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EXECUTIVE SUMMARY
The entire project focuses on commodity market. It deals with
how the trade takes place in commodity market and respective
procedures. Along with that it focuses on calculation of commodities
prices for future period. In commodity market traders may adopt two
different approaches to commodity investment. They may buy
commodities at certain point of time and simply hold these
commodities over a period of time, without restructuring their
portfolio. Such a passive approach to investment is called buy and
hold policy. Alternatively, investor may adopt an active investment
strategy, constantly evaluating their holdings, and reshuffling the
commodities they hold. This approach requires constant evaluation
of market. It is a well established fact that commodity market also
portrays cyclical movement similar to business cycle. An active
investor who is able to identify the turns in the market would be able
to at bottom (low prices) and sell it at peaks (high price) and make
substantial gains out of it.
Methodology:
Primary Data: Here I will collect the primary data through personal
interviews and discussions with our internal guide. The information
thus gathered is an unstructured interview which is going to ask to
brokers.
Secondary Data:
some
of
data
collected
from
AnandRathis
manual
reports,
Out comes:
Awareness about the commodity market is essential. Almost
respondents are scaring about commodity market and set in their
mind that is commodity trading is very risky. The Commodity trading
is having enough risk. The value of invested assets may fluctuate,
and as a result, clients may lose entire value of their original
investment.
Previous
results
will
not
indicate
the
future
Chapter-I
Company Profile
Introduction:
AnandRathi (AR) is a leading full service securities firm providing the entire gamut of
financial services. The firm, founded in 1994 by Mr. AnandRathi, today has a pan
India presence as well as an international presence through offices in Dubai and
Bangkok. AR provides a breadth of financial and advisory services including wealth
management, investment banking, corporate advisory, brokerage and distribution of
equities, commodities, mutual funds and insurance - all of which are supported by
powerful research teams.
The firm's philosophy is entirely client centric, with a clear focus on providing long
term value addition to clients, while maintaining the highest standards of excellence,
ethics and professionalism. The entire firm activities are divided across distinct client
groups: Individuals, Private Clients, Corporate and Institutions.
Milestones of AnandRathi
1994: Started activities in consulting and Institutional equity sales with staff of 15.
1995: Set up a research desk and empanelled with major institutional investors.
1997: Introduced investment banking businesses and Retail brokerage services
launched.
1999: Lead managed first IPO and executed first M & A deal.
2001: Initiated Wealth Management Services.
the product specialists from across the firm to create an optimum solution to the client
needs.
Establishment year
Regional Office
Bangalore
Head Office
Mumbai
Clients
232(approx)
Commission
Intra Day
Delivery Base
0.4%
Mutual Funds
MANAGER
DEALER
Achievements of AnandRathi
a)
b)
4. MCX-Commodities
5. Depository Participant-CDSL
6. Depository Participant-NSDL
7. Depository Participant-NCDEX
8. Portfolio Manager (SEBI)
9. Insurance Broker (IRDA)
10. Mutual fund distribution (AMPI)
Philosophy of AnandRathi:
AnandRathi try and understand clients financial needs; to offer client personal advice
and expert analysis that client need to make clients assets go the extra mile. AR
ability to think far ahead and formulate a long-term strategy, coupled with long hours
of practice and research are the key drivers, which make clients wealth work harder
for clients.
AR believes that the key to build wealth lies in allocating assets across various
markets, financial instruments and industry sectors. Keeping this in mind AR leverage
their expertise in scientific asset allocation, to help client maximize returns and
minimize risks.
Process in AnandRathi:
AR realizes the need to simplify the complexities of the investment strategies and we
achieve this by offering highly customized wealth management product - LaXmi TM
(let your Assets go the extra Mile TM).
ARs Personalized Relationship Managers along with the expert team of analysts and
advisors will assist client in analyzing all your investment needs and advice clients on
specialized solutions created exclusively for client
AR has a dedicated research team who constantly screens the market for investment
prospects. The team provides support in fine-tuning the investment strategy &
suggests how to capitalize on these opportunities.
Products of AnandRathi:
1. Equity and Derivatives
2. Mutual Funds
3. Depository Services
4. Commodities
5. Insurance Broking
10
2. Mutual Funds
The definition of a Mutual Fund is a form of collective investment that pools money
from many investors and invests their money in stocks, bonds, short-term money
market instruments, and/or other securities, In a mutual fund, the fund manager trades
the fund's underlying securities, realizing capital gains or losses, and collects the
dividend or interest income. The investment proceeds are then passed along to the
11
individual investors. The value of a share of the mutual fund, known as the net asset
value per share (NAV), is calculated daily based on the total value of the fund divided
by the number of shares currently issued and outstanding.AR is one of India's top
mutual fund distribution houses.
