Académique Documents
Professionnel Documents
Culture Documents
INDEX
Chapter No 1 2 3 4 5 6 7 8 Topic Introduction Company profile Mission and vision Objective SWOT analysis Competitors Product and service Introduction to Commodity Market 9 History of Commodity Market in India 10 Commodity exchanges in India Page No.
11 12
13
Analysis International Commodity Exchanges Quantitative Analysis How Commodity market works?
14
15
16
17 18 19 20
Limitations Analysis
Annexure Bibliography
INTRODUCTION
FINANCIAL SYSTEM
The financial is one of the most important inventions of the modern society. The phenomenon of imbalance in the distribution of capital or funds existed in every economic system. There are areas or people with surplus funds and there are those with a deficit. A financial system functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A financial system is a composition of various institutions, markets, regulations and laws, practices, money managers, analysts, transactions and claims and liabilities. The functions performed by a financial system are: THE SAVINGS FUNCTION: LIQUIDITY FUNCTION: PAYMENT FUNCTION: RISK FUNCTION: POLICY FUNCTION:
COMPANY PROFILE
SHAREKHAN LIMITED
Sharekhan is one of the top retail brokerage houses in India with a strong online trading platform. The company provides equity based products (research, equities, derivatives, depository, margin funding, etc.). It has one of the largest networks in the country with 704 share shops in 280 cities and Indias premier online trading portal www.sharekhan.com. With their research expertise, customer commitment and superior technology, they provide investors with end-to-end solutions in investments. They provide trade execution services through multiple channels - an Internet platform, telephone and retail outlets. Sharekhan was established by Morakhia family in 1999-2000 and Morakhia family, continues to remain the largest shareholder. It is the retail broking arm of the Mumbaibased SSKI [SHANTILAL SHEWANTILAL KANTILAL ISWARNATH LIMITED] Group. SSKI which is established in 1930 is the parent company of Sharekhan ltd. With a legacy of more than 80 years in the stock markets, the SSKI group ventured into institutional broking and corporate finance over a decade ago. Presently SSKI is one of the leading players in institutional broking and corporate finance activities. Sharekhan offers its customers a wide range of equity related services including trade execution on BSE, NSE, and Derivatives. Depository services, online trading, Investment advice, Commodities, etc. Sharekhan Ltd. is a brokerage firm which is established on 8th February 2000 and now it is having all the rights of SSKI. The company was awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote. It is first brokerage Company to go online. The Company's online trading and investment site - www.Sharekhan.com - was also launched on Feb 8, 2000. This site gives access to superior content and transaction facility to retail customers across the country. Known for its jargon-free, investor friendly language and high quality research, the content-rich and research oriented portal has stood out among its contemporaries because of its steadfast dedication to offering customers best-of-breed technology and superior market information. Share khan has one of the best states of art web portal providing fundamental and statistical information across equity, mutual funds and IPOs. One can surf across 5,500 companies for in-depth information, details about more than 1,500 mutual fund schemes and IPO data. One can also access other market related details such as board meetings, result announcements, FII transactions, buying/selling by mutual funds and much more. Sharekhan's management team is one of the strongest in the sector and has positioned Sharekhan to take advantage of the growing consumer demand for financial services 5
products in India through investments in research, pan-Indian branch network and an outstanding technology platform. Further, Sharekhan's lineage and relationship with SSKI Group provide it a unique position to understand and leverage the growth of the financial services sector. We look forward to providing strategic counsel to Sharekhan's management as they continue their expansion for the benefit of all shareholders." SSKI Corporate Finance Private Limited (SSKI) is a leading India-based investment bank with strong research-driven focus. Their team members are widely respected for their commitment to transactions and their specialized knowledge in their areas of strength. The team has completed over US$5 billion worth of deals in the last 5 years making it among the most significant players raising equity in the Indian market. SSKI, a veteran equities solutions company has over 8 decades of experience in the Indian stock markets. If we experience their language, presentation style, content or for that matter the online trading facility, we'll find a common thread; one that helps us make informed decisions and simplifies investing in stocks. The common thread of empowerment is what Sharekhan's all about! "Sharekhan has always believed in collaborating with like-minded Corporate into forming strategic associations for mutual benefit relationships" says Jaideep Arora, Director - Sharekhan Limited. Sharekhan is also about focus. Sharekhan does not claim expertise in too many things. Sharekhan's expertise lies in stocks and that's what he talks about with authority. So when he says that investing in stocks should not be confused with trading in stocks or a portfolio-based strategy is better than betting on a single horse, it is something that is spoken with years of focused learning and experience in the stock markets. And these beliefs are reflected in everything Sharekhan does for us! Sharekhan is a part of the SSKI group, an Indian financial services power house, with strong presence in Retail equities Institutional equities Investment banking.
