trading

currency. Gold has long been regarded by investors as a good protection against

depreciation in a currency's value, both internally (i.e. against inflation) and externally

(against other currencies). Gold is widely considered to be a particularly effective hedge

against fluctuations in the US dollar, the world's main trading currency.

The gold price has been found to be negatively correlated with the US dollar and this

relationship appeared to be consistent over time. It is a consistently good protectionagainst the economic instability and the exchange rate fluctuations.

Gold prices are skyrocketing over the years both in the national and international

markets. However, the price increase in the national market was significant during the

current year as average price (till end of Aug 09) ruled at about Rs.14600 per 10 grams

compared with the annual average of Rs.12,670 per 10 grams in 2008. With this, the

market has witnessed price appreciation of about 15% compared with merely 5%

international market for the same period, which could be mainly linked to the currency

factor.

Factorsinfluencing Gold Prices

y World macro economic factors including US Dollar, interest rate and so on

y Global gold mine production

y Demand by Central banks

y Domestic demand, which is linked to agricultural prosperity and


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Festivals/marriages etc

y Producer / miner hedging interest

y Comparative returns on stock markets

y US dollar movement against other currencies

y Indian rupee movement against the US dollar

y Geopolitical tensions

y Global economic situation


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LEARNINGS

After having a deep insight about gold as an investment in India as well as international

markets, I came to following conclusion:

1) Gold is an important commodity for every nation as it is mandatory by the world

gold council to maintain certain amount of gold reserves as the nations wealth.

2) Also gold is a commodity that is appreciating tremendously in the past few years,

hence investing in gold is profitable as it acts as a hedge over the fluctuating

currency.3) Another important learning is that in whole of the history this is for the first time

that U.S. dollar and gold is appreciating simultaneously. The reason behind this

is the European economic collapse.

4) Also interest rates and exchange rates fixed by RBI play a very important role in

shooting up of the gold prices. If the interest rates and exchange rates are high

then more number of people will invest in gold and gold products and vice-versa.

5) Another important factor that is important for the rise in demand of gold is the

prosperity of agricultural sector in India. Since government of India is

continuously concentrating on the agricultural sector of India hence demand of

gold has been increasing day by day in India helping the nation to become leader

in consumption of gold around the globe.


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PEST ANALYSIS OF GOLD

AS A COMMODITY IN INDIAN MARKETS

Political

Changinggovernments

change in RBI

policies Trading policies

Wars and conflict

Economical

economic stability

interest rates andexchange rates

inflation

Social

lifestyle

demographies consumer attitude

and opinion

Technological

better innovation -

online trading transparency - price

feeds


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SWOT ANALYSIS

Strengths:

y Well established Brand Name

y Pan India reach through established equity terminals

y First Public Private commodity exchange

y Efficient delivery mechanism through accredited warehouses

y Collaboration with BBA biggest bullion association

Weakness:

y Late arrival in the market

y Staff not well trained

y Spread is not narrow

y No proper marketing strategies

Opportunities:

y Vast potential in market

y More product in product portfolio

y

In future players like mutual funds can invest in commodity market

y In future they can be their own clearing house


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Threats:

y Big Players like MCX and NCDEX are major threat

y Macro environment factor

y Upcoming exchanges are another threat to the security of ICEX.


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ThreatofNew Entrants

This is one of the fundamental force which describes the behavior of the players in this

commodity industry. There are many features which describes the threat to new

entrants in this industry.

Any customer of an exchange has faith and trust upon the exchange and transparency

is also important. Therefore any new exchange has to build up its name in the industry

to attract the customers.

Threatofsubstitutes

There are some substitutes to commodity exchanges in the form of stock market and

mutual funds and other form of investments. The relative price is among different

exchanges also matters as the customer pays a certain percentage of every transaction

to the exchange. Therefore as MCX charges Rs. 7 per transaction ICEX charges only

Rs. 1 per transaction.