ARs success lies in their philosophy of providing consistently superior, independent
and unbiased advice to their clients backed by in-depth research. We firmly believe in
the importance of selecting appropriate asset allocations based on the client's risk
profile.
AR have a dedicated mutual fund research cell for mutual funds that consistently
churns out superior investment ideas, picking best performing funds across asset
classes and providing insights into performances of select funds.
3. Depository Services
AR Depository Services provides to their clients with a secure and convenient way for
holding their securities on both CDSL and NSDL. ARs depository services include
settlement, clearing and custody of securities, registration of shares and
dematerialization. AR offers to their clients daily updated Internet access to their
holding statement and transaction summary.
CDSL Depository [Control and Dynamic Systems Lab.]
12
4. Commodities
Commodities Broking - a whole new opportunity to hedge business risk and an
attractive investment opportunity to deliver superior returns for investors. ARs
commodities broking services include online futures trading through NCDEX and
MCX and depository services through CDSL Commodities broking is supported by a
dedicated research cell that provides both technical as well as fundamental research.
ARs research covers a broad range of traded commodities including precious and
base metals, Oils and oilseeds, agri-commodities such as wheat, chana, guar, guar gum
and spices such as sugar, jeera and cotton. In addition to transaction execution, we
provide our clients customized advice on hedging strategies, investment ideas and
arbitrage opportunities.
5. Insurance Broking
As an insurance broker, AR provides to its clients comprehensive risk management
techniques, both within the business as well as on the personal front. Risk
management includes identification, measurement and assessment of the risk and
handling of the risk, of which insurance is an integral part. The firm deals with both
life insurance and general insurance products across all insurance companies.
ARs guiding philosophy is to manage the clients' entire risk set by providing the
optimal level of cover at the least possible cost. The entire sales process and product
13
selection is research oriented and customized to the client's needs. We lay strong
emphasis on timely claim settlement and post sales services.
14
Derivative:
A financial instrument, traded on or off an exchange, the price of which is directly
dependent upon the value of one or more underlying securities, equity indices, debt
instruments, commodities, other derivative instruments, or any agreed upon pricing
index or arrangement. Derivatives involve the trading of rights or obligations based on
the underlying product but do not directly transfer property. They are used to hedge
risk or to exchange a floating rate of return for a fixed rate of return.
Brokerage:
For a commission or fee, bringing together parties interested in buying, selling,
exchanging or leasing real property. Or the bringing together of parties interested in
making a real estate transaction.
AnandRathi Services:
I. Risk Management
II. Due diligence and research on policies available
III. Recommendation on a comprehensive insurance cover based on clients needs
IV. Maintain proper records of client policies
V. Assist client in paying premiums
VI. Continuous monitoring of client account and
VII. Assist client in claim negotiation and settlement
15
Strengths of AnandRathi:
a) One Stop Shop: Offering a wide range of services to cater to their clients
investment needs
b) Strong distribution network: AnandRathi group has been ranked consistently
amongst the top 10 distributors for IPO.
c) No conflict of interest: At AR, clients will get tailor made solutions keeping in
mind their financials needs and AR distributes only 3 rd party products. There is
no bias towards any product or any company.
d) Geographical Reach: Presence in over 180 locations all over India
e) Research: AnandRathi provides value based research for their products. They
have a dedicated team of professional from various fields covering various
sectors and companies.
f) Global Perspective: AR follow a top down approach where in firm cover the
global markets their impact on Indian economy, the sectors and companies
affected by these changes.
16
Chapter-II
Commodity
Introduction :
The word commodity is a term with distinct meanings in business and in Marxian
political economy. For the former, it is a largely homogeneous product, whereas for
the latter, it refers generically to wares offered for exchange.
Linguistically, the word commodity came into use in English in the 15th century,
being derived from the French word "commodit" , meaning today's (2000)
"convenience" in term of quality of services. The Latin root meaning is commoditas,
referring variously to the appropriate measure of something; a fitting state, time or
condition; a good quality; efficaciousness or propriety; and advantage, or benefit. The
German equivalent is die Ware, i.e. wares or goods offered for sale. The French
equivalent is "produit de base" like energy, goods, industrial raw materials.