Share khan is one of India's leading financial services company. It provides a complete life cycle of investment solution in Equities, Derivatives, Commodities, IPO, Mutual
Funds, Depository services, Portfolio Management Services and Insurance. Share khan also offer personalized wealth management services for High Net worth individuals. With a physical presence in over 300 cities of India through more than 800 "Share Shops", and an online presence through Sharekhan.com, India's premier online destination, it reaches out to more than 800,000 trading customers.
Vision:
To provide the most useful and ethical Investment Solutions - guided by values driven approach to growth, client service and employee development.
OBJECTIVES:
To project Sharekhan as an authority in the retail stock trading business. To execute business for the company by selling demat accounts and mutual funds. To study the various products of the company. To know how to open and close the calls. To learn the online terminal used for trading. To know the various policies of the company. To know how to handle various types of customers. To know various reasons for market fluctuations. To learn to manage time. To gain practical knowledge of the market. To have a practical experience of working in a reputed organization.
STRENGTHS
WEAKNESSES
year)
First brokerage firm to go online. Products PMS Services. Technology Online fund transfer. Research reports. Clients (average of 15,000 accounts per
High brokerage charges but now they have overcome this by a new prepaid scheme in which brokerage is reduced to half.
Recommendations from clients. Free Demat a/c opening. Low annual maintenance charge
OPPORTUNITIES
THREATS
Huge market.
Competitors:
Share khan is one of the major player in on line Trading. The main competitors of Share khan are:
1. Religare Enterprises 2. India Info line 3. ICICI DIRECT 4. INDIA BULLS 5. RELIANCE MONEY 6. Kotak Securities 7. MOTILAL OSWAL 8. 5 Paisa 9. HDFC 10. Angel Trade 11. Standard Chartered
Product & services:Share khan customers have the advantage of trading in all the market segments together in the same window, as we understand the need of transactions to be executed with high speed and reduced time. At the same time, they have the advantage of having all Advisory Services for Life Insurance, General Insurance, Mutual Funds and IPOs also. Sharekhan is a customer focused financial services organization providing a range of investment solutions to our customers. We work with clients to meet their overall investment objectives and achieve their financial goals. Our clients have the opportunity to get personalized services depending on their investment profiles. Our personalized approach enables clients to achieve their Total Investment Objectives.
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1.Equity 2. Commodity 3. Depository 4. Distribution (a). IPO (c). Insurance 5. Fixed Income 6. NRI Services 7. Back Office 8. Online services (b). Mutual Fund (d). Properties
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What is Commodity?
The word commodity came into use in English in the 15th century, it came from the French, "commodit", to benefit or profit. Going further back, the French word derived from the Latin commoditatem (nominative commoditas) meaning "fitness, adaptation,". The Latin root commod- meant variously "appropriate", "proper measure, time or condition" and advantage, or benefit. A commodity is something for which there is demand, but which is supplied without qualitative differentiation across a market. It is a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.[1] In other words, copper is copper. The price of copper is universal, and fluctuates daily based on global supply and demand. Sharekhan customers have the advantage of trading in all the market segments together in the same window, as we understand the need of transactions to be executed with high speed and reduced time. At the same time, they have the advantage of having all Advisory Services for Life Insurance, General Insurance, Mutual Funds and IPOs also. Sharekhan is a customer focused financial services organization providing a range of investment solutions to our customers. We work with clients to meet their overall investment objectives and achieve their financial goals. Our clients have the opportunity to get personalized services depending on their investment profiles. Our personalized approach enables clients to achieve their Total Investment Objectives. Key product offerings are as follows The word commodity came into use in English in the 15th century, it came from the French, "commodities", to benefit or profit. Going further back, the French word derived from the Latin commoditize Stereos, on the other hand, have many levels of quality..