Bargainingpowerofsuppliers

The suppliers of exchanges are the vault owners, security agencies and various

information agencies and clearing houses.

The number of suppliers of exchange is limited and have specialized skills and work

which is indispensable. Therefore they have some bargaining power against the

exchange which goes in their benefit.

Bargainingpowerofbuyers

The bargaining power of buyers i.e. the traders or members is also very important in this

case.

The products or commodity contracts are standardized as per FMC guidelines.

Therefore there is no customization as per the exchange memberships are concerned.


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This works in favour of the exchanges and thus the customers dont have much

bargaining power.

Intensityofrivalry

The intensity of rivalry or competition is also important as the strategies and tactics of

the exchanges are also based on this. The market has five major national players

MCX, NCDEX, NMCE and ICEX. Therefore it has an oligopolistic framework.


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RECOMMENDATIONS

After a long journey with ICEX certain recommendations that can help them generate

some business are as follows:-

y They can betheirown clearinghouse: - Since ICEX has a tie up with

GLOBE they are not able to generate more business from their customers and

also they cant give their customers a benefit over clearing and settlement.

Hence they can have their in-house clearing house.

y They can add moreproductsin portfolio:- The product portfolio of

ICEX is very small and is focused mainly on gold. Hence the customer base of

ICEX is very small. So they should try to increase their products.

y Morefocused marketingstrategies: - ICEX can work upon its marketing

strategies to increase the customer base and increase volumes over trade. Their

marketing strategies can include:

Free memberships

Large discounts on trading on special days.

Privileges to customers who trade on ICEX over a specific amount of

volumes.

y Add moreassociationslike BBA totheircliental: - Since there is

only one association in their cliental that is generating business for ICEX so it

should try to capture more of such organizations that can help it generate more

business. One such step was the MARCOMM PROJECT initiated by ICEX to

generate awareness about ICEX and commodity trading in other jewellery

associations in Mumbai.

y Propertrainingtostafftohandlefinancial queriesshould be

given: - More staff training is necessary for improving efficiency of the

business. Generally the sales people are not


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completely aware about the terms and conditions of the business and so theycreate a wrong impression about the company in the minds of consumers.


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ASSIGNMENT NO.2

MARCOM PROJECT

UNDER THE GUIDANCE OF

MR. DHARMESH PANDYA

COUNTRY HEAD

ICEX

OBJECTIVE: To spread awareness about ICEX to increase customer base and volumes of

trade.

METHODOLOGY: The project was initiated by the Business Development team of Indian

Commodity Exchange under the leadership of Mr. Dharmesh Pandya (Business Head, ICEX).

The methodology of the project was: -

1) Target various jewelers associations in Mumbai which do not trade in commodity

markets.

2) Then visiting those associations and find out who the president of the association is.

3) Fixing meeting with the president and telling them what the agenda of the meeting is.

4) Discussing the benefits of the commodity trading with the president.

5) Asking the president to conduct a small event in which the members of the association

and the people from ICEX would sit together and discuss the various issues about ICEX

and how they can make full use of ICEX to spread the awareness about ICEX and the

benefits of commodity trading.

6) Finalizing the various details about the event like location, budget, number of the

members who will be a part of the event.


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Thevariousassociationsthatwere captured were:-

BOMBAY BULLION ASSOCIATION: This association was established in 1948. The

association consists of three departments viz. The office deptt, the refinery department,

the assay department. The office is headed by the chartered accounted as its secretary

and other staff. It maintains the record of gold and silver imported, stocks of bullion

(gold and silver) held in the country. It was conducting forward trading in the past and

has now applied to the central government for permission to conduct futures trading in

gold and silver.

Dire

ctor:

Mr. S

ureshG. H

yund

ia,

M/shyundiaexports, 109, room no. 31, shahilane,

S.M. street, Mumbai-02

Contact no. 9820034132

NAVI MUMBAI JEWELLERS ASSOCIATION: This association wasestablished in 2005. Most of the operations of this associations includes sale of gold

ornaments and not much of the people are interested in any kind of commodity trading.

