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A Project Report On Training undertaken at

Titled A Profile of Commodity Dealers with special reference to Cotton in Sri Ganganagar Submitted in partial fulfillment for the Award of Degree of Master of Business Administration

Submitted By: Pradeep Panecha MBA III SEM.

Submitted To:Miss Sandhya Taneja (Assistant Professor)


Beginning of the system project is entirely creative. This does not come all of a sudden, but it comes by result of discussion, consultation and contemplation. Problem unsolved here can never be satisfactory later. It is therefore a slow process. Moreover practical training is an important part of management courses. The theoretical studies are not sufficient to get into the corporate world. Only practical knowledge can help us to understand the complexities of large scale organizations. To develop healthy managerial and administration skill in potential managers, it is necessary that theoretical knowledge must be supplemented with exposure to the real environment. Actually, it is life for, a management itself is realized. In my case I confronted myself to MCX. And the exposure that I could not gained from the books. I found it very interesting and challenging. I did my training at SRI GANGANAGAR and my topic of project is A Profile of Commodity Dealers with special reference to Cotton in Sri Ganganagar.

Summer Internship is indeed an important aspect of MBA program and it is my great privilege to have this internship at an esteemed organization, MCX Ltd. The organization has provided me the opportunity to complete my Summer Internship in the best possible manner. Words are inadequate to express my gratitude to MCX for giving me an opportunity to practical training in their company and extend me full cooperation, enabling me to successfully complete this project report. I would like to extend my heartfelt gratitude to Miss Sandhya Taneja, my internal guide for valuable suggestion and encouragement during my project. I am grateful to Mr. Ravikant Khatri, MCX for his cooperation extended to me my by providing necessary information and timely help. I would like to thank entire Ganpati Multi Commodity team for supporting and helping me during my Summer Internship with a positive approach.

Pradeep Panecha

Need for Study:The study aims to understand the major factors influencing the behavior of commodity traders and analysis of the prospective traders for MCX commodity market. This study will give insights to the marketer that would help that would help to understand the traders segment and increase the trading pattern and general satisfaction level of this target group.

Scope of project:This project gives me great exposure to the commodity market because it includes product knowledge and the field job in which I have visited the commodity trading store comes under the region of Bikaner. During this project I also took part in exhibition of MCX which held for the purpose branding and awareness of MCX product. This project helps me to know the market practically .in my project I find that how do they trading with MCX and how to achieve profit.

My job includes while visiting the shops:Calculate the position of MCX agri. Items in every trading shop which comes under Bikaner region. Collect the data of traders that how much traders are interested in trading of AGRI. (guar gum, guar seed) item with MCX. Find out the problems that the traders are facing in Owen trading. Find out the traders response for MCX agri. Item trading.

The objective of my research is to explore commodity market, MCX, agri. product-Cotton and investment in Commodity Market. The data is collected with the help of primary as well as secondary data. I have done survey of 130 dealers through questionnaire to know their knowledge about Commodity and to find out their opinion about investment in Cotton at MCX. I have found during my survey that people are not ready to do invest in commodity market because either they dont have much knowledge about commodity market, some of them not even ready to take risk. I have found during my survey that most of people invest in Cotton in MCX due to presence of delivery center of Cotton in Sri Ganganagar. Through my questionnaire survey I found that people are interested in investing in commodity market and most of them want good return while investing in commodity. It is a self decision or friends decision to do investment in commodity market.

Certificate from the Company Certificate from the Institute Preface Acknowledgement Need for Study Executive Summary

S. No. Chapters 1 2 3 4 5 6 7 8 9 10 Introduction to Commodity Market Introduction to MCX Project Profile Research Methodology Analysis and Interpretation Facts and Findings Limitation of the study Conclusion Bibliography Annexure

Page No. 07 31 38 41 46 56 58 59 60 61


What we know as the Commodity Market of today from some humble beginnings. Trading in future originated in Japan during the 18th century and was primarily used for the trading of rice and silk. It wasnt until the 1850s that U.S. started using futures markets to buy and sell commodities such as cotton, corn and wheat.

Definition of a 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. Forward Contracts (Regulation) Act (FCRA), 1952 define goods as every kinds 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 nation commodity exchanges, recognized by the Central Government, permits commodities which include precious (gold and silver) and non-ferrous metals; cereals and pulses; ginned and unginned cotton; oilseeds, oils and oilcakes; raw jute and jute goods; sugar and gur; potatoes and onions; coffee and tea; rubber and spices etc

Different dictionary defines Commodity as under:Any item that can be bought and sold, taken to refer to Exchange- traded items including sugar, wheat, soya beans, coffee and tin. That which affords convenience, advantages, or profit, especially in commerce, including everything movable that is bought and sold (except animals), goods, wares, merchandise, produce of land and manufactures etc. In other words of business, a commodity is an undifferentiated product whose market value arises from the owners right to sell rather than to use. Example commodities from the financial world include oil (sold by the barrel), wheat and bulk chemicals such as sulphuric acid and even pork-bellies.

A Brief History of Commodities:Before the North American futures market originated some 150 years ago, farmers would grow their crops and then bring them to market in the hope of selling their commodity of inventory. But without any indication of demand, supply often exceeded what was needed and unpurchased crops were left to rot in the streets. Conversely, when a given commodity such as soybeans was out of season, the goods made from it became very expensive because the crop was no longer available, lack of supply. In the mid-19th century, grain markets were established and a central market palace was created for farmers to bring their commodities and sell them either for immediate delivery (spot trading) or for forward delivery. The latter contracts, forwards contracts were the fore-runners to todays futures contracts. In fact, this concept saved many farmers from the loss of crops and helped stabilize supply and prices in the off-season. Todays commodity market is a global marketplace not only for agriculture product, but also currencies and financial instruments such as Treasury Bonds and securities futures. Its a diverse marketplace of farmers, exporters, importers, manufactures and speculators. Modern technology has transformed commodities into a Global Marketplace where a Kansas Farmer can match a bid from a buyer in Europe.

Future contract & derivative

Future Contract:A commodity future contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at a later date. If you buy a commodity contract, you are basically agreeing to buy something, for a set of price that a seller has not yet produced. But participating in the commodity market does not necessarily mean that you will be responsible for receiving or

delivering large inventories of physical commodities, remember, buyers and sellers in the future market primarily enter into futures contracts to hedge risk or speculate rather than delivery (which is the primary activity of the cash/spot market). That is why commodities are used as financial instruments by not only producers and consumers but also speculators. The consensus in the investment world is that the commodities market is a measure financial hub, more importantly, providing a centre to manage price risk. The commodity market is extremely liquid, risky, and complex by nature, but it can be understood if we break down how it function. While commodities are not for the risk-averse, they are useful for a wide range of people.

Advantage of future contracts: If price moves are favorable, the producer realizes the greatest return with this marketing alternative. No premium charge is associated with futures market contracts.

Disadvantages of future contracts: Subject to margin calls Unable to take advantage of favorable price moves Net price is subject to basis change Future contracts are similar to options. Both represent actions that occur in future. But options are contract on the underlying futures contract where future is either to accept or deliver the actual physical commodity. To make a decision between using a future contract or an option contract, producers need to evaluate both alternatives.