One of the characteristics of a commodity good is that its price is determined as a function of its market as a whole. Well-established physical commodities have actively traded spot and derivative markets. Generally, these are basic resources and agricultural products such as iron ore, crude oil, coal, ethanol, salt, sugar,
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coffee beans, soybeans, aluminum, rice, wheat, gold and silver. Commoditization occurs as a goods or services market loses differentiation across its supply base, often by the diffusion of the intellectual capital necessary to acquire or produce it efficiently. As such, goods that formerly carried premium margins for market participants have become commodities, such as generic pharmaceuticals and silicon chips
COMMODITY MARKET: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.
History of Evolution of Commodity Markets:The modern commodity markets have their roots in the trading of agricultural products. While wheat and corn, cattle and pigs, were widely traded using standard instruments in the 19th century in the United States, other basic foodstuffs such as soybeans were only added quite recently in most markets. For a commodity market to be 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
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spokesmen for, and innovators of, improvements in transportation, warehousing, and financing, which paved the way to expanded interstate and international trade."
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to buy or sell wheat but would purely speculate on price movements in market to earn profit. Trading of wheat in futures became very profitable which encouraged the entry of other commodities in futures market. This created a platform for establishment of a body to regulate and supervise these contracts. Thats why Chicago Board of Trade (CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and Produce Exchanges were born. Agricultural commodities were mostly traded but as long as there are buyers and sellers, any commodity can be traded. 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 Commodity Exchange, Inc. was established in New York through the merger of four small exchanges the National Metal Exchange, the Rubber Exchange of New York, the National Raw Silk Exchange, and the New York Hide Exchange. The largest commodity exchange in USA is Chicago Board of Trade, The Chicago Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are major futures trading exchanges in over twenty countries including Canada, England, India, France, Singapore, Japan, Australia and New Zealand.
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in 2007 to $9.0 trillion. OTC trading accounts for the majority of trading in gold and silver. Overall, precious metals accounted for 8% of OTC commodities derivatives trading in 2007, down from their 55% share a decade earlier as trading in energy derivatives rose.Global physical and derivative trading of commodities on exchanges increased more than a third in 2007 to reach 1,684 million contracts. Agricultural contracts trading grew by 32% in 2007, energy 29% and industrial metals by 30%. Precious metals trading grew by 3%, with higher volume in New York being partially offset by declining volume in Tokyo. Over 40% of commodities trading on exchanges was conducted on US exchanges and a quarter in China. Trading on exchanges in China and India has gained in importance in recent years due to their emergence as significant commodities consumers and producers.
Returns
It is generally agreed that commodities have an expected return of 5% in real terms which is based on the risk premium for 116 different commodities weighted equally since 1888 (Source Report 219171-Wharton Business School). Investment professionals often too mistakenly claim there is no risk premium in commodites.
Spot trading
Spot trading is any transaction where delivery either takes place immediately, or with a minimum lag between the trade and delivery due to technical constraints. Spot trading normally involves visual inspection of the commodity or a sample 16
of the commodity, and is carried out in markets such as wholesale markets. Commodity markets, on the other hand, require the existence of agreed standards so that trades can be made without visual inspection.
Forward contracts
A forward contract is an agreement between two parties to exchange at some fixed future date a given quantity of a commodity for a price defined today. The fixed price today is known as the forward price.
Futures contracts:A Commodity futures is an agreement between two parties to buy or sell a specified and standardized quantity of a commodity at a certain time in future at a price agreed upon at the time of entering into the contract on the commodity futures exchange. The need for a futures market arises mainly due to the hedging function that it can perform. Commodity markets, like any other financial instrument, involve risk associated with frequent price volatility.
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Benefits of Commodity Futures Markets:The primary objectives of any futures exchange are authentic price discovery and an efficient price risk management. The beneficiaries include those who trade in the commodities being offered in the exchange as well as those who have nothing to do with futures trading. It is because of price discovery and risk management through the existence of futures exchanges that a lot of businesses and services are able to function smoothly.