Mr. Ashok H. Dharmawat who is the president of the association has a very good

relationship with the local political leaders and hence enjoy full rights to take any kind of

decision in the interest of the association.

Nameofthepresident: Ashok H. Dharmawat

No. Ofmembers: 35

Contact details: 9820588357(m); 27663365(o)

Address:f- 7/6, opp. Achrya Shri Tulsi Chowk, Sec 10, Vashi, Navi Mumbai


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MAHARASHTRA JEWELLERS WELFARE ASSOCIATION (VIKROLLI):

this association is in close proximity to the local train station of Ghatkopar. It is almost 6

years old organization which includes sale and purchase of gold ornaments. The office

is headed by Mr. Ganpat Jain who is senior member and is a large exporter.

Nameofthepresident: Mr. Ganpat Jain

No. Ofmembers: 17

Contact details: 9869844453(m), 25783908(o)

Address:Pushpam Jewellers, Shop no. 7, Gorakhnath, Malapalat Chawl, Station

Road, Vikrolli (west), Mumbai

CHEMBUR JEWELLERS ASSOCIATION: This is one of the biggest

associations in Mumbai having almost 117 members. It has very large customer base

having customers from Kurla and other neighborhood places. The main operations is

the same as other associations i.e. sale and purchase of gold ornaments. The eventcould not be handled due to the ill health of Mr. Hemraj Mehta who is the president of

the organization.

Nameofthepresident: Mr. Hemraj Mehta

No. ofmembers: 127

Contact details:022-25214043(o)

Address: Manjushree Jewelers, 4- Ashirwad Building, Opp. Hotel Orchid, N.G

Acharya Marg, Chembur(e), Mumbai- 400071


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GHATKOPAR JEWELLERS ASSOCIATION: Its operations last almost five

years starting in the year 2003. Since it is not a very large association and most of the

families are proper business class so they prefer buying gold from places like Bandra

and Andheri. This is the reason that people in the association are more interested in

commodity trading and that is why a good response came from this association.

Nameofthepresident: Mr. Alok Ashok Doshi

No. Ofthemembers:25

Contact details: 022-25152285

Address:22Prafful Niwas, Agra Road, Ghatkopar(W), Mumbai- 400086

BANDRA AND SION: Most of the jewelers are independent and there are no

associations in this region. However there are certain big players in these locations

(TRIBHUWAN DAS ZAVERI, TATA ENTERPRISE) who dominate the market there

and so any event could not be held in these two locations. However the jewelers whoare trading in commodity are doing their business through RIDHI SIDHI INDEPENDENT

JEWELLERS who are themselves member of ICEX.


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Recommendationsand Leanings

Recommendations:

1) Companyshould tryto covermore numberoflocalitiesto

capture new customers: - In the heat of intense competition, with the largest playerin the business as the main rival, the company should try to capture more number of customers

to increase its customer base. These customers should be from other parts of the city where the

people are not much aware about commodity trading and where the domination of other

players is less.

2) Moreaggressivemarketingstrategiesshould beimplemented: -In spite of charging less fees for its membership company should still try to make attempts to

formalize better strategies in line to make people lure about its membership.

3) Membership could bemadeabsolutelyfree (ifpossible):- Ifmembership process can be made absolutely then it could help them attract more customers.

Since the customers wont have to pay anything for the membership they would avail it and

later on tap those customers to make larger volumes of trades due to its less transaction fee

which is the lowest among all the exchanges.

4) Somebigplayersalreadytradein commodity:- There are certain bigplayers who already trade in commodity with membership under RIDHI SIDHI BULLIONS which isalready a member of ICEX.

Leanings:-

1) Difficultyin makingpeoplebelievethatthereisafuturein

commoditytrading: - Most of the people believe that it is a loss making process toinvest in commodity trading due to its poor past. They believe that it has more to do with

gambling instead of pure application of mind.

