Summer Internship Preentation on Commoditie Futures

7/30/2019 Summer Internship Preentation on Commoditie Futures

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SUMMER INTERNSHIP PROJECTCOMMODITY FUTURES:AN INVESTORS PERSPECTIVE

Presented by- Under Guidance of Aditya Singh Chandan KumarMBA Finance (3 rd Sem) IIFL, Varanasi


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Company Profile IndiaInfoline founded in 1995 Independent business research and information

provider

Listed on the Bombay Stock Exchange (BSE) and theNational Stock Exchange (NSE). offer a wide range of services and products comprising

broking (retail and institutional equities and

commodities), wealth management, credit and finance,insurance, asset management and investment banking It is registered as a Category I merchant banker and are

a SEBI registered portfolio manager


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Objectives To study the various aspects of commodity

market To understand the stages through which a

commodity deal is done To anticipate the market based on the market

research reports To study the whole process- from application of

d-mat account opening, enclosures required,brokerage charged, allotment of login id and finaltrading commencement


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Introduction

Any product or an article of commerce which is traded on an authorizedcommodity exchange All goods and products of agricultural (including plantation), mineral and

fossil origin allowed for commodity trading recognized by FCRA The national commodity exchanges, recognized by the Central

Government, permits commodities include precious (gold and silver) andnon-ferrous metals, cereals and pulses, ginned and un-ginned cotton,oilseeds, oils and oilcakes, raw jute and jute goods, sugar and jaggery,potatoes and onions, coffee and tea, rubber and spices

Of the country's GDP of Rs 13, 20,730 crore (Rs 13,207.3 billion),

commodities related (and dependent) industries constitute about 58 percent Currently, the various commodities across the country clock an annual

turnover of Rs 1, 40,000 crore (Rs 1,400 billion)


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Futures Market

An agreement betweentwo parties to buy or sellan asset at a certain timein the future at a certainprice

The main standardizeditems in a futures contractare:

Quantity of the underlying Quality of the underlying

The date and the monthof delivery The units of price

quotation and minimumprice change

Delivery center

FUTURES FORWARD

Trade on an organizedexchange

OTC in nature

Standardized contractterms

Customized contract terms

hence more liquid hence less liquid

Requires marginpayments

No margin payment

Follows daily settlement Settlement happens atend of period


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Continued..

A derivative is a product whose value isderived from the value of one or moreunderlying variables or assets in a contractual

manner Underlying asset can be equity, forex,

commodity or any other asset A Commodity Derivative derives its value

from an underlying asset, which is necessarilya commodity


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Estimation Technique for Future PriceFinancial Instruments Futures: There is no cost of carry, but the holding cost is cost of financing (less) Dividend Returns. Therefore the fair

value of Future contract can be defined as under:F = Se (rt) Where,F = Future PriceS = Spot Pricer = Cost of Financing (using continuous compounded interest rate)

t = Time till expiratione = 2.71828Commodities Futures:

In commodities you have to carry till it is sold as there is physical delivery. Here the seller so insures holdingcost which is equal to cost of finance + Storage cost+ Insurance. Fair value of Future contract here isdefined as under:

F = (S + U)e(rt) Where,F = Future PriceS = Spot PriceU = Present Value of Storager = Cost of Financing (using continuous compounded interest rate)t = Time till expiration,e = 2.71828


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Commodity Trading Cycle

TRADING

[both of the partiesagrees to buy or

sell the underlyingasset]

CLEARING[members are

informed of thedeliverable/receiva

ble positions]

SETTLEMENT

[The sellerintending to makedelivery takes the

commodities to thedesignatedwarehouse]


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Risks

OPERATIONAL

MARKET

LIQUIDITY

AVERAGING

SWITCHING

LOCKING

RiskManagement


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Research Methodology

Research Type : Exploratory

Universe : Varanasi (confined to Jewelers Market)

Sampling Technique : Convenience Sampling

Sample Unit : Jewelers & Prospects

Sample Size : 30

Methods of Data Collection: Primary Data QuestionnaireSecondary Data Internal Sources,Brochures, Websites, Leaflet, Pampslet.