1.
information, the demand and supply equilibrium, weather forecasts, expert views and comments, inflation rates, Government policies, market dynamics, hopes and fears, buyers and sellers conduct trading at futures exchanges. This transforms in to continuous price discovery mechanism. The execution of trade between buyers and sellers leads to assessment of fair value of a particular commodity that is immediately disseminated on the trading terminal.
2.
of price risk management. It is strategy of offering price risk that is inherent in spot market by taking an equal but opposite position in the futures market. Futures markets are used as a mode by hedgers to protect their business from adverse price change. This could dent the profitability of their business. Hedging benefits who are involved in trading of commodities like farmers, processors, merchandisers, manufacturers, exporters, importers etc.
3.
their price risk and improve their competitiveness by making use of futures market. A majority of traders which are involved in physical trade internationally intend to buy forwards. The purchases made from the physical market might expose them to the risk of price risk resulting to losses. The existence of futures market would allow the exporters to hedge their proposed purchase by temporarily substituting for actual purchase till the time is ripe to
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buy in physical market. In the absence of futures market it will be meticulous, time consuming and costly physical transactions.
4.
highly price elastic. The manufacturers have to ensure that the prices should be stable in order to protect their market share with the free entry of imports. Futures contracts will enable predictability in domestic prices. The manufacturers can, as a result, smooth out the influence of changes in their input prices very easily. With no futures market, the manufacturer can be caught between severe short-term price movements of oils and necessity to maintain price stability, which could only be possible through sufficient financial reserves that could otherwise be utilized for making other profitable investments.
5.
direct bearing on farmers in the absence of futures market. There would be no need to have large reserves to cover against unfavorable price fluctuations. This would reduce the risk premiums associated with the marketing or processing margins enabling more returns on produce. Storing more and being more active in the markets. The price information accessible to the farmers determines the extent to which traders/processors increase price to them. Since one of the objectives of futures exchange is to make available these prices as far as possible, it is very likely to benefit the farmers. Also, due to the time lag between planning and production, the market-determined price information disseminated by futures exchanges would be crucial for their production decisions.
6.
tools would attract the marketing and processing of commodities to high-risk exposure making it risky business activity to fund. Even a small movement in prices can eat up a huge proportion of capital owned by traders, at times making it virtually impossible to payback the loan. There is a high degree of reluctance
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among banks to fund commodity traders, especially those who do not manage price risks. If in case they do, the interest rate is likely to be high and terms and conditions very stringent. This posses a huge obstacle in the smooth functioning and competition of commodities market. Hedging, which is possible through futures markets, would cut down the discount rate in commodity lending.
7.
facilitating delivery with grading facilities along with other related benefits provides a very strong reason to upgrade and enhance the quality of the commodity to grade that is acceptable by the exchange. It ensures uniform standardization of commodity trade, including the terms of quality standard: the quality certificates that are issued by the exchange-certified warehouses have the potential to become the norm for physical trade.
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envisages three tire regulations: (i) Exchange which organizes forward trading in commodities can regulate trading on day-to-day basis; (ii) Forward Markets Commission provides regulatory oversight under the powers delegated to it by the central Government. (iii) The Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public Distributionis the ultimate regulatory authority. The commodities future market remained dismantled and remained dormant for about four decades until the new millennium when the Government, in a complete change in a policy, started actively encouraging commodity market. After Liberalization and Globalization in 1990, the Government set up a committee (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 Forward Markets Commission, and certain amendments to Forward Contracts (Regulation) Act 1952, particularly allowing option trading in goods and registration of brokers with Forward Markets Commission. The Government accepted most of these recommendations and futures trading was permitted in all recommended commodities. It is timely decision since internationally the commodity cycle is on upswing and the next decade being touched as the decade of Commodities. Commodity exchange in India plays an important role where the prices of any commodity are not fixed, in an organized way. Earlier only the buyer 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 a price transparency and risk management in the vital market. A big difference between a typical auction, where a single auctioneer announces the bids and the Exchange is that people are not only competing to buy but also to sell. By Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell higher than someone elses lower offer. That keeps the market as efficient as possible, and keeps the traders on their toes to make sure no one gets the purchase or sale before they do. Since 2002, the commodities future market in India has experienced an unexpected boom in terms of modern exchanges, number of commodities allowed for derivatives trading as well as the value of futures 21
trading in commodities, which crossed $ 1 trillion mark in 2006. Since 1952 till 2002 commodity datives market was virtually non- existent, except some negligible activities on OTC basis. In India there are 25 recognized future exchanges, of which there are three national level multi-commodity exchanges. After a gap of almost three decades, Government of India has allowed forward transactions in commodities through Online Commodity Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar to facilitate better risk coverage and delivery of commodities. The three exchanges are: National Commodity & Derivatives Exchange Limited (NCDEX) Mumbai, Multi Commodity Exchange of India Limited (MCX) Mumbai and National Multi-Commodity Exchange of India Limited (NMCEIL) Ahmedabad. There are other regional commodity exchanges situated in different parts of India.
