Study of Indian Commodity Market

Ahmedabad Institute of Technology

1

angel COMMODITIES angel COMMODITIES PVT.LTDPVT.LTD..

A ProjectReport

On “Study of Indian Commodity

Market”

04/07/23

ObjectivesObjectivesTo learn about commodity

market and need of it.

To know about investment pattern, participation, perception and awareness of retail investors in commodities through survey.

Ahmedabad Institute of Technology 204/07/23

About Angel BrokingAbout Angel BrokingVision:

To provide best value for money to investors through innovative products, trading/investments strategies, state of the art technology and personalized service.

Activities of company Advice based broking in equities, commodities,

derivatives Research & advisory products in

equities/commodities/derivatives E-Broking services Wealth management services (PMS) Depository services Value added back office services

04/07/23 Ahmedabad Institute of Technology 3

About Angel BrokingAbout Angel Broking 31 Regional Hubs 148 branch offices 6000+Employees Over 7.4 lakhs Customers 6500+RegistareSub-brokeres/Remises/

Authorized Persons 100+Reserch Team Member Highest no of Sub-brokers on NSE & BSE

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Introduction of Introduction of Commodity MarketCommodity Market What is “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.

What is “Commodity market”? Commodity market is a place where trading in

commodities takes place. Markets where raw or primary products are exchanged.


List of Traded CommodityList of Traded CommodityAgricultural Products:- Corn, Oats, Rough

Rice, Jeera. Soybeans, Rapeseed, Soybean Oil, Wheat, Coffee etc

Livestock and Meat:- Lean Hogs, Frozen Pork Bellies, Live Cattle, Feeder Cattle.

Energy:- WTI Crude Oil, Brent Crude, Ethanol, Natural Gas, Heating Oil, Gulf Coast Gasoline etc

Precious Metal:- Gold, Platinum, Palladium, Silver.

Industrial Metals:- Copper, Lead, Zinc, Tin, Aluminum, Aluminums alloy, Nickel, Recycled steel, Iron etc.


India and The Commodity India and The Commodity MarketMarketThe history of organized commodity derivatives in

India goes back to the nineteenth century when Cotton Trade Association started futures trading in 1875

Cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in Bombay (1920).

The parliament passed the Forward Contracts (Regulation) Act, 1952, which regulated contracts in Commodities all over the India.

After Liberalization and Globalization in 1990, the Government set up a committee (1993) to examine the role of futures trading.


Introduction to Introduction to Commodity DerivativesCommodity DerivativesDerivatives are financial contracts,

which derive their value from an underlying asset. E.g. When we say an Infosys future, these will carry a value only because of the value of Infosys

Derivative markets Financial Derivatives Commodity Derivatives

Ahmedabad Institute of Technology 8

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Participants In Commodity Participants In Commodity DerivativesDerivativesHedgers-They face risk associated with

the price of an asset. They use the futures market to reduce or eliminate this risk.

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.


Continued…Continued…


Continued…Continued…Speculators – They are participants

who wish to bet on future movements in the price of an asset.

Arbitragers – They work at making profits by taking advantage of discrepancy between prices of the same product across different markets.


Commodity Exchanges In Commodity Exchanges In IndiaIndia


Commodity Exchanges In Commodity Exchanges In IndiaIndiaNational Level Multi Commodity

Exchanges

1. National Commodity & Derivatives Exchange (NCDEX)

2. Multi Commodity Exchange (MCX)

3. National Multi Commodities Exchange of India Ltd. (NMCEIL)


Research ObjectiveResearch Objective To know about investment pattern,

participation, perception and awareness of retail investors in commodities through survey.

To find out the reasons why people are not trading into commodity markets.

To understand the factors which are affecting to the commodity markets the most?

Which commodities are mainly traded by the people?


Research MethodologyResearch Methodology Type of Research: Descriptive Research

Research Instrument: Questionnaire

Sample Size: 100 samples

Sampling Method: Convenience sampling

Limitations: * Time constraint * Cost of the survey * Bias from the side of interviewee


Data AnalysisData Analysis


1.1. Where are you investing your money?Where are you investing your money?


Analysis:Highest 30% of the people are investing into the share market.

Only 2% of the people are falls into the others options which consists gold.

Investment Option

Value

Bank Deposits(FD) 38NSC/PPF(Govt Sec) 40Mutual Funds 50Insurance Schemes 58Share Market 92Commodities Market 24Others 6

308

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2.2. What are your criteria for investment What are your criteria for investment in share market?in share market?


Analysis:More than 50% of the people are intraday trader and short term investors. So it will be opportunity for the commodity markets to convert them to the commodity trading by proper awareness.

Investment Criteria

Value

Intraday Trading 36Short term investment 50Medium term investment 14Long term investment 46Others 6

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3. Are you aware about the commodity 3. Are you aware about the commodity markets?markets?


Analysis:Nearly 50% of the people are unaware about the commodity markets.So commodity exchanges & brokers have to take some corrective steps to create the awareness into the general public.

Options Value

Yes 56

No 44

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4. From where you are getting the 4. From where you are getting the information about the commodity information about the commodity markets?markets?


Analysis:News channel is the most important source of information about the commodity markets.Here others consisting magazines and some people are knowing because of their business line.

Options Value

News paper 18

News channel 30

Through broker 24

Family/friend 6

Other 16

94

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5. Are you interested into awareness 5. Are you interested into awareness programs (seminars)?programs (seminars)?