In the original and simplified sense, commodities were things of value, of uniform
quality, that were produced in large quantities by many different producers; the items
from each different producer are considered equivalent. It is the contract and this
underlying standard that define the commodity, not any quality inherent in the
product. One can reasonably say that food commodities, for example, are defined by
17
the fact that they substitute for each other in recipes, and that one can use the food
without having to look at it too closely.
Characteristics of Commodity:
The following are te main characteristics of commodity;
1. In Marx's theory, a commodity has value, which represents a quantity of human
labor. The fact that it has value implies straightaway that people try to economise
its use.
2. A commodity also has a use value, an exchange value and a price. It has a use
value because, by its intrinsic characteristics, it can satisfy some human need or
want, physical or ideal. By nature this is a social use value, i.e. the object is useful
not just to the producer but has a use for others generally.
3. It has an exchange value, meaning that a commodity can be traded for other
commodities, and thus give its owner the benefit of others' labor (the labor done to
produce the purchased commodity).
4. According to the labor theory of value, product-values in an open market are
regulated by the average socially necessary labour time required to produce them,
and price relativities are ultimately governed by the law of value.
5. Price is then the monetary expression of exchange-value (but exchange value
could also be expressed as a direct trading ratio between two commodities without
using money).
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Commodity Markets:
Commodity markets are markets where raw or primary products are exchanged. These
raw commodities are traded on regulated commodities exchanges, in which they are
bought and sold in standardized Contracts.
This article focuses on the history and current debates regarding global commodity
markets. It covers physical product (food, metals, electricity) markets but not the ways
that services, including those of governments, nor investment, nor debt, can be seen as
a commodity. Articles on reinsurance markets, stock markets, bond markets and
currency markets cover those concerns separately and in more depth. One focus of this
article is the relationship between simple commodity money and the more complex
instruments offered in the commodity markets.
19
established, there must be very broad consensus on the variations in the product that
make it acceptable for one purpose or another.
The economic impact of the development of commodity markets is hard to overestimate. Through the 19th century "the exchanges became effective spokesmen for,
and innovators of, improvements in transportation, warehousing, and financing, which
paved the way to expanded interstate and international trade."
20
would pay 10-15% more for energy that was not from coal or nuclear, but strictly from
renewable sources such as wind.
Commodities Trading:
Commodities exchanges, usually trade futures contracts on commodities. Such as
trading contracts to receive something, say corn, in a certain month. A farmer raising
corn can sell a future contract on his corn, which will not be harvested for several
months, and guarantee the price he will be paid when he delivers; a breakfast cereal
producer buys the contract now and guarantees the price will not go up when it is
21
delivered. This protects the farmer from price drops and the buyer from price rises.
Speculators also buy and sell the futures contracts to make a profit and provide
liquidity to the system.
2.
3.
4.
5.
6.
7.
8.
9.
Indian Markets:
1.
2.
3.
22
Type of Markets:
can cover their price risk. Theoretically, the relationship between the futures and cash
prices is determined by cost of carry. The two prices therefore move in random. This
enables the participants in the physical/cash markets to cover their price risk by taking
opposite position in the futures market.
2.
Futures prices evolve from the interaction of bids and offers emanating from all
the buyers and sellers which converge in the trading floor or the trading engine. The
bid and offer prices are based on the expectations of prices on the maturity date.
23
3.
Participants in physical markets use futures market for price discovery and price
risk management. In fact, in the absence of futures market, they would be compelled
to speculate on prices.
4.
The spot price is the real price of the physical commodity while the futures price
Commodity Exchanges:
A commodity exchange is an exchange where various commodities and derivatives
products are traded. Most commodity markets across the world trade in agricultural
products and other raw materials (like wheat, barley, sugar, maize, cotton, cocoa,
coffee, milk products, pork bellies, oil, metals, etc.) and contracts based on them.
These contracts can include spots, forwards, futures and options on futures. Other
sophisticated products may include interest rates, environmental instruments, swaps,
or ocean freight contracts.
24
25
Out of the total investors who enter the first stage, 80% of them finish off at the first
stage only and after a year or two find that the stock market is not their cup of tea. So
in the 2nd stage only the 20% investors try to break even in their trading and quite a
lot of them are able to have control over their fear and greed with a result that they
stop giving losses. Now these traders are ready for the 3rd stage.
III. The trader starts to make profits
This stage where a trader makes consistent profit i.e. he does not give loss cheque to
the broker. In fact this is the stage which everyone wishes to have in the stock market.