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Analysis

38%

62%

Yes No

Column Chart Showing ThePercentage of Respondents who

have Invested In ComodityFuture

Yes No

70%

30%

Yes No

Column Chart Showing ThePercentage of Respondentswho have Invested Other

Securities

Yes No


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27%

50%

20%

3%

Pie chart showing the amount invested incommodity futures

Rs. 2 lakh

Rs. 2-3 lakh

Rs. 3-5 lakh

Above Rs.5lakh0%

20%

40%

60%

80%

Yes No

P e r c e n t a g e

Particular

Column chart showing the percentage of investors who use fundamental/technicalanalysis when giving an order

Yes No

0%

10%

20%

30%40%

50%

60%

Friends Media Self-Research Others

Column chart showing the means throughwhich the investors got to know about

commodity futures

Friends Media Self-Research Others

0%

10%

20%

30%

40%

50%

60%

70%

Good Reasonable Bad

Column chart showing the extent of returnsderived by the investors from commodity

futures

Good Reasonable Bad


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0%

20%

40%

60%

80%

Yes No

Column chart showing opinion of theinvestor of whether commodity futures is a

good investmentopportunity

Yes No

0%

10%

20%

30%

40%

50%

60%

MARKETLIQUIDITYLOT SIZE

PERCENTAGE

PERCENTAGE

0%

20%

40%

60%

Very High High Reasonable Low

Column chart showing theinvestors perception towards the

facility fee charged by theircompany

Very High High Reasonable Low


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Findings There is a little less awareness of commodity

market to investors. Person between ages of 20-40 years are more

active player in the commodity trading and 10-30% of their income are invested in market There has been seen that most of private sector

employees and business person invests incommodity market

It has been seen that Gold, Silver and Copper aremore dealing commodity


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Recommendations

Since commodity futures are a new concept, more awareness mustbe created by marketing this investment instrument appropriately.

If the minimum investment is reduced, this might induce morepeople to invest in commodity future.

As commodity market are growing so one should trade in exchangetraded market rather than the OTC market As commodity market growing so all groups of people must be

asked to invest in commodity futures. One should take better position with the help of fundamental and

technical analysis It is not a necessity that one must be very educated to invest in

commodity futures. So, it is recommended that those who are notsoundly educated also can invest in commodity futures


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Conclusion Investor becomes more careful in investment with considering the

factor like global economy, availability of commodity etc In the trading system people consider above factor for investment

so we can conclude that investor are more moving towards theexchange traded market

The trading system also includes trading and intermediaryparticipants, who ensure the correct price discovery. Thus, thetrading system is one of the factors, which reduce the risk incommodity futures

It can be concluded that one can use commodity futures for the hedging purposes rather than for the speculative

This can be emphasized by the fact that there has been anincreasing trend in the volume traded in most of the commodities.Thus, commodity futures are a growing market


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References www.crnindia.com www.indiamart.com www.ncdex.com www.fmc.gov.in

COMMODITY EXCHANGE WEBSITES http://www.mcxindia.com http://www.icexindia.com http://www.ncdex.com/ http://www.sebi.gov.in/ http://www.fmc.gov.in/ http://www.nseindia.com/ http://www.bseindia.com/

BOOKSKolb, Robert W, Futures, options and swaps,

by LPE PublicationsThomas, Derivative markets in India 2003,

3rd Edition
http://www.crnindia.com/http://www.indiamart.com/http://www.ncdex.com/http://www.fmc.gov.in/http://www.mcxindia.com/http://www.icexindia.com/http://www.ncdex.com/http://www.sebi.gov.in/http://www.fmc.gov.in/http://www.nseindia.com/http://www.worldenergyoutlook.org/http://www.worldenergyoutlook.org/http://www.nseindia.com/http://www.fmc.gov.in/http://www.sebi.gov.in/http://www.ncdex.com/http://www.icexindia.com/http://www.mcxindia.com/http://www.fmc.gov.in/http://www.ncdex.com/http://www.indiamart.com/http://www.crnindia.com/


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THANK YOU

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Summer Internship Preentation on Commoditie Futures