Derivatives:commodities whose value is derived from the price of some underlying assets like securities, commodities, bullion, currency, interest level, stock market index or anything else are known as Derivatives. In simpler form, derivatives are financial security such as option or future whose value is derived in part from the value and characteristics of another security, the underlying

assets. It is a generic term for a variety of financial instruments. Essentially, this means you buy a promise to convey ownership of the asset, rather than asset itself. The legal term of a contract is much more varied and flexible than the term of property ownership. In fact, its this flexibility that appeals to investors. When a person invests in derivative, the underlying asset is usually a commodity, bond, stock, or currency. He bet that the value derived from the underlying asset will increase or decrease by a certain amount within a certain fixed period of time. Futures and option are two commodity traded types of derivatives. An option contract gives the owner the right to buy or sell an asset at a set price on or before a given date. On the other hand, the owner of a futures contract is obligated to buy or sell asset. The other example of derivatives is warrants and convertible bonds (similar to shares in that they are assets). But derivatives are usually contracts. Beyond this, the derivatives range is only limited by the imagination of investment bank. It is likely that any person who has funds invested an insurance policy or a pension fund that they are investing in, and exposed to, derivatives- wittingly or unwittingly. Shares or bonds are financial assets where one can claim on another person or corporation; they will be usually being fairly standardized and governed by the property of securities laws in an appropriate country. On the other hand, a contract is merely an agreement between two parties; where the contract detail may not be standardized. Derivatives securities or derivative products are in real term contracts rather than solid as it fairly sounds.


Introduction:The Indian economy is witnessing a mini revolution in commodity derivatives and risk management. Commodity options trading and cash settlement of commodity futures had been


banned since 1952 and until 2002 commodity derivatives market was virtually non-existent, except some negligible activity on an OTC basis. Now in September 2005, the country has 3 national level electronic exchange and 21 regional exchanges for trading commodity derivatives. As many as eighty (80) commodities have been allowed for derivatives trading. The value of trading has been booming and is likely to cross the$ 1 Trillion mark in 2006 and, if all goes well, seems to be set to touch $5 Trillion in a few years.

History:The history of organized commodity derivatives in India goes back to the nineteenth century when the Cotton Trade Association started futures trading in 1875, barely about a decade after the commodity derivatives started in Chicago. Over time the derivatives market developed in several other commodities in India. Following cotton, derivatives trading started in oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), wheat in Hapur (1913) and in Bullion in Bombay (1920). However, many feared that derivatives fuelled unnecessary speculation in essential commodities, and where detrimental to the healthy functioning of the markets for the underlying commodities, hence to the farmers. With a view to restricting speculative activity in cotton market, the government of Bombay prohibited option business in cotton in 1939. Later in 1943, forward trading was prohibited in oilseeds and some other commodities including food-grains, spices, vegetable oils, sugar and cloth. After independence, the Parliament passed Forward Contracts (Regulation) act, 1952 which regulated forward

contracts in commodities all over India. The Act applies to goods, which are defined as any moveable property other than security, currency and actionable claims. The Act prohibited option trading in goods along with cash settlements of forward trades, rendering a crushing

blow to the commodity derivative market. Under the Act, only those associations/exchanges, which are granted recognition by the government, are allowed to organize forward trading in regulated commodities. The Act envisages three-tier regulation: 1. The Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; 2. The Forward Market Commission provide regulatory oversight under the powers delegated to it by the central government, and


3. The Central Government-Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distribution is the ultimate regulatory authority. The already shaken commodity derivatives market got a crushing blow when in 1960s, following several years of severe draughts that forced many farmers to default on forward contracts (and even caused some suicides), forward trading was banned in many commodities considered primary or essential. As a result, commodities derivatives markets dismantled and undergrounds where to some extent they continued as OTC contracts at negligible volumes. Much later, in 1970s and 1980s the Government relaxed forward trading rules for some commodities, but the market could never regain the lost volumes.

Structure of Indian Commodity Market:-

Change in Government Policy:After the Indian economy embarked upon the process of liberalization and globalization in 1990s, the Government set up a Committee in 1993 to examine the role of futures trading. The Committee (headed by prof .K.N. Kabra) recommended allowing futures trading in 17 commodity groups. It also recommended strengthening of the Forward Markets Commission,


and certain amendments to Forward Contracts (regulation) Act 1952, particularly allowing option trading in goods and registration of broker s with Forward Markets Commission. The Government accepted most of these recommendations futures trading was permitted in all

recommended commodities. Commodity futures trading in India remained in a state of hibernation for nearly four decades, mainly due to doubts about the benefits of derivatives. Finally a realization that derivatives do perform a role in risk management led the government to change its stance. The policy

changes favoring commodity derivatives were also facilitated by the enhance role assigned to free market forces under the new liberalization policy of the government. Indeed , it was a timely decision too, since internationally the commodity cycle is on the upswing and the next decade is being touted as the decade of commodities.

Why are commodity Derivatives Required?

India is among the top-5 producers of most of the commodities, in addition to being a major consumer of bullion and energy products. Agriculture contribution about 22% to the GDP of the Indian economy. It employees around 57% of the labor force on a total of 163million hectares of land. Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major center for trading of commodity derivatives. It is unfortunate that the policies of FMC during the most of 1950s to 1980s suppressed the vary markets it was supposed to encourage and nature to grow with times. It was a mistake other emerging economies of the world would want to avoid. However, it is not in India alone that derivatives were suspected of creating too much speculation that would be to the detriment of the healthy growth of the market and the farmers. Such suspicions might normally arise due to misunderstanding of the characteristics and role of derivative product. It is important to understand why commodity derivatives are required and the role they can play in risk management. it is common knowledge that prices of commodities, metals, shares and currencies fluctuate over time. The possibility of adverse price changes in future creates risk for businesses. Derivatives are used to reduce or eliminate price risk arising from unforeseen price changes. A derivative is a financial contract whose price depends on, or is derived from, the price of another asset.



Agriculture sector in India has always been a major field of government intervention since long back. Government tries to protect the interest of the poor Indian farmers by procuring crops at remunerative prices directly from the farmers without involving middleman in between. This way government maintains sufficient buffer stock and at the same time provides the farmers safeguard against the fluctuating food crop prices. But government at the same time has restricted this traditional sector by fixing prices of crops at a particular level and also by imposing several other restrictions on export and import of agriculture commodities. All these restrictions prevented this sector to move its traditional features. So according to many economists liberalization of this traditional sector could have been of great benefit to our economy. But question will naturally come up about the maintenance of buffer stock and provision of remunerative price to the farmers. In absence of governments intervention farmers will not be getting any prior information about the future market of their products. Naturally a sudden price crash of food crops will have devastating effects on farmers. Here comes the significant role of futures market. If the buyers in the commodity market anticipate shortage of a particular crop in the coming season, future price of that crop will increase now and this will act as a signal to the farmers who will accordingly plan their seeding decisions for the next season. In the same way, an increase in future demand of food crops will be reflected in the todays price in futures market. In this way the system of futures market can be of great help to the Indian farmers preventing them from being directly exposed to the unexpected price changes all of a sudden. It also helps towards evolving a better cropping pattern in our country. If the peasants are farming some crop now and are very much concerned that price will crash by the time the crop comes in, then if there is futures market, they will have the option to sell their products in it. Price in the future markets being fixed ; by selling products in future markets they get rid of their worries about the unexpected price fall this helps them to take the risk of innovations, by using new high yielding varieties of seeds , fertilizers and new techniques of cultivation. Futures market will act as a smoothing agent between the present and future commodity market. If the price, which is going to prevail in future, is high compared to what it is now, then the arbitragers would like to buy the commodities now to sell those in future. The


reverse process is also true. So the existence of a futures market is always good for any economy. It opens up a new opportunity to people to protect them from unexpected risk