But we strongly believe that anybody who wishes to come to the 3 rd Stage has to
pass through the above 2 stages.
Trading Rules
These are some of the trading rules which are universally valid for stock trading.
1. Never risk more than 10% of your trading capital in a single trade.
2. Always use stop loss orders (Here you should know your loss you can give in a
situation where the trade starts going against you.)
3. Never do overtrading.
4. Never let a profit run into a loss.
5. Don't enter a trade if you are unsure of the trend.
6. When in doubt, get out, and don't get in when in doubt.
7. Only trade active markets.
8. Distribute your risks equally among different markets.
9. Never limit your orders. Trade at the markets.
10. Extra monies from successful trades should be placed in a separate account.
11. Never trade to scalp a profit.
12. Never average a loss.
13. Never get out of the market because you have lost patience, or get in because
you are anxiously waiting.
26
27
serfdom and slavery. Typically, however, it is the producer himself who trades his
surpluses.
However, as the division of labour becomes more complex, a class of merchants
emerges which specialises in trading commodities, buying here and selling there,
without producing products themselves, and parallel to this, property owners emerge
who extend credit and charge rents. This process goes together with the increased use
of money, and the aim of merchants, bankers and rentiers becomes to gain income
from the trade, by acting as intermediaries between producers and consumers.
Modern Capitalism however is a mode of production based on generalised commodity
production a universal market This means that both the inputs and the outputs of most
production in society have become priced, tradeable goods (including the means of
production and human labour power), and that what and how much is produced is
largely determined by the response of producers to the "state of the market".
Production is now explicitly engaged in for the purpose of market sales only, which
implies both that its whole organisation is reshaped for this aim, and that people can
meet their own needs by purchases in the market (rather than producing goods for
their own consumption).
2)
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3)
M-M' (a sum of money is lent out at interest to obtain more money, or, one
currency is traded for another)
4)
5)
6)
7)
Commodity Derivatives:
Derivatives as a tool for managing risk first originated in the commodities markets.
They were then found useful as a hedging tool in financial markets as well. In India,
trading in commodity futures has been in existence from the nineteenth century with
organized trading in cotton through the establishment of Cotton Trade Association in
1875. Over a period of time, other commodities were permitted to be traded in futures
exchanges. Regulatory constraints in 1960s resulted in virtual dismantling of the
commodities future markets. It is only in the last decade that commodity future
exchanges have been actively encouraged. However, the markets have been thin with
29
poor liquidity and have not grown to any significant level. The commodity derivatives
differ from financial derivatives.
30
31
32
33
Latin America:
Latin America's largest commodity exchange is the Bolsa de Mercadorias & Futuros,
(BM&F) in Brazil. Although this exchange was only created in 1985, it was the 8th
largest exchange by 2001, with 98 million contracts traded. There are also many other
commodity exchanges operating in Brazil, spread throughout the country. Argentina's
futures market Mercado a Termino de Buenos Aires, founded in 1909, ranks as the
world's 51st largest exchange. Mexico has only recently introduced a futures exchange
to its markets. The Mercado Mexicano de Derivados (Mexder) was launched in 1998.
34
began only in 1927 with the establishment of East Indian Jute Association Ltd. These
two associations amalgamated in 1945 to form the East India Jute & Hessian Ltd. to
conduct organized trading in both Raw Jute and Jute goods. Forward Contracts
(Regulation) Act was enacted in 1952 and the Forwards Markets Commission (FMC)
was established in 1953 under the Ministry of Consumer Affairs and Public
Distribution. In due course, several other exchanges were created in the country to
trade in diverse commodities.
Latest Developments:
Commodity markets have existed in India for a long time. The above table gives the
list of registered commodities exchanges in India. The total annualized volumes on
various exchanges. National level commodity derivatives exchanges seem to be the
new phenomenon. The Forward Markets Commission accorded in principle approval
35
for the following national level multi commodity exchanges. The increasing volumes
on these exchanges suggest that commodity markets in India seem to be a promising
game.
1. National Board of Trade
2. Multi Commodity Exchange of India
3. National Commodity & Derivatives Exchange of India Ltd.
36
37
A. Agricultural products
B. Precious metal
C. Other metals and
D. Energy
Of these, the NCDEX has commenced trading in futures on agricultural products and
precious metals. For derivatives with a commodity as the underlying, the exchange
must specify the exact nature of the agreement between two parties who trade in the
contract. In particular, it must specify the underlying asset, the contract size stating
exactly how much of the asset will be delivered under one contract, where and when
the delivery will be made. In this chapter we look at the various underlying assets for
the futures contracts traded on the NCDEX. Trading, clearing and settlement details
will be discussed later.