Analysis:More than 50% of the people are interested into the awareness programs.

Options Value

Yes 24

No 20

4455%

45%

No of people intrested in awareness programme

Yes

No

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6. Are you trading into the commodity 6. Are you trading into the commodity markets?markets?


Analysis:Only 22% of the people are trading into the commodity markets so there is having a large market share to cover by creating the proper awareness.

Options ValueYes 22No 78

100

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7. Why are you not trading into the 7. Why are you not trading into the commodity market?commodity market?


Analysis:34% of the people are not trading because of lack of understanding.While 31% of the people are not trading because they are not having the time and interest.

Options ValueLack of

understanding 44Lack of guidance

from brokers 12

No Option for 6Warehousing

problem 2

Influence of macroeconomic 2

Big losses 14Big lots(high

margin) 6Other 38

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8. In which commodity you will mainly 8. In which commodity you will mainly trade?trade?


Analysis:More than 50% of the people are trading into the metals like gold/silver & copper.Only 19% of the people are trading into any agriculture commodities which are very much lesser than the metals.So we can say that by creating more awareness to the farmers commodity exchanges can get better turnover into agri commodities.

Commodity Value

Gold/Silver/

Copper

22

Any Agriculture

commodity

8

Crude oil 12

Other 0

42

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9. What is your purpose for trading into 9. What is your purpose for trading into the commodity markets?the commodity markets?


Analysis:45% of the people are just doing speculation into the commodity markets.O% people are taking the delivery of the commodity.

Options Value

Speculation 18

Hedging for

physical goods 8

Investment(Deliv

ery purpose) 0

Arbitrage 6

Other 8

40

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10. Which factors are affecting to the 10. Which factors are affecting to the commodity markets the most?commodity markets the most?


Analysis:34% of the people who are falling within the others criteria are believe that commodity market is just speculation so no factors are affecting to it is completely depend on the operators.Only 2% and 5% of the people are believe crop harvesting and spot prices as important factor for that.27% of people believe demand-supply scenario can be a important factor.

Options ValueMonsoon 16Crop Harvesting 2Political 12Demand-supply scenario 24Spot prices 4Other 30

88

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11. From which broker you will dealing 11. From which broker you will dealing for a commodity trading?for a commodity trading?


Analysis:The charts shows that Angel is having nearly 30% share in total commodity market segment in AhmadabadWhile other consisting Monark Projects, Parko Commodities

Options ValueAngel Broking 7Kotak Commodities 0India Infoline 2India Bulls 0Reliance Money 3Kunwerji Commodities 4Other 6

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12. What are the reasons for dealing 12. What are the reasons for dealing with particular broker?with particular broker?


Analysis:27% people are dealing with particular broker because they provide better research call (Tips)0% of the people needs brand name of their broker..

Options Value

Personalized ser. 8

R M services 4

Less brokerage a 10Better research call (Tips) 12Brand name 0Online Back office services 2Door step services 0Other 8

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13. Do you feel that in last couple of years 13. Do you feel that in last couple of years prices of general commodities have gone up prices of general commodities have gone up due to commodity speculations?due to commodity speculations?


Analysis:86% of the people are believe that price of general commodities have gone up due to commodity speculations.

Options Value

Yes 48

No 8

56

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FindingsFindingsFindings of this Project show that only 8% of the

people are investing money in the commodity market at this stage even though 56% respondents are aware about the commodity market.

Basically news channel is the main source for awareness regarding commodity markets in the respondents.

The main reason for not trading in the commodity market is the lack of understanding and other major reason is that lack of time and interest and also some bad experience in previous investment.


Continued…Continued…Out those who invest in the commodity

market, more than half of them invest in the gold, silver and copper.

When asked to the people regarding the factors affecting commodity market, 34% respondents reply that speculation is the Broker where they deal.

Respondents reply regarding the broker where they deal show that 32% of them deal through angel broking.

Most of the people think that speculation is responsible for increase in the general price levels of the commodities


Recommendations Recommendations Nearly 50% of the population is unaware

about the commodity markets so it is recommended to commodity exchanges that they have to take some serious actions for creating awareness about these markets to the general public.

They can create more and more awareness by arranging seminars targeting general public’s and people who are more risk takers into the share markets.

News channel is also one of the better sources for creating awareness.


Continued…Continued… In our survey nobody take delivery of the

commodities because they are facing the problem of warehousing so commodity exchanges have to take some steps for solving the warehousing problem.

Only 20% of the peoples are hedgers into these markets so exchanges can get better turnover by attracting other people who are dealing such commodities.

Very less no of the people are trading into any agriculture commodities we can say that by creating more awareness to the farmers commodity exchanges can get better turnover into agriculture commodities.


Suggestions to Angel Suggestions to Angel CommoditiesCommodities Arrange seminars for existing equity clients

Aggressive marketing into this segment through the trained executives

Improve research work

Start SMS services

learn certain risk management techniques like arbitrage, hedging to their clients.


ConclusionConclusionAwareness need be increased in the

general public about the commodity market if it is to grow at a faster rate than prevailing.

If speculation is curbed then and then only we can make the general people think positively about commodity market because normal perception about commodity market is that it is “satta” market i.e. speculation market.


Thank YouThank You


Documents

Study of Indian Commodity Market