Commodity exchanges
A brief description of commodity exchanges is those which trade in particular commodities, neglecting the trade of securities, stock index futures and options etc. In the middle of 9th century in the United States, businessmen began organizing market forums to make the buying and selling of commodities easier. These central marketplaces provided a place for buyers and sellers to meet, set quality and quantity standards and establish rules of business. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodities can be trade. In 1872, a group of Manhattan dairy merchants got together to bring chaotic condition in New York market to a system in terms of storage, pricing and transfer of agricultural products. In 1933, during the Great Depression, the Commodities Exchange, Inc. was established in New York through the merger of four small exchanges- the National Metal Exchange of New York, the National Raw Skill Exchange and the New York Hide Exchange. The major commodities market is in the United Kingdom and in the USA. In India there are 25 recognized future exchanges, of which there are national level multi-commodities exchanges. After a gap of almost three decades, Government of India has allowed forward transaction in commodities through Online Commodity Exchanges, a modification of tradition business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. National Exchanges Compulsory online trading Transparent trading


Exchanges to be de-mutualised Exchange recognised on permanent basis Multi commodity exchange Large expanding volumes

Regional Exchanges: Online trading not compulsory De-mutualisation not mandatory Recognition given for fixed period after which it could be given for re-regulation Generally, these are single commodity exchanges. Exchanges have to apply for trading each commodity. Low volumes in niche markets

Forward Markets Commission (FMC):It is statutory institution set up in 1953 under Forward Contracts (Regulation) Act, 1952. Commission consists of minimum two and maximum four members appointed by Central Govt. Out of these members there is one nominated chairman. All the exchanges have been set up under overall control of Forward Market Commission (FMC) of Government of India.

NMCE (National Multi Commodity Exchange of India Ltd.)

NMCE is the first demutualized electronic commodity exchange of India granted the National exchange on Govt. of India and operational since 26th Nov, 2002. Promoters of NMCE are, Central warehousing corporation (CWC), National Agricultural Cooperative Marketing Federation of India (NAFED), National Institute of Agricultural Marketing (NIAM) and Neptune Overseas Ltd. (NOL). Main equity holders are PNB. The Head Office of NMCE is located in Ahmadabad. There are various commodity trades on NMCE Platform including Agro and nonagro commodities.


The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX) Multi Commodity Exchange of India Limited (MCX) National Multi-Commodity Exchange of India Limited (NMCEIL)

All the exchanges have been setup under overall control of Forward Market Commission (FMC) of Government of India.

National Commodity & Derivatives Exchange Limited (NCDEX):National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai in a public limited company incorporated on April 23, 2003 under the Companies Act, 1956 and had commenced its operations on December 15, 2003. This is the only commodity exchange in the country promoted by national level institutions. It is promoted by ICICI Bank Limited, Life Insurance Corporation of India (LIC), National Bank for Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSE). It is a professionally managed online multi commodity exchange. NCDEX is regulated by forwarded market commission and is subjected to various laws of the land like the companies act, stamp act, contracts act, forward commission (regulation) act and various other legislations.

Multi Commodity Of India Exchange (MCX):Headquartered in Mumbai multi commodity exchange of India limited (MCX), is an independent and de- mutilated exchange with a permanent recognition from government of India. Key shareholders of MCX are Financial technologies (India) Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of India and Canara Bank. MCX facilitates online trading, clearing and settlement operations for commodity future markets across the country. MCX started offering trade in November 2003 and has built strategic alliance with Bombay Bullion Association, Bombay Metal Exchange, Solvent Extractors Association of India, Pulse Importers Association and shetkari Sanghatana.


National Multi-Commodity Exchange of India Limited (NMCEIL):NATIONAL MULTI COMMODITY EXCHANGE OF INDIA LIMITED (NMCEIL) is the first de-mutual zed, electronic multi commodity exchange in India. On 25 July, 2001, it was granted approval by the government to organized trading in the edible oil complex. It has operationalised from November 26, 2002. It is being supported by central warehousing corporation Ltd., Gujarat state agriculture marketing board and Neptune overseas Ltd. It got its recognition in October 2002. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyers of produce and its seller in the market judged upon the prices. Others never had a say. Today, commodity exchanges are purely speculative in nature. Before discovering the price, they reach to the producers, end users, and even the retail investors, at a grassroots level. It brings an ice transparency and risk management in the vital market.

Pricing and Limits

As we mentioned before, contracts in the commodity futures market are a result of competitive price discovery. Prices are quoted as they would be in the cash market: in dollars and cents or per unit (gold ounces, bushels, barrels, index point, percentages and so on). Prices on future contracts, however, have a minimum amount that they can move. These minimum are established by the futures exchanges and are known as ticks. For example, the minimum sum that a bushel of grain can moves upwards or downwards in a day is quarter of one U.S. cent. For futures investors, its important to understand how the minimum price movement for each commodity will affect the size of the contract in question. If you had a grain contract for 3000 bushels, a minimum of $7.50(0.25cents*3000) could be gained or lost on that particular contract in one day. Futures prices also have a price change limit that determines the price between which the contract trade on a daily business. The price change limit is added to and subtract from the previous days close, and the result remain the upper and lower price boundary for the day. Say


that the price change limit on silver per ounce is $0.25. Yesterday, the price per ounce closed at $5. Todays upper price boundary for silver would be $5.25 and lower boundary would be $4.75. If any moment during the day price of future contracts for silver reaches either boundary, the exchange shuts down all trading of silver futures for the day. The next day, the new boundaries are again calculated by adding and subtracting $0.25 until an equilibrium price is found. Because trading shuts down if price reaches their daily limits, there may be occasions when it is not possible to liquidate an existing futures position at will.

Kinds of Commodities
Soft Commodities:Soft commodities are typically grown, while hard commodities are typically mined or extracted. Orange juice, corn, wheat, lean hogs, coffee, sugar and beans are all examples of soft commodities. Many soft commodities are subject to spoilage, which can create huge volatility in the short term; if youre sitting on 30000 pounds of cocoa beans and price drops, you might have to dump them into the market whether you want to or not. On the flip side, a well-timed, narrow investment in a soft commodity can yield phenomenal gains if you buy in at just the right time. Producers are often large players in the softs market. Farmers, for instance, regularly hedge their crops by selling futures contracts and locking in prices. The demand . Combined with the natural growing cycle of many of these commodities can create a natural seasonality in prices, which investors must consider as theyre looking into the space. Weather plays a huge role in the soft market, which makes predicting supply especially difficult.

Sample Soft Commodities:Barley Canola Corn Oats


Rice Soybean Meal soybean Oil Cocoa Coffee Lean Hogs Live Cattle Orange Juice Sugar Wool

Hard Commodities:Hard commodities are typically mined from the ground or taken from other natural resources: gold, oil, rubber, aluminum. In many cases, initial products are refined into further commodities, as oil is refined in gasoline. Some agriculture products such as cotton are also considered hard commodities, because they dont rot quickly and they are industrial materials rather than foodstuffs. Because hard commodities are easier to handle than soft commodities and because they are more integrated into the industrial process, most investors focus on these products. Thats changing to an extent as former soft like corn and sugar are transformed into ethanol-based energy products, but still, hard commodities dominate the marketplace. For instant, literally trillions of dollars of oil futures trade hands each year. Sample Hard Commodities:Light sweet crude oil Gas oil Heating oil Natural gas Unleaded gasoline


Cotton Rubber Aluminum Copper gold lead Nickel Platinum Silver Tin, Zinc

Emerging commodities:Beyond these, there is a whole class of goods that most of us consider commodities, but for whatever reason, have no liquid futures market. These include things like coal, timber, and iron. There are also emerging commodities like water (and water rights); pollution rights and ethanol, which many expect to develop into booming markets in 5-10 years. There are serious investors who believe that these function in a similar fashion to other commodities, and that they deserve a place in a commodities portfolio. For now, investor can only access these commodities by buying stock in companies that operate in this field.