Legal framework for regulating commodity futures in India:The commodity futures traded in commodity exchanges are regulated by the Government under the Forward Contracts Regulations Act, 1952 and the Rules framed there under. The regulator for the commodities trading is the Forward Markets Commission, situated at Mumbai, which comes under the Ministry of Consumer Affairs Food and Public Distribution
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.
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A commodity exchange is an association or a company or any other body corporate organizing futures trading in commodities for which license has been granted by regulating authority.
List of Exchanges in India:-
1. Bhatinda Om & Oil Exchange Ltd., Batinda. 2. The Bombay Commodity Exchange Ltd., Mumbai 3. The Rajkot Seeds oil & Bullion Merchants` Association Ltd 4. The Kanpur Commodity Exchange Ltd., Kanpur 5. The Meerut Agro Commodities Exchange Co. Ltd., Meerut 6. The Spices and Oilseeds Exchange Ltd. 7. Ahmedabad Commodity Exchange 8. Vijay Beopar Chamber Ltd., Muzaffarnagar 9. India Pepper & Spice Trade Association, Kochi 10. Rajdhani Oils and Oilseeds Exchange Ltd., Delhi 11. National Board of Trade, Indore 12. The Chamber Of Commerce, Hapur 13. The East India Cotton Association, Mumbai
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14. The Central India Commercial Exchange Ltd., Gwalior 15. The East India Jute & Hessian Exchange Ltd. 16. First Commodity Exchange of India Ltd, Kochi 17. Bikaner Commodity Exchange Ltd., Bikaner 18. The Coffee Futures Exchange India Ltd, Bangalore 19. Esugarindia Limited 20. National Multi Commodity Exchange of India Limited 21. Surendranagar Cotton oil & Oilseeds Association Ltd 22. Multi Commodity Exchange of India Ltd 23. National Commodity & Derivatives Exchange Ltd 24. Haryana Commodities Ltd., Hissar 25. e-Commodities Ltd
Of these 25 commodities exchanges the MCX, NCDEX and NMCEIL are the major Commodity Exchanges.
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NCDEX
(National Commodities & Derivatives Exchange Limited)
National Commodities & Derivatives Exchange Limited (NCDEX) promoted by ICICI Bank Limited (ICICI Bank), Life Insurance Corporation of India (LIC), National Bank of Agriculture and Rural Development (NABARD) and National Stock Exchange of India Limited (NSC). Punjab National Bank (PNB), Credit Ratting Information Service of India Limited (CRISIL), Indian Farmers Fertilizer Cooperative Limited (IFFCO), Canara Bank and Goldman Sachs by subscribing to the equity shares have joined the promoters as a share holder of exchange. NCDEX is the only Commodity Exchange in the country promoted by national level institutions. NCDEX is a public limited company incorporated on 23 April 2003. NCDEX is a national level technology driven on line Commodity Exchange with an independent Board of Directors and professionals not having any vested interest in Commodity Markets. It is committed to provide a world class commodity exchange platform for market participants to trade in a wide spectrum of commodity derivatives driven by best global practices, professionalism and transparency. NCDEX is regulated by Forward Markets Commission (FMC). NCDEX is also subjected to the various laws of land like the Companies Act, Stamp Act, Contracts Act, Forward Contracts Regulation Act and various other legislations. NCDEX is located in Mumbai and offers facilities to its members in more than 550 centers through out India. NCDEX currently facilitates trading of 57 commodities.