2) Peoplearerathermore concerned abouttheirwholesale

business: - Due to shooting gold prices the demand for gold ornaments have decreaseddrastically. Since these jewelers are not very big players they dont have enough capital to invest

in both the things simultaneously.


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ASSIGNMENTNO. 3

WEBSITE COMPARISON

Parameters Mcx Ncdex Nmc Icex Comments

Appearance

Positioning Scattered Appropriate Ideal average

Compact No Yes Yes No

Design Lacklustur

e

Ok Good Ok

center

picture

Dull Good Best good NMCE picture

animated so good

colortheme Dull Ok Ok good ICEX going with

Indiabulls

Charts Stagnant Responsiv

e

Responsiv

e

no chart

Language

options in

other

languages

Yes No No No Hindi and Gujarati

option in MCX

user friendly

language

Yes Yes Yes Yes

Informative

Updates Ok Better Best ok

top gainers

and losers

No Yes No yes

Offers Attractive No Yes no

Parameters MCX NCDEX NMCE ICEX Comments


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membership

details

Attractive Organized Both No phone numbers in

MCX

Feedback Yes Yes Yes No

enquiry

details

No No Yes No

News No Yes Yes No

Quotes No No Yes No NMCE provides

quotes of all

commodities

member

account

No No yes No specific area for

members

trade

calendar

No No yes No

member

calendar

No Yes no No

Partners Yes Yes yes Yes good utilization of

space by NMCE

but not ICEX

knowledge

hub

Yes Yes yes Yes best in NMCE,

ICEX provides user

manual

OTHERS

tradingportal No No yes No live market in

different

languages,

interactive

general

enquiry

No No yes No

searchengine No No yes No



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online

membership

No No yes No


mobilefeeds Yes No yes No

rssfeeds No No yes No

Animations Offers None everything

best

No

LACUNAS scattered

information

lack of

animation

losers and

gainers

space wasted on partners

user

friendly to

a limit

lack of

offers

repetitive tabs

stagnant chart less information

USP mobile

feeds

Charts live market colour

theme

language

option

compact

design

animation picture

rss feeds

testimonials


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CONCLUSION

After comparing the websites of different commodity exchanges the observations are:

1) As far as websites appearance is concerned NMCE and ICEX are far ahead of

other two exchanges.

2) Coming to language options MCX website is available in two most important

languages that is GUJARATI and HINDI in which most of the commodity trading

is done.3) Coming to the information pattern, NMCE has the maximum information available

on its website including price quotes of all the commodities and also the

membership details.

4) NMCE also makes perfect use of space and shows price feeds in different

languages. Also its website has complete user manual.


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RECOMMENDATIONS

The comparison of different websites has led to the following

recommendations:

1) ICEX should come up with different language options so that people

can easily communicate with the website and also the level of

complications reduces to a larger extent.

2) ICEX should also include charts and graphs for different parameters

so that the traders work becomes rather simple.

3) They can also come up with live market price feeds and situations to

make the website more interactive.

4) The company should also attach testimonials of various traders that

are presently trading through ICEX portal which gives a good

impression about the company.


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ASSIGNMENT NO 4

MARKET SURVEY:

A CONSUMER BEHAVIOUR SURVEY

64%

36%

Doyoutradeincommodities?

yes

no

40%

30%

14%

16%

Whichexchange doyoupreferforonlinetrading?

a

b

c

d

Of all the people trading online only 16% people trade through ICEX.

It shows that ICEX has a lot of potential to grow and to increase its customer

base.

However for this ICEX has to implement aggressive marketing strategies like

compensation schemes for traders who trade in larger volumes.

Also setting certain days free for trading on the exchange will help in

increasing the customer base.


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66%

34%

Areyouawareofonlinetradingin commodities?

yes

no

48%

18%

12%

14%

8%

Rankthefollowingfactorswhichinfluenced youtotrade

over ICEX?

a

b

c

d

e

10%

40%36%

14%

If ICEX, then how doyoucometoknowaboutit?

a

b

c

d

The people trading in commodities online have very less knowledge about ICEX.