Economic Important of the Futures Market

Because the commodity market is both highly active and central to the global marketplace, its a good source for vital market information and sentimental indicators.

Price Discovery:Due to its highly competitive nature, the futures market has become an important economic tool to determine prices, based on todays and tomorrows estimated amount of supply and demand. Futures market prices depend on a continues flow of information from around the world and thus require a high amount of transparency. Factors such as weather, war, debt default, refugee


displacement, land reclamation and deforestation can all have a major effect on supply and demand and hence the present and future price of a commodity. This kind of information and the way people absorb it constantly changes the price of a commodity. This process is known as price discovery.

Risk Reduction:Futures markets are also a place for a people to reduce risk when making purchases. Risk are reduce because of price is pre-set, therefore letting participations know how much of the commodity they will need to buy or sell. This helps reduce the ultimate cost to the retail buyer, because with less risk there is less chance of manufactures hiking up prices to make up for profit losses in the cash market.


How to trade
You can invest in the futures market in a number of different ways, but before taking the plunge, you must be sure of the amount of risk youre willing to take. As futures traders, you should have a solid understanding of how the market works and contracts functions. Youll also need to determine how much time, attention, and research you can dedicate to the investment. Talk to your broker and ask question before opening a futures account. Unlike traditional equity traders are advice to only use funds that have been earmarked as risk capital. Once youve made the initial decision to enter the market, the next question should be, how? Here are three different approaches to consider:

Self directed:
As an investor, you can trade your own account, without the aid or advice of a commodity broker. This involve the most risk because you become responsible for managing funds , ordering traders , maintaining margins , acquiring research , and coming up with your own analysis of how the market will move in relation to the commodity in which youve invested. It requires time and complete attention to the market.

Full Service:Another way to participate in the markets by opening a managed account, similar to an equity account. Your broker would have the power to trade on behalf, following conditions agreed

upon when the account was opened. This method could lesson your financial risk, because a professional broker would be assisting you, or making informed decision on your behalf. However, you would still be responsible for any loss incurred and margin calls.

Commodity pool:A third way to enter the market, and one that offers the smallest risk, is to join a commodity pool. Like mutual funds, the commodity pool is a group of commodities which can be invested in. no one person has an individual account; funds are combined with others and traded as one. The profit & losses are directly proportionate to the account of money invested. By entering a


commodity pool, you also gain the opportunity to invest in diverse type of commodities. You are also not subject to margin calls. However, it is essential that the pool be managed by a

Types of Traders
The players in futures market fall into two categories:- Hedger and Speculator.

1 Hedger:A Hedger can be farmers, manufacturers, importers and exporter. A hedger buys or sells in the future market to secure the future price of a commodity intended to be sold at a later date in the cash market. This helps protect against price risks. The holder of the long position in future contracts (buyers of the commodity), are trying to secure as low a price as possible. The short holders of the contract (sellers of the commodity), will want to secure as high a price as possible. The commodity contract, however, provides a definite price certainty for both parties, which reduces the risk associated with price volatility. By means of future contracts, Hedging can also be used as a means to lock in an acceptable price margin between the cost of the raw material and the retail cost of the final product sold. Example: A silversmith must secure a certain amount of silver in six months time for earrings and bracelets that have already been advertised in an upcoming catalog with specific prices. But what if the price of silver goes up over the next six months? Because the prices of the earring and bracelets are already set, the extra cost of the silver cant be passed onto the retail buyer, meaning it would be passed onto the silversmith. The silversmith needs to hedge, or minimize her risk against a possible price increase in silver. How? The silversmith would enter the futures market and purchase a silver contract for settlement in six months time (lets say June) at a price of $5 per ounce. At the end of six months, the price of silver in the cash market is actually $6 per ounce, so the silversmith benefits from the futures contract and escapes the higher price. Had the price of silver declined in the cash market, the silversmith would, in the end, have been better off without the future contract. At the same time, however, because the silver market is very volatile, the


silver market was still sheltering him from risk by entering into the future contract. So thats basically what a hedger is: the attempt to minimize risk as much as possible by locking in prices for a later date purchase and sale. Someone going long in a securities future contract now can hedge against rising equity prices in three months. If at the time of the contracts expiration the equity price has risen, the investors contract can out at the higher price. The opposite could happen as well: a hedger could go short in a contract today to hedge against declining stock prices in the future. A potato farmer would hedge against lower French fry prices, while a fast food chain would hedge against higher potato prices. A company in need of a loan in six months could hedge against rising in the interest rates future, while a coffee beanery could hedge against rising coffee bean prices next year.

2 SPECULATORS:Other commodity market participants, however, do not aim to minimize risk but rather to benefit from the inherently risky nature of the commodity market. These are the speculators, and they aim to profit from the very price change that hedgers are protecting themselves against. A hedger would want to minimize their risk no matter what they are investing in, while speculators want to increase their and therefore maximize their profits. In the commodity market, a speculator buying a contract low in order to sell high in the future would most likely be buying that contract from a hedger selling a contract low in anticipation of declining prices in the future. Unlike the hedger, the speculator does not actually seek to own the commodity in question. Rather, he or she will enter the market seeking profits by offsetting rising and declining prices through the buying and selling of contracts.

Long Hedger


Secure a price now to protect Secure a price now to protect against future against future rising prices. declining prices.


Secure a price now in anticipation Secure a price now in anticipation of of rising prices. declining prices.


In a fast-paced market into which information is continuously being fed, speculators and hedgers bounce off ofand benefit fromeach other. The closer it gets to the time of the contracts expiration, the more solid the information entering the market will be regarding the commodity in question. Thus, all expect a more accurate reflection of supply and demand and the corresponding price. Regulatory bodies the United States future market is regulated by the commodity future Trading Commission, CFTC, an independent agency of U.S. government. The market is also subject to regulation by the National Futures Association, NFA, a self-regulatory body authorized by the U.S. Congress and subject to CFTC supervision. A commodity broker and/or firm must be registered with the CFTC in order to issue or buy or sell futures contracts. Future brokers must also be registered with the NFA and CFTC in order to conduct business. The CFTC has the power to seek criminal prosecution through the Department of Justice in cases of illegal activity, while violation against the NFAs business ethics and code of conduct can permanently bar a company or a person from dealing on the futures exchange. It is imperative for investors wanting to enter the futures market to understand this regulation and make sure that the brokers, traders or companies acting on their behalf are licensed by the CFTC.

3 Arbitrators:There is one more type of trader exist known as Arbitrators. According to dictionary definition, a person who has been officially chosen to make a decision between two people or groups who do not agree is known as Arbitrator. In commodity market Arbitrators are the person who takes the advantage of discrepancy between prices in two different markets. If he finds future prices of a commodity edging out with the cash price, he will take offsetting position in both the markets to lock in a profit. Moreover the commodity future investor is not charged interest on the difference between margin and the full contract value.



Given the marked change in the landscape of commodities investment, several challenges and risks exist. Here we detail these challenges and risks we perceive for firms, recognized investment exchanges, and consumers exposed to the commodities market.