38
A. Agricultural Commodities:
The NCDEX offers futures trading in the following agricultural commodities refined
soy oil, mustard seed, expeller mustard oil, RBD palmolein, crude palm oil, medium
staple cotton and long staple cotton. Of these we study cotton in detail and have a
quick look at the others.
1. Cotton
Cotton accounts for 75% of the fibre consumption in spinning mills in India and 58%
of the total fibre consumption of its textile industry (by volume). At the average price
of Rs.45/ kg, over 17 million bales (average annual consumption, 1 bale = 170 kg) of
raw cotton trade in the country. The market size of raw cotton in India is over Rs.130
billion.
The average monthly fluctuation in prices of cotton traded across India has been at
around 4.5% during the last three years. The maximum fluctuation has been as high as
11%. Historically, cotton prices in India have been fluctuating in the range of 3-6% on
a monthly basis.
Cotton is among the most important non-food crops. It occupies a significant position,
both from agricultural and manufacturing sectors' points of view. It is the major source
of basic human need - clothing, apart from other fibre sources like jute, silk and
synthetic. Today, cotton occupies a significant position in the Indian economy on all
fronts as a commodity that forms a means of livelihood to over millions of cotton
cultivating farmers at the primary agricultural sector.
39
40
41
Increasing price competitiveness, and aggressive cultivation and promotion from the
major producing nations have given way to widespread soy oil growth both in terms
of production as well as consumption.
5. Rapeseed oil
Rapeseed (also called mustard or canola) oil is the third largest edible oil produced in
the world, after soy and palm oils. On crushing rapeseed, oil and meal are obtained.
The average oil recovery from the seed is about 33%. The remaining is obtained as oil
cake/ meal, which is rich in proteins and is used as an ingredient in animal feed.
Mustard oil, which is known for its pungency, is traditionally the most favored oils in
the major production tracts world over.
6. Soybean
The market size of the popularly known miracle bean in India is over Rs.5000 crore.
With an annual production of 5.0 - 5.4 million tons, soybean constitutes nearly 25% of
the country's total oilseed production. The average monthly fluctuation in prices of
soybean traded at one of the active soybean spot markets at Indore (Madhya Pradesh)
has been at 10.07% during the past two years, the maximum monthly fluctuation
being as high as 24 - 30% during the period. Historically, soybean prices in the major
spot markets across the country have been fluctuating in the range of 5- 9%. Soybean
is the single largest oilseed produced in the world. The commodity has been
commercially exploited for its utility as edible oil and animal feed. On crushing
mature beans, around 18% oil could be obtained; the rest being the oil cake/ meal,
which forms the prime source of protein in animal feeds.
42
7. Rapeseed:
Rapeseed/ Mustard is one of the major sources of oil and meal to India. It supplies
over 1.5 million tons of oil (15 - 18% of India's annual edible oil requirement) and 3
3.2 million tons of 48 Commodities traded on the NCDEX platform oil meal, the
major protein source in animal feeds. The average monthly fluctuation in prices of
rapeseed traded at one of the active rapeseed spot market at Jaipur (Rajasthan) has
been at 9.8% during the past two years (July 2001 to July 2003), the maximum
monthly fluctuation being as high as 23.4% during the period. Rapeseed/ Mustard/
Canola is a traditionally important oilseed. China, Canada and India are the major
producers of this commodity. The other major producers are Germany, France,
Australia, Pakistan and Poland. The commodity has been commercially exploited in
the form of seeds, oil (seed to oil recovery is 3940%) and meal. The hybrid form of
rapeseed, known as canola, is more popular internationally.
B. Precious Metals:
1. GOLD
Gold is a brilliant yellow precious metal that is resistant to air and water corrosion. It
is a very soft and pure metal (24 Kt.). Gold is the most malleable and ductile metal
found on earth. Thats why it is expensive and it is alloyed with other metals, usually
copper and silver to make it less expensive and harder. A karat is the unit that
measures the purity of gold jewelry or else it is hallmarked with a three-digit number
that indicates the parts per thousand of gold. Some countries hallmark gold with a
43
three-digit number that indicates the parts per thousand of gold. The alloyed gold
comes in many colors and may not be bright yellow all the time.