Also the people who are trading on ICEX has just one thing in favour of it is that it has

very less transaction cost.

For this the company should try to make more attempts to increase its USPs.

They should try to make more attempts to make people aware about their less transaction

cost and other value added services like cheaper memberships and also free set up of its

software.


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46%

54%

Doyoufeeltheinformationprovided by ICEX issufficientfor

tradingand otherbenefits?

yes

no

6%

16%

78%

Was ICEX able to resolve the dispute?

yes

no

n/a

ICEX has not been able toprovide sufficient information to

its customers.

To face this challenge they

should try to make more

advertisements in different media

and try to ake more awareness

campaigns.

Most of the people said that they

are not at all satisfied with their

services since ICEX has not

been able to settle disputes

between their members.

For this ICEX should make more

stringent laws to avoid such

problems in the future.


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46%

26%

0%

28%

Whichexchangeismostaccountablein caseofany

disputebetween theparties?

a

b

c

d

The survey also showed that

MCX is the most accountable

organization in case of any

kind of disputes.

For this ICEX should study

as how MCX handles its

operations if there is any kind

of settlement disputes.

ICEX should also try to

enforce stringent laws to

avoid any kind of Disputes

among the parties.

This will not only help ICEX

to retain its customers but

also to capture new

customers that had someissues with other exchanges.


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BIBLIOGRAPHY:

y

www.ncdex.comy www.icexindia.com

y www.mcxindia.com

y www.fmc.gov.in

y www.bombaybullion.com

y I have also followed gold reports given by ICEX


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Annexure: 1(a)

Questionnaire

NAME___________________ AGE ________

OCCUPATION-____________

Q1:- Do you trade in commodities?

a) Yes

b) No

Q2:- How long have you been trading in commodities?

a) Less than one month b) 1 to 6 months c) 6 months to a year

d) 1 to 3 years e) Over 3 years

Q3:- Are you aware of online trading in commodities?

a) Yes

b) No

Q4:- How long have you been trading online?a) Less than one month b) 1 to 6 months c) 6 months to a year

d) 1 to 3 years e) Over 3 years

Q5:- Which exchange do you prefer for online trading?

a) MCX b) NCDEX c) NMCE d) ICEX

Q6:- If ICEX, then how do you come to know about it?

a) Newspaper

b) Internet

c) Recommended by someone

d) Flier or coupons

e) Others, please specify:


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Q7:- Was the membership process simple or complex?

a) Simple

b) Complex

Q8:- To what extent does the transaction fee plays an important role in selecting ICEX

as the medium of exchange?

a) Very important

b) Important

c) Neutral

d) Not important

e) Least important

Q9:- Rank the following factors which influenced you to trade over ICEX?

a) Price

b) Transparency

c) Accountability

d) Value Added Services

e) Information Availability

Q10:- Do you feel the information provided by ICEX is sufficient for trading and other

benefits?

a) Yes

b) No

Q11:- Overall, how satisfied are you, with services of ICEX?a) Very satisfied

b) Satisfied

c) Neutral

d) Dissatisfied

e) Very dissatisfied


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Q12:- Have you ever been a part of any kind of dispute while trading over ICEX?

a) Yes

b) No

Q13:- Was ICEX able to resolve the dispute?

a) Yes

b) No

Q14:- Which exchange is most accountable in case of any dispute between the parties?

a) MCX b) NCDEX c) NMCE d) ICEX

Q15:- In thinking about your most recent experience with ICEX, how much satisfied are

you with the customer services?

a) Very satisfied

b) Satisfied

c) Neutral

d) Dissatisfied

e) Very dissatisfied

Q16:- What specific/general improvements should be made regarding ICEX and

charges?

Please specify:

..

Documents

REPORT ON ICEX