1 Firm:1.1 Lack of expertise:Many firms told us of the challenge in recruiting enough staff with the appropriate degree of expertise and experience. As firms have expanded their commodities investment activities, or have entered these markets for the first time, they have struggled to recruit staff with the necessary experience. Some firms are transferring staff from the fixed income areas of their business, or staff with experience of derivatives but not specifically commodity derivatives. Firms are training staff in this area but there is inevitably a time lag before these staff gain enough experience. If the sector continues to increase, this will become an even more pressing matter. Stories of qualified commodity traders receiving substantial recruitment inducements indicate the extent to which demand exceeds supply in the market. Many we spoke to said that while they need, they doubt other can recruit the necessary commodities specialists. We expect that all firms would consider they have adequate resource, but we heard the same concerns so often that we have to conclude that some firms must be overstretched. The FSAs Financial Risk Outlook 2007 identifies this as a risk and it is something that concerns our firm supervisors. If inexperienced traders dont fully understand the nature of the commodities markets they operate in, this could harm the interests of both individual firm and the markets as a whole. 1.2 Ineffective Risk Management:Several markets have become much more volatile, and many analysts believe that the market is not responding to fundamentals as perhaps it used to. Electronic access has speeded up the market and algorithmic trading enables the trading of large volumes very quickly. So the daily price range can be much wider than before.


In light of this increased volatility firms risk management must be effective and their risk modeling appropriate. One of the Ospraie funds (a US-based hedge fund) had to close after incurring substantial losses on short base metals position. Amaranth Advisors was also forced to close after suffering heavy losses of around $6 billion in a single week from a wrong way bet on natural gas spreads. Many correspondents believe this was an important test of market stability, demonstrating the ability of the markets to spread. These examples do however highlight the potential pitfalls that await firms that fail to maintain effective risk management systems and risk models. To return to the issue of black box trading, it is essential that firms have adequately tested their algorithmic trading system. Many scenarios must be modeled to ensure automated trading systems behave appropriately in any given set of circumstances. By way of example, overnight trading when volumes are thin can, and has, resulted in unintentional disorderly trading and price spikes in some markets. Exchanges and firms have an obligation to ensure markets remain orderly at all times. 1.3 Potential for market abuse:There is no suggestion that these markets are any more susceptible to market abuse than any other, but the FSA will increasingly focus its attention on monitoring them. This reflects the growing size of the market, though still relatively small, and the increasing range and changing nature of those investing in commodities. it is vital that appropriate measures are in place at firms and exchanges to detect and prevent improper practices , and that the FSA ensures markets remain efficient orderly and fair . 1.4 Acquisition of physical assets:In addition to the changing risks facing firms due to increased volatility some firms have become involved with commodities through the acquisition of physical assets such as power station .this presents a significantly different element to their portfolio of risk, which is otherwise determined by the management of exposure to financial instruments based on underlying commodities. It is vital that firms have appropriate arrangements in place to manage this very different type of exposure and resulting range of risk.


1.5 Increased cost of trading:In time of sustained volatility the clearing houses increased initial margins. Margin rates on the London metal exchange increased by 500% (from $5000 to $25000/ contract) over the space of a few month. Larger firms can afford to buy or sell, but smaller players have had to reduce the number of contracts they hold, which has reduced overall market open interest, and may lead to greater volatility in the market (which in itself may discover age more conservative investors) 1.6 Liquidity issues:Several participants felt that the influx of money into the commodity market had caused increased tightness in some market, especially in the front months where index rolling takes place. As is always the case with physically delivered markets a risk may exist that some speculative investors are unable to trade out of certain position, resulting in the delivery of physical assets on occasion. However, our findings do not suggest this is of particular concern to the market at present.

2. Recognized Investment Exchanges (RIEs):2.1 System Capacity:With volumes increasing rapidly over the past 5 years, U.K recognized investment exchanges upon which commodities futures are traded have had to ensure that their system and control are sufficiently robust to enable them to monitor their respective markets. Primarily, especially given the shift towards electronic trading, this means that it systems must be thoroughly tested and robust and able to cope with large volumes. The first concern may be the trading platform, but exchanges must also consider the requirements for reporting data and ensure the systems in place are sufficient to deal with this side of operation. 2.2 Compliance resource:Compliance departments must be appropriately staffed and capable of maintaining standards of monitoring. The challenge of recruiting staff with appropriate expertise and experience is also one that many firms are facing.


2.3 New User Type:New user often has trading experience but may be less well aware than traditional users of commodity markets behaviors and characteristics. Conversely, they may bring new techniques that the commodity markets are not used to. For example, an automated trading system or inexperienced commodities trader may seek to exit positions triggered by stop-losses at times of low liquidity, or too near to settlement and cause an unusual price spike (which may be less remarkable in equity markets). The challenge for exchanges is to separate inexperienced behavior from potentially abusive behavior and then to decide on the most appropriate action, be that education or disciplinary measures.

3 Retail Consumers
3.1 Suitability of Investment:We have reported on the eagerness of some professionals to devise investment products to target retail consumers, and they have begun to do so with varieties of ETFs, ETNs and ETCs. We have reported the scarcity of experienced market professionals who fully understand the subtleties of the commodities markets. Given these two factors there may be a danger that consumers will at risk of taking up investments without sufficiently understanding the associated risk. 3.2 Indirect exposure is growing:Institutional investors have to be authorized to invest in commodities market (or have a mandate to invest in them in the case of pension funds), yet consumers are already increasingly exposed through the assets institutions hold on their behalf. At present, a pension fund is unlikely to fail through over exposure to commodities where these represent an estimated average 3% of the portfolio. However, if some firms increase their exposure to 20% as has been suggested, the risk of significant losses may increase even if a failure doesnt occur. Significant pension fund losses would create undesirable detriment.



The Multi Commodity Exchange of India Limited (MCX), Indias first listed exchange, is a state-of-the-art, commodity futures exchange that facilitates online trading, and clearing and settlement of commodity futures transactions, thereby providing a platform for risk management. The Exchange, which started operations in November 2003, operates within the regulatory framework of the Forward Contracts Regulation Act, 1952 (FCRA, 1952) and regulations there under. MCX offers trading in more than 30 commodity futures contracts across segments including bullion, ferrous and non-ferrous metals, energy, and agricultural commodities. The exchange focuses on providing commodity ecosystem participants with neutral, secure and transparent trade mechanisms, and formulating quality parameters and trade regulations, in conformity with the regulatory framework. The Exchange has an extensive national reach, with over 2100 members, operations through more than 400,000 trading terminals (including CTCL), spanning over 1770 cities, towns villages of India. MCX is Indias leading commodity futures exchange with a market share of 87.3 per cent in terms of the value of commodity futures contracts traded in FY 2012-13. The Exchange was the third largest commodity futures exchange in the world, in terms of the number of contracts traded in CY2012, based on the Futures Industry Associations annual volume survey released in March 2013. Moreover, as per the survey, during CY 2012, MCX was the world's largest exchange in silver and gold futures, second largest in copper and natural gas futures. To ease participation, the Exchange offers facilities such as calendar-spread facility, as also EFP (Exchange of Futures for Physical) transactions which enables participants to swap their positions in the futures/ physical markets. The exchanges flagship index, the MCXCOMDEX, is a real-time composite commodity futures price index which gives information on market movements in key commodities. Other commodity indices developed by the exchange include MCX agri., MCX energy, and MCX metal. MCX has been certified to three ISO standards including ISO 9001:2000 quality management standard, ISO 27001:2005 information security management standard and ISO 14001:2004 environment management standard. With an aim to seamlessly integrate with the global commodities ecosystem, MCX has forged strategic alliances with leading international exchanges such as CME Group, London Metal Exchange (LME), Shanghai Futures Exchange (SHFE) and Taiwan Futures Exchange (TAIFEX). The Exchange has also tied-up with various trade bodies, corporate, educational institutions and R&D centers across the country.