Years
Indian
demand
(Figures in
metric tons)
Total World
demand
(Figures in
metric tons)
Indian
demand as %
of the total
World
Demand
1996
1997
1998
1999
2000
2001
508
737
815
839
830
843
2780
3054
2714
3284
3264
3218
18%
24%
30%
25%
25%
26%
Average price
(Rs per 10
grams)
5191
4556
4182
4327
4518
4080
44
1. Reclaimed scrap and official gold loans (Above ground supply from sales by
central banks)
2. Producer / miner hedging interest.
3. World macro-economic factors - US Dollar, Interest rate.
4. Comparative returns on stock markets
5. Domestic demand based on monsoon and agricultural output.
2. SILVER
Silver is a white colored shiny element that is highly ductile and malleable and is used
in making jewelry, coins and tableware. It is also used in chemical experiments as it
provides a high electrical and thermal conductivity. It is found in the metallic state and
also in a large amount of minerals mainly in argentite. That is why it is called
argentums in Latin.
45
depends. But, even this sharp decline could not affect Indias reputation of being one
of the largest consumer countries of silver in the world. India stands third after United
States and Japan among the leading consumers of silver in the world. The countries
from which India imports silver and maintain the flow of silver in the market are: 1. China
2. United Kingdom
3. European Union
4. Australia
5. Dubai
Over 50% share of import of silver in India is held by Chinese silver. The major
importing center of silver in India was Mumbai but now it has been shifted to
Ahmedabad and Jaipur due to high sales tax and octroi charges.
46
47
regarding zinc is not significant as it just produces a small share of the metal in the
worlds production and is not able to satisfy its domestic consumption demand making
it a net importer of zinc.
Zinc production in India was in the hands of the government initially as all the
operations in India relating to the metal were in the hands of a public sector company
Hindustan Zinc Limited. It was the biggest company in India, which took care of
zinc extraction and its smelting process. But in April 2002, this company was
privatized in favor Sterlite group and after that the Indian industry is in the hands of
private sector completely. The current Indian demand for zinc stands at around 3.5
lakh tons that is fulfilled with the help of domestic production and imports too. About
70% of the Indian demand comes from the galvanizing sector. After privatizing the
zinc sector it is expected that by 2010 the country would become self-reliant to satisfy
the domestic demand. After that, India may transform into a net exporter of the metal.
48
4. COPPER
Copper is an element, reddish brown in color, having atomic number 29 and
pertaining to the scientific symbol Cu. Coming from the same family of silver and
gold, this element shares numerous common characteristics with those precious
metals. This element is a highly ductile and malleable element and a very good
conductor of electricity. That is why it is highly used in the electrical appliances as a
thermal and electrical conductor and in building wires. It occurs in various minerals
on earth and is also forms part of a lot of alloys. Copper also has characteristics that it
is a creep and corrosion free metal and all of its so very useful features make it an
element on which the worlds economy directly depends.
49
and secondary. Primary segment comprises of the producers that convert copper ore
into refined copper. Three companies namely Hindustan Copper ltd, Birla Copper and
Sterlite Industries constitute this primary segment. Secondary segment comprises the
producers that manufacture value added products made from copper like wires, foil
etc.
The domestic consumption demand of copper is around 5.5 lakh tons in the country. A
major percentage i.e. 10% of the total consumption in India is contributed by the two
major tele-communication providers namely BSNL and MTNL. The rest of the
demand is contributed by the construction and automobile sector. India has always
been an importer of copper ore to satisfy the domestic consumption demand. The
countries from the ore is imported into India are;
1. Chile
2. Indonesia
3. Australia
4. Canada
But, due to the rise in the production of the three major players in the Indian market,
the country is now emerging as a net exporter. The production of copper has
significantly during the last few years that has enabled India not only to satisfy it is
own domestic demand but export refined copper in small quantities. The prices of
copper in Indian market are highly dependent on the prices in London Metal
Exchange.
50
51
characteristics of this metal. Aluminiums abundance in the earths crust stands third
among other elements. But it is not found in the Free State anywhere in the world but
in combined form with other materials in the ore form.
52
1. Bangladesh
2. Sri Lanka
3. Egypt
4. Iraq
53
CHAPTER-III
ANALYSIS AND INTERPRETATION
This chapter analyses the investors behavior and their interest
towards the investing in commodity market. The data required was
collected from 1st Jan to 31st March 2007, from the individual
investors of Bijapur city. The data was analyzed with the help of
trend ratios, growth ratios etc.
Investment motivators
11.
Periodicity of investment
12.
13.