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Minerals:Electrolytic Copper Cathode, Aluminum Ingot, Nickel Cathode, Zinc Metal Ingot, Mild steel Ingots
Oil and Oil seeds:Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow Electrolytic Copper Cathode, Aluminum Ingot, Cathode, Zinc Metal Ingot, Mild steel Ingots Cotton seed, Oil cake, Crude Palm Oil, Groundnut (in shell), Groundnut expeller Oil, Cotton, Mentha oil, RBD Pamolein seed oil cake, Refined soya oil, Rape seeds, Mustard seeds, Caster seed, Yellow ,soybean, Meal
Grain:\Wheat, Indian Pusa Basmati Rice, Indian parboiled Rice (IR36/IR-64), Indian raw Rice (ParmalPR-106), Barley, Yellow red maize
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Fibers and other:Guar Gum, Guar seeds, Guar, Jute sacking bags, Indian 28 mm cotton, Indian 31mm cotton, Lemon, Grain Bold, Medium Staple, Mulberry, Green Cottons, , , Potato, Raw Jute, Mulberry raw Silk, V-797 Kapas, Sugar, Chilli LCA334
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Desi, which has small, darker seeds and a rough coat, cultivated mostly in the Kabuli, which has lighter coloured, larger seeds and a smoother coat, mainly
grown in Southern Europe, Northern Africa, Afghanistan, and Chile, also introduced during the 18th century to the Indian subcontinent.[6]
Groundnut (in shell):The peanut, or groundnut (Arachis hypogaea), is a species in the legume family (Fabaceae) native to South America, Mexico and Central America. [1] It is an annual herbaceous plant growing to 30 to 50 cm (1 to 1.5 ft) tall. The leaves are opposite, pinnate with four leaflets (two opposite pairs; no terminal leaflet), each leaflet 1 to 7 cm ( to 2 in) long and 1 to 3 cm ( to 1 inch) broad. The flowers are a typical peaflower in shape, 2 to 4 cm ( to 1 in) across, yellow with reddish veining. After pollination, the fruit develops into a legume 3 to 7 cm (1 to 2 in) long, containing 1 to 4 seeds, which forces its way underground to mature.
Jeera:Cuminseed (Jeera) is a native of the Levant and Upper Egypt. Now it is grown mainly in hot countries, especially India, North Africa, China and the Americas. Cumin is stomachic, diuretic, carminative, stimulant, astringent, emmenagogic and antispasmodic. It is valuable in dyspepsia, diarrhoea and hoarseness, and may relieve flatulence and colic. It is a widely used spice in India.
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Indian 28 mm Cotton:Cotton is a soft, staple fiber that grows in a form known as a boll around the seeds of the cotton plant, a shrub native to tropical and subtropical regions around the world, including the Americas, India and Africa. The fiber most often is spun into yarn or thread and used to make a soft, breathable textile, which is the most widely used natural-fiber cloth in clothing today.
Facilities offered:NCDEX also offers as an information product, an agricultural commodity index. This is a composite index, called NCDEXAGRI that convers 20 commodities currently being offered for trading by NCDEX. This is a spot-price based index. NCDEX also offers as an information product, the index futures, called FUTEXAGRI. This is essentially a what-if index. It indicates, that if futures on the index could be traded, then the current FUTEXAGRI value should be the no-arbitrage value for the index futures. However, indexes and index futures are not allowed to be traded under the current regulatory structure. Hence, these are only available for information, as of now.
MCX
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MCX is India's No. 1 commodity exchange with 84% Market share in The exchange's competitor is National Commodity & Derivatives Exchange Globally, MCX ranks no. 1 in silver, no. 2 in natural gas, no. 3 in crude oil and The crude volume touched 23.49 Miliion barrels [3] on January 3, 2009 The highest traded item is gold with an average monthly turnover of Rs 1.42 MCX has 10 strategic alliances with leading commodity exchange across the The average daily turnover of MCX is about US$ 2.4 billion [4] MCX now reaches out to about 500 cities in India with the help of about MCX COMDEX is India's first and only composite commodity futures price
Ltd ([1])
globe
index .