MCXs ability to use and apply technology efficiently is a key factor in the development of its business. The exchanges technology framework is designed to provide high availability for all critical components, which guarantees continuous availability of trading facilities. The robust technology infrastructure of the exchange, along with its with rapid customization and deployment capabilities enables it to operate efficiently with fast order routing, immediate trade execution, trade reporting, real-time risk management, market surveillance and market data dissemination. The Exchange is committed to nurturing communities that are vital for the development of its business. To achieve our goal of inclusive growth, we collaborate with diversified partners. Gramin Suvidha Kendra, our social inclusion programmed in partnership with India Post, seeks to enhance farmers value realization from agricultural activities. MCX has been continuously raising the bar through effective research and product development, intelligent use of information and technology, innovation, thought leadership and ethical business conduct.

It is regulated by the Forward Markets Commission.

MCX is India's No. 1 commodity exchange with 83% market share in 2009 The exchange's main competitor is National Commodity & Derivatives Exchange Ltd. Globally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude oil and gold in futures trading (But actual volume is far behind CME group volume as Silver is traded in 30 kg lots on MCX whereas CME traded in Approx 155 kg Lot size same in Gold 1 kg : 3. kg Approx and Crude 100 Barrels : 1000 Barrels on CME) and major volume in manipulated as there in no strict regulation in Indian markets just to Escalate the prices of Shares of company. Also the major volume comes from Arbitration of CME and MCX which is also not legal to do. The highest traded item is gold. MCX has several strategic alliances with leading exchanges across the globe As of early 2010, the normal daily turnover of MCX was about US$ 6 to 8 billion MCX now reaches out to about 800 cities and towns in India with the help of about 126,000 trading terminals MCX COMDEX is India's first and only composite commodity futures price index



































Vision:We envision a unified Indian commodity market that is driven by market forces and continually provides a level playfield for all stakeholders ranging from the primary producer to the endconsumer; corrects historical aberrations in the system; leverages technology to achieve exceptional efficiencies and ultimately lead to a common world market. We also envision a brand image for MCX that identifies it as the Exchange of Choice not only by direct participants in the commodity ecosystem but also by the general public.

Mission:MCX shall accomplish the above vision by relentlessly endeavoring to enhance awareness and understanding of exchange-enabled trade in commodity derivatives. The Exchange will continue to minimize the adverse effects of price volatilities; providing commodity ecosystem participants with neutral, secure and transparent trade mechanisms; formulating quality parameters and trade regulations in conjunction with the regulatory authority. Moreover, it will continue to enforce a zero-tolerance policy toward unethical trade practices-attempted or real-by any participant/s; and invest in the all-round development of the commodity ecosystem.


Promoter group companies

Exchange Ventures:A pan-India electronic spot market for agriNational Spot Exchange Limited commodities trading (NSEL) www.nationalspotexchange.com Indias first power exchange for trading in Indian Energy Exchange (IEX) electricity www.iexindia.com







exchange, that provides a single platform for(SMX) multi-product trade between Asia and the world www.smx.com.sg


multi-asset, multi-access internationalBahrain Financial Exchange (BFX)

exchange in Bahrain and the Middle East, wherewww.bfx.bh market participants can raise capital and manage risk using both conventional and Islamic financial instruments. Multi-asset class electronic exchange fromGlobal Board of Trade (GBOT) Mauritius to serve as a gateway to the Africanwww.gbot.mu continent Multi-asset-class pan African exchange andBourse ecosystem based out of Botswana hub Africa (BA)


First international commodity and currencyDubai derivatives market in the Middle East



Commodity (DGCX)

Exchange www.dgcx.ae


Ecosystem Ventures:-





Handling (NBHC)

platform to offer organized marketsCorporation for rural lending

www.nbhcindia.com technologies

A platform to enable 'any transactionatom on mobile' Global financial industry, content provider in

www.atomtech.in the

information which

services andTickerPlant Limited


disseminates ultra-low latency datawww.tickerplantindia.com feeds, news and information to

support investment decisions Specializes in securities and FT Knowledge Management Company www.ftkmc.com Clearing Limited

commodities market education

It is the clearing arm of the MCX-SX,MCX-SX

and has been jointly promoted byCorporation Limited (MCXMCX-SX, MCX and FTIL. Provides high quality domain Consulting Ltd. SX CCL)

consulting services to the Banking andRiskraft Financial financial analytics Services risk Industry on(Riskraft)




Project Profile

Introduction To Cotton:Introduction:

Cotton is essentially grown for its fiber, which is used the world-over in textile manufacturing. Cotton fiber is one of the most important textile fibers, accounting for around 35% of the total textile fiber used in the world.

Its strength, absorbency and capacity to be washed and dyed, make cotton an adaptable raw material for producing a variety of textile products such as clothes, space suits, household items and industrial products.

Cotton is classified on the basis of staple, grade and character of each balestaple refers to the fiber length; grade ranges from course to premium and is a function of color, brightness and purity; and character refers to the fibers strength and uniformity.

Global Scenario:

Cotton production and trade is widely spread across the world, with more than 80 nations cultivating the crop. However, its production, consumption and trade are dominated by a few nations.

The world cotton production in 2012-13 marketing year (July August) is forecasted to be 26.25 million metric tons (MMT) (154.41 million bales of 170 kg each) as compared with 27.44 MMT (161.35 million bales of 170 kg each) in 2011-12 marketing year.

The world's four largest cotton-producing countries are China, India, USA and Pakistan. They account for nearly 79% of the world's production. The other major producers include Brazil and Uzbekistan.

The top three consumers of cotton are China, India and Pakistan, which together account for two thirds of the world's consumption, which is estimated around 23.3 MMT. Turkey, Brazil and the USA are the other major consumers. In the recent years, the global trade has been around 7-8 MMT. While USA is the largest exporter of cotton, accounting for over one-third of the global trade in raw cotton, China is its largest importer.


Indian Scenario:

India's annual production of cotton has been steadily increasing in the recent years supported by a rise in acreage, better genetically modified seeds and improved practices.

India is expected to produce 33.4 million bales of cotton from an acreage of 11.61 million hectares in 2012-13 (October September).

In India, the yield of cotton is estimated to be at 489 kg per hectare against the world average of 766 kg per hectare.

In India, cotton is planted from the end of April through September, and harvested from October to January, based on the time of sowing.

India's cotton consumption increased by 15% from 21.9 million bales in 2005-06 to 25.3 million bales in 2011-12. This further increased to 27.0 million bales in 2012-13.

The states of Gujarat, Maharashtra and Andhra Pradesh are the major producers of cotton, accounting for about 75% of the total production.

India has been a major exporter of cotton, since 2005-06 and currently, the world's second largest exporter. It is likely to export 7 million bales of cotton in 2012-13.

India mostly imports Long and Extra Long Staple (ELS) cotton from the US, Egypt, and West Africa.

Factors Influencing the Market:

The domestic demand supply scenario, inter-crop price parity, cost of production and international price situation are the major factors that influence prices in the market.

Weather, pests, diseases and other risk factors associated with agricultural crops also have a bearing on cotton production.

Government policies with relation to import, export and Minimum Support Price are significant influencers of cotton prices.

Cotton yarn accounts for around 70% of the total yarn production in India. Thus, the price of cotton is a very important factor that influences the health of India's textile industry. And the Government usually considers both the cotton and textile sectors while deciding on its polices.

Cotton yarn prices at different markets across the country show a high correlation of above 90% with India's raw cotton prices.

Global trade is particularly important for cotton. In addition to around 30% of global cotton


fiber production being traded, it is also traded indirectly as yarn, fabric and clothing.

As cotton is used primarily in manufacturing products such as clothing and home furnishings, the overall health of associated industries and the economic well-being of final consumers are important.