14.
15.
16.
54
17.
Sources of feedback
18.
Age groups
Below 25 years
26 -35 years
36-45 years
46-55 years
Above 55 years
Total
No of investors
16
10
10
8
6
50
Percentage
32
20
20
16
12
100
Graph -1
Investors age
55
relating
to
different
educational
qualification
Educational qualification
Non matriculation
Matriculation
Degree
Masters Degree
Others
Total
No of investors
4
10
10
26
0
50
Graph- 2
Investors educational qualification group.
Percentage
8
20
20
52
0
100
of
56
The
investors
are
engaged
in
different
Occupation
Agriculture
Business
Service
Profession
Other
Total
No of investors
7
11
12
19
1
50
Graph - 3
Investors occupation
Percentage
14
22
24
38
2
100
57
Table - 4
Awareness of commodity market.
Sl no
Option
No of investors
Percentage
a)
Yes
42
84
b)
No
16
Total
50
100
Graph - 4
Awareness of commodity market.
58
From Table 4, it may be inferred that the majority of investors (84%) are aware of
commodity market in Bijapur city whereas about 16% of the investors are unaware
of the commodity market.
5. Preference for investing in commodity market : The general
Option
No of investors
Percentage
a)
Yes
50
100
b)
No
Total
50
100
Graph -5
Preference for investing in commodity market
59
Option
No of investors
Percentage
a)
Yes
27
54
b)
No
23
46
Total
50
100
Graph -6
Assessment of commodity market fluctuations
60
Table -7
Preferred form of commodities
Sl no
a)
b)
c)
d)
e)
f)
g)
h)
Option
Gold
Silver
Copper
Zinc
Maize
Oil
Coffee
Others
No of investors
22
22
0
1
4
1
0
0
Percentage
44
44
0
2
8
2
0
0
61
Total
50
100
Graph -7
Preferred form of commodities
Table 7 depicts that the majority of investors (44% each) are ready
and interested to invest in gold and silver followed by maize (8%)
and (2%) in the zinc and copper (2% each). No investors are found in
coffee and others.
8. Basis of trading: The investors may trade on a specific basis.
So, some of the investors may trade on intra base trading and some
of the investors may trade on delivery base trading. This analysis
helps to know the investors basis of trading in commodity market.
The information relating to respondents basis of trading is
presented in Table 8.
Table -8
Basis of trading
Sl no
Option
No of investors
Percentage
a)
28
56
b)
22
44
Total
50
100
Graph- 8
Basis of trading
62
Annual income
Below Rs 50,000
Rs 50,001-1,50,000
1,50,001-3,00,000
3,00,001-5,00,000
Above 5,00,000
Total
No of investors
10
22
16
2
0
50
Percentage
20
44
32
4
0
100
63
Graph - 9
Annual income of investors
Table -10
Amount of investment
Sl no
a)
b)
c)
d)
Amount of investment
Below Rs 5000
Rs 5001-15000
15001-30000
30001-50000
No of investors
Percentage
29
12
7
1
58
24
14
2
64
e)
Above 50000
Total
1
50
2
100
Graph -10
Amount of investment
Table -11
Investment motivators
Sl no
a)
b)
c)
Option
Provision for old age
Capital appreciation
Children education and
No. of investors
14
25
11
Percentage
28
50
22
65
d)
marriage
Others
Total
0
50
0
100
Graph -11
Investment motivators
Table 12
Periodicity of investment
Sl.no
a)
b)
c)
d)
Periodicity of investment
Quarterly
Half yearly
Yearly
1 to 2 years
No of investors
5
14
17
8
Percentage
10
28
34
16
66
e)
f)
2 to 5 years
Once in more than 5 years
Total
5
1
50
10
2
100
Graph- 12
Periodicity of investment
Table -12 shows that the majority of investors (34%) invest yearly,
followed
by
half
yearly
and
1-2
years
(28%)
and
(16%)
in
commodity
market.