New developments in the textile industry, with regard to the adoption of new technology, fibers, mechanization, and so forth, impact cotton prices in the long run.



Research is used to choose the best line of action (in the light of growing competition and increasing uncertainty). Research in common context refers to a search for knowledge. It can also be defined as a scientific and systematic search for gaining information and knowledge on a specific topic of phenomena. In management research is extensively used in various areas. Research is a structured inquiry that utilizes acceptable scientific methodology to solve problems and create new knowledge that is generally applicable. It contains characteristics like Controlled, Rigorous, Systematic, Valid and Verifiable, Empirical,

Title of Research:A Profile of Commodity Dealers with special reference to Cotton in Sri Ganganagar

Duration of the Project:Duration of the project was 45 days i.e. from 25th April to 24 June.

Objectives of the Project:1. Primary objective: The main objective of filed survey during the project was to find out traders interest about MCX agri. Items Find out nature of traders in survey how they can do trading The main objective of research was to identify potential traders for MCX agri. item and development these traders Find out the problems of traders those are faced by him in everyday trading This will ease the dependence on the some big traders like nine star commodity Pvt. Ltd. & bhairavnath derivatives & commodity Pvt. Ltd.


2. Secondary objective: To enhance the knowledge of trading market To increase the knowledge of commodity in MCX To enhance the knowledge about the marketing of commodity market(MCX)

Types of study:Descriptive Research:The types of research adopted for study is descriptive. Descriptive studies are undertaken in many circumstances when the researches is interested to know the characteristic of certain group such as age ,sex, education level, occupation or income . A descriptive study may be necessary in cases when a researcher is interested in knowing the proportion of people in a given population who have in particular manner, making projection of a certain thing, or determining the relationship between two or more variable. The objective of such study is to answer the who, what, where, and how of the subject under investigation. There is a general feeling that descriptive studies are factual and very simple. This is not necessarily true. Descriptive study can be complex, demanding a high degree of scientific skill on part of the researcher.

Descriptive studies are well structured. An exploratory study needs to be flexible in its approach, but a descriptive study in contrast tends to be rigid and its approach cannot be changed every now and then. It is therefore necessary the researcher give sufficient thought to framing researcher. Question and deciding the types of data to be collected and the procedure to be used in this purpose. Descriptive studies can divided into two broad categories: cross sectional and longitudinal sectional. A cross sectional study is concerned with a sample of elements from a given population. Thus, it may deal with household, dealers, retail stores and other entities. Data on a number of characteristics from sample elements are collected and analyzed. Cross sectional studies are two types: Field study and survey. Although the distinction between them is not clear cut, there are some practical differences, which need different techniques and skills. Field studies are ex-post factor scientific inquiries that aim at finding the relations and interrelations


among variable in a real setting. Such studies are done in live situations like communities, school, factories, and other organizations. Another type of cross sectional study is survey result, which has been taken by me. A major strength of survey research is its wide scope. Details information can be obtained from a sample of large population. Besides it is economical as more information can be collected per unit of cost. In addition, it is obvious that a sample survey needs less time than a census inquiry. Descriptive research includes survey and fact finding enquiries of different kinds of the major purpose. Descriptive research is description of the state of affairs, as it exists at present. The main characteristic of this method is that the researcher has no control over the variables; he can only report what has happened or what is happening. The method of research utilized in descriptive research is survey methods of all kinds including comparative and co relational methods. The reason for using such needs to be flexible in its approach , but a descriptive study in contrast tends to be rigid and its approach cannot be changed every now and study.

Research methods: Methodology used is explained in detail. Data collection, primary or secondary, is done using appropriate technique. The type of data (evidence, framework, argument) collected and used are evidently appropriate & justified. Contact method with personal interview and internet connectivity. Data collection method used through survey for primary data and internet surfing for secondary data. Structured schedule and computer with internet research instrument was used.

Sampling Design:Population: Sri Ganganagar District Unit Sample: Agri. commodity investor Sample Size: 130


Data Collection:Primary Data: it is collected for new research for the first time. Personal interview Close interview Survey conduction Group discussion Secondary Data: already existed data is called secondary data. I collected them from following method. Internet Books Previous research

Research Design:A research design is a specification of method and procedures or acquiring the information needed. It is the overall observation pattern or framework of the projects that stipulates what information is to be collected, from which source, by what procedure. Research design is important primarily because of the increased complexity in the market as well as marketing approaches available to the researcher. In fact it is the key to the evolution of successful marketing strategies and programmers. It is an important tool to study of commodity traders behaviors, trading pattern and focus on market changes. A research design specifies the methods and procedure for conducting a particular study.

Format of survey/research
Types of research: Sources of data: descriptive research Primary and secondary data for collection of traders information and knowing the interest for MCX in agri. Commodity. structured schedule and questionnaires personal interview/shop to shop

Research instrument: Contact method: -


Significance of the study:Every study of such nature involved time efforts and cost hence it is must that it generates sufficient benefit for all the concerned parties. With the help of survey the researcher are interpret the problems of traders about specific topic and then after he was find out the solution of these problems so it was very helpful for company and researcher. The study undertaken by the researcher purports to identify the variables in trading decision for agri. And other items, company goodwill also influence to trader trading like that: - for example agri. traders are generally doing trading in NCDEX and metals & energy trading in MCX.

TO THE RESEARCHER:This study provide great opportunity to researcher To understand practical dimension of traders behavior and trading and trading process To gain practically insight in to conducting research, pilot survey, preparing schedule and administrating the same To get a few experience about the real life situation.

Scope of research study:This research study gives me great exposure to the commodity market because it includes product knowledge and the field job in which I have visited the commodity trading store comes under the region of Bikaner. During this project I also took part in exhibition of MCX which held for the purpose branding and awareness of MCX product. This project helps me to know the market practically .in my project I find that how do they trading with MCX and how to achieve profit.


Analysis and Interpretation

Q1. Do you know commodity trading as an investment option? Feedback Yes No Numbers 76 54 Percentage 58 % 42 %

60 50 40 30 20 10 0 Yes No

Yes No

INTERPRETATION:Most of the investor knows that Commodity trading is an investment option


Q 2. Which option do you prefer to COMMODITY TRADING? Feedback Online Offline Numbers 52 78 Percentage 40 % 60 %


Online Offline

INTERPRETATION:Majority of the investor, due to lack of technological knowledge they prefer offline trading Very few investors have heard of commodity market. Vast majority of people are unaware of commodity market in online way.


Q 3. Which exchange an Investor Preferences? Feedback MCX-NCDEX(BOTH) MCX NCDEX Numbers 24 08 20 Percentage 46.15 % 15.38 % 38.47 %



INTERPRETATION:Majority of people invest related to agro commodity in NCDEX, due to good volume in commodity market.


Q4 . How many investors interested to trade with MCX? Feedback Interested Not interested Numbers 85 45 Percentage 65.38 % 34.62 %

90 80 70 60 50 40 30 20 10 0 Yes No Interested Not Interested

INTERPRETATION:Market some people have heard of commodity due to lack of complete knowledge about it half of them not interested in investing in commodity market. Due to less volume of Agro commodity in MCX, majority of investor are not interested to trade with MCX.


Q5 . Which commodity mostly invested in MCX? Feedback Cotton Gaur seed Barley Mustard seed Numbers 59 38 20 13 Percentage 45 % 30 % 15 % 10 %


Cotton Gaur Barley Musterd

INTERPRETATION:There we can watch that 4 most important product is cover whole turnover of MCX. In 4 products cotton plays big role because it covered 45% of total turnover of financial year and 2ND gaur 33% and 3RD barley 15% also increase the turnover. Investor mostly invested in Cotton with MCX, due to availability of additional delivery centre and good volume of cotton in MCX


Q6. Perception about MCX? Feedback Less risky Risky Very risky Numbers 20 43 67 Percentage 15 % 33 % 52 %

120 100 80 60 40 20 0 Risk @ MCX Very Risky Risky Less Risky

INTERPRETATION:Many people due to lack of complete knowledge think that invest in commodity MCX is very risky. Perception of most of investor is MCX is very risky.


Q7. Opinion about improve MCX Trading? Feedback Improve Quality Improve Volume Better Lab-Testing Open Additional Centre Numbers 85 110 52 Delivery 26 Percentage 65 % 85 % 40 % 20 %

90 80 70 60 50 40 30 20 10 0 Improve Qality Improve Volume Better LabTesting Delivery Centre Improve Qality Improve Volume Better Lab-Testing Delivery Centre

INTERPRETATION:Majority of person wants improve volume of Agri. commodity in MCX. According to investors MCX have also improve quality, give better lab-testing and also open additional delivery centre at Sri Ganganagar.


Q8. Age wise Distribution? Age group Up to 25 25-35 35-45 45-55 Above 55 Number s 07 10 39 58 16 Percentage 05 08 30 45 12


Up to 25 25-35 35-45 45-55 Above 55

INTERPRETATION:Mostly 45-55 age of investors is doing online trading. But there is also different age group investors are present.


Q9. Education wise Distribution? Qualification Uneducated Matric Graduate Proffestional Numbers 05 21 78 26 Percentage 04 % 16 % 60 % 20 %


Uneducated Matric Graduation Proffesnol

INTERPRETATION:Majority of investors are graduate. But some have professional degree also. Few are metric and uneducated.


Q10. Do factor related to MCX (product/services/ethics/leader) affect the behavior of investor ? Feedback Yes No Numbers 117 13 Percentage 90 % 10 %


Yes No

INTERPRETATION:Yes factor related to MCX (product/ services/ ethics/ leader) affect the behavior of investor.



FACTS & FINDINGS: By the survey of 60 days I find that many traders are known MCX as metal and energy market. And in Sri Ganganagar region mostly traders are doing trading in physical form (kachchi ka kaam) (adat). And more Competition also influences to traders behaviors because NCDEX also provide agri. commodity to traders at reasonable price. Mostly in Sri Ganganagar market traders have to do trading with NCDEX and they understand that only NCDEX provide agri. commodity trading. But in metal and energy sector traders are do booming trading with MCX Its effect that there is high growth of trading in metal and energy market. In Sri Ganganagar area the performance of MCX is in better position but the competitor also holds closer volume. We also came to know while visiting the shops that there was big problem of brokerage and commission & delivery of goods. Many traders are facing the problems of delivery because some traders are jointed with physical trading and they have no take risk of money miss. Majority of people invest related to agro commodity in NCDEX, due to good volume in commodity market. Local commodity delivery centre is not available in MCX like Barley, mustard seed, wheat, channa, etc in Sri Ganganagar. Some of the investor wants to do online trading but they dont have technical knowledge i.e. how to do online trading in MCX. Majority of commodity investor s likes to invest in Bullion (Gold and Silver).


Many people due to lack of complete knowledge think that invest in commodity market is very risky. Commodity market advertisements do not give complete information. Company should make efforts to increase awareness among the traders by giving advertisement in local media like news paper, magazines etc. Company should provide regular poster and display board to the traders for the advertisement. Company should maintain time to time communication with commodity traders and make them aware about any change in the schemes, so that the traders can provide better volume to market of company. Company should conduct seminar for telling new policy, schemes for traders benefits.


Limitation of the study:Every study has certain limitations. In my study, also there was certain limitation, which I could not able to solve. 1. The research was conducted in a very small area. 2. Time factor was also important for me. I had only 60 days to complete my research, for which a full fledged report was insufficient for me. 3. The traders filled the questionnaires mostly in careless manner, so it was difficult to make them hold for time. 4. I had only found the upper middle class traders to fill up questionnaires, but generally, an average middle class trader was required for the study. 5. The tic size is also influence to commodity traders behaviors. 6. And last and mostly I find that; several traders are not believed in commodity market (dibba market) they have not know about this. So its effect that there I not collect much information those are useful for my study.


Buying and selling in the commodity market can seem risky and complicated. As weve already said, futures trading are not for everyone, but it works for a wide range of people. This report has introduced you to the fundamentals of futures trading. The commodity market is a global market place, created initially as a place of farmers and merchants to buy and sell commodities for either spot or future delivery. This was done to lessen the risk to both and prevent waste of product. Rather than trade a physical commodity, commodity market buy and sell contract, which state the contract specification, such as price per unit, value, quality and quantity of the commodity in question, as well as the month contract expires. The players in the future market are hedgers and speculators. Hedgers try to minimize risk by buy and selling now in an effort to avoided rising or declining prices. Conversely, the speculator will try to profit from the risks by buying selling now in anticipation of rising or declining prices. The CFTC and the NFA are the regulatory bodies governing and monitoring futures market in the U.S. Commodity accounts are credited and debited daily depending on profit and losses incurred. The futures market is also characterized as being highly leveraged due to its margins; although leverage works as a double-edged sword. Its important to understand the arithmetic of leverage when calculating profit and loss, as well as the minimum price movements and daily price limits at which contracts can trade. Going long, going short and spreads are most common strategies used when trading on the futures market. Once you make the decision to trade in commodities, there are several ways to participate in the market. All involve risk, some more than others. You can trade your own account, find a Commodity Broker or join a commodity pool.




Website referred:www.mcxindia.com www.ncdex.com www.bloomberg.com www.cnnmoney.com www.kitco.com www.moneycontrol.com www.commodityindia.com

2. Books referred:Guide to Indian Commodity Market by Ankita Gala and Jitendra Gala, Published by Network 18 Publication Pvt. Ltd . (2009) Kothari, C. R. Research Methodology: Method &Technologies, 3rd Edition March 1989 Pearson.

3. Bulletin and Magazines:Commodity India Green line Business standard



Questionnaire Name: - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Address: - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Contact no:-_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Firm name:-_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Age: - _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

Q. (1) Do you think that commodity trading ensure better return? (a) Yes (c) Can't say (b) No

Q. (2) What makes you choose a particular company for commodity trading? (a) Brand name (c) Brokerage (b) Present performance (d) Credit facility

Q. (3) Do factor related to a firm (product/ services/ ethics / leader) affect Indian investors? (a) Yes (b) No

the behavior of


Q. (4) Do external factors (media, comments of new experts, advertisement) affect the behavior of Indian investors? (a) Yes (b) No

Q. (5) Is the behavior of Indian investor influenced by peers, parents and colleagues? (a) Yes (b) No

Q. (6) Which option do you prefer for Commodity Market? (a) Online (b) Offline

Q. (7) Do you aware about Commodity Market? (a) Yes (b) No

Q. (8) Are you willing to invest in Commodity Market? (a) Yes (b) No

Q. (9) If yes, which Commodity Exchange you will prefer for investment? (a) MCX (b) NCDE (c) NMCE (d) OTHER (e) Can't say

Q. (10) In which Commodity you will prefer to invest? (a) Bullion (b) Agriculture (c) metals (d) Fossils/ Energy


Q. (11) What is your perception about Commodity Market? (a) Less Risky (b) Risky (c) Very Risky

Q. (12) What you think Commodity Market Advertisements (hoardings, prints etc) are explanatory enough to give needed useful information? (a) Yes (b) No