The
information
relating
to
Table -13
Knowledge about stock brockers
Sl no
No. of investors
Percentage
67
a)
b)
c)
d)
e)
f)
g)
h)
Anand Rathi
Karvy
Geogit
Nimesh securities
Dharamsingh securities
Share khan securities
India Info line
Others
Total
16
14
15
3
1
0
0
1
50
32
28
30
6
2
0
0
2
100
Graph -13
Knowledge about stock brockers
Table -14
68
Sources of information
Sl no
a)
b)
c)
d)
Source of information
Friends
Family members
Advertisements
Others
Total
No of investors
36
5
7
2
50
Percentage
72
10
14
4
100
Graph -14
Sources of information
AnandRathi
from
the
friends
(72%)
followed
by
Preference
for
investing
through
AnandRathi:
The
Table -15
69
Option
No of investors
Percentage
a)
Yes
31
62%
b)
No
19
38%
Total
50
100%
Graph -15
Preference for investing through AnandRathi
70
No. of investors
18
16
9
5
2
50
Percentage
36
32
18
10
4
100
Graph 16
Preferred form of services
Table 16 shows that the majority of investors (36%) expect service like customer
relationship management followed by more security for money invested (32%), keep
in touch on regular basis (18%), provision for update information (10%) and others
(4%).
17. Factors favoring the stock brokers: The investors consider
some factors while selecting the stock brokers namely, promoters
credibility and experience, earning per share, competitive positions,
growing stream, return on equity, return on investment, etc. This
analysis helps to know the factors favoring for investing in
commodities. The information relating to factors favoring for
investing in commodities is presented in Table 17.
Table -17
71
No of investors
18
5
10
2
6
9
0
50
Percentage
36
10
20
4
12
18
0
100
Graph -17
Factors favoring the stock brokers
Table 17 reveals that the majority of investors (36%) favored promoters credibility
and experience followed by competitive position (20%) and return on investment
(18%), return on equity are (12%), EPS (10%) and growing stream (4%).
18. Basis of selection of stock broker: The investors select the stock
brokers while investing on the basis of namely, familiarity, size of clientele, average
daily turnover, etc. This analysis helps to know the investors basis for selecting the
stock brokers. The information relating to investors basis for selecting the stock
brokers is presented in Table 18.
Table -18
72
No of investors
8
15
14
4
7
2
50
Percentage
16%
30%
28%
8%
14%
4%
100%
Graph -18
Basis of selection of stock broker
From Table 18 it may be inferred that the majority of investors (36%) select the
stock brokers on the basis of financial soundness followed track record of the stock
brokers (20%), familiarity (16%), average daily turnover (14%), size of clientele (8%)
and other (4%).
19. Assessment of quality of stock brokers: The investors
assess the quality of management of commodity broking company
while investing that company on the basis of media reports, meeting
and interaction with management, promoters background, promises
made by management, vision /mission statement, management
performance etc. The information relating to respondents basis for
73
No of investors
18
9
12
2
0
9
50
Percentage
36
18
24
4
0
18
100
Graph- 19
Assessment of quality of stock brokers
Table 19 reveals that the majority of investors (36%) want to assess the quality of
stock brokers on the basis of media reports followed by promoters background
(24%), meeting and interaction and management performance (18% each) and
promises made by management (4%).
20. Sources of feedback: The investors collect the feedback
about the companies i.e., companys annual report, advertisements,
professional
consultants,
friends,
and
relatives,
BSE/NSE,
is presented in
74
Table -20
Sources of feedback
Sl no
a)
b)
c)
d)
e)
f)
g)
Sources of feedback
Companys annual income
Advertisements
Professional consultants
Friends and relatives
BSE/NSE publications
Internet
Others
Total
No.of investors
8
22
7
8
5
0
0
50
Percentage
16
44
14
16
10
0
0
100
Graph -20
Sources of feedback
From the Table 20 it may be inferred that 44% of the investors select the broking
company from the advertisements followed by companys annual income and friends
and relatives (16% each) professional consultants (14%) and BSE/NSE publications
(10%).
CHAPTER - IV
Findings, suggestion and conclusion
Findings
The following are the major findings of the present study,
75
76
12.
once in a year.
13.
77
78
Conclusion:
Commodity markets are markets where raw or primary products are
exchanged. These raw commodities are traded on regulated
commodities exchanges, in which they are bought and sold in
standardized Contracts. Most of investors are interested to invest in
gold and silver, advice investors to purchase copper also, to get the
advantage of hike price in the future. Make the investors to invest in
agricultural commodities because no investors have taken the
advantage of agricultural commodities till now in Bijapur city. The
study found that the investors engaged in business, service,
agriculture etc. are less in number as compared to professionals for
investing in commodities. Therefore, the prospective investors
engaged in business, service, agriculture etc need to be motivated
to incentives. According to the outcomes of the study it may be
concluded that the awareness about commodity market is necessary
79
Bibliography
Websites:
1. www.rathi.com
2. www.mcxindia.com
3. Google search engine.
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