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METAL
BULLION
Aluminium, Copper, Lead, Nickel, Sponge Iron, Steel Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat, Tin, Zinc
FIBER ENERGY
Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M. E. Sour Crude Oil, ATF, Electricity, Carbon Credit
PLANTATIONS
Cardamom, Jeera, Pepper, Red Chilli PULSES Chana, Masur, Yellow Peas
OIL & OIL SEEDS
Arecanut, Cashew Kernel, Coffee (Robusta), Rubber PETROCHEMICALS HDPE, Polypropylene(PP), PVC
Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Bean, Soy Seeds
CEREALS OTHERS
Guargum, Guar Seed, Gurchaku, Maize Mentha Oil, Potato (Agra), Potato (Tarkeshwar), Sugar M30, Sugar S-30
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Gold:Gold is the oldest precious metal known to man. Therefore, it is a timely subject for several reasons. It is the opinion of the more objective market experts that the traditional investment vehicles of stocks and bonds are in the areas of their all-time highs and may be due for a severe correction. To fully appreciate why 8,000 years of experience say " gold is forever", we should review why the world reveres what England's most famous economist, John Maynard Keynes, cynically called the "barbarous relic."
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Why gold is "good as gold" is an intriguing question. However, we think that the more pragmatic ancient Egyptians were perhaps more accurate in observing that gold's value was a function of its pleasing physical characteristics and its scarcity. Gold is primarily a monetary asset and partly a commodity. More than two thirds of gold's total accumulated holdings account as 'value for investment' with central bank reserves, private players and high-carat Jewellery.Less than one third of gold's total accumulated holdings is as a 'commodity' for Jewellery in Western markets and usage in industry.The Gold market is highly liquid and gold held by central banks, other major institutions and retail Jewellery keep coming back to the market. Due to large stocks of Gold as against its demand, it is argued that the core driver of the real price of gold is stock equilibrium rather than flow equilibrium.South Africa is the world's largest gold producer with 394 tons in 2001, followed by US and Australia. India is the world's largest gold consumer with an annual demand of 800 tons.
Silver:-
Silver's unique properties make it a very useful 'Industrial Commodity', despite it being classed as a precious metal.Demand for silver is built on three main pillars; industrial uses, photography and Jewellery & silverware accounting for 342, 205 and 259 million ounces respectively in 2002.Just over half of mined silver comes from Mexico, Peru and United States, respectively, the first, second and fourth largest producing countries. The third largest is
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Australia.Primary mines produce about 27 percent of world silver, while around 73 percent comes as a by-product of gold, copper, lead, and zinc mining.The price of silver is not only a function of its primary output but more a function of the price of other metals also, as world mine production is more a function of the prices of other metals.Often a faster growth in demand against supply leads to drop in stocks with government and investors.
NMCX
(National Multi-Commodity Exchange of India Limited)
The first De-Mutualised Electronic Multi-Commodity Exchange of India granted the National status on a permanent basis by the Government of India and operational since 26th November 2002.NMCE facilitates electronic derivatives trading through robust and tested trading platform, Derivative Trading Settlement System (DTSS), provided by CMC. When an order is placed on the exchange, the server at NMCE scans through the orders posted on it from all its trading terminals. It then locates and matches the best counter-offers/bids by maintaining anonymity of the counter-parties.
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Anonymity helps is eliminating formation of cartels and other unfair practices, thereby protecting the efficiency of price-discovery at the Exchange. NMCE was the first commodity exchange to provide trading facility through internet, through Virtual Private Network (VPN). NMCE follows best international risk management practices. The contracts are marked to market on daily basis. The system of upfront margining based on Value at Risk is followed to ensure financial security of the market. In the event of high volatility in the prices, special intra-day clearing and settlement is held. NMCE has also set up a Trade Guarantee Fund. Well-capitalized in-house clearinghouse assumes counter-party risk of settlement. NMCE was the first to initiate process of dematerialization and electronic transfer of warehoused commodity stocks. The unique strength of NMCE is its settlements via a Delivery Backed System, an imperative in the commodity trading business. These deliveries are executed through a sound and reliable Warehouse Receipt System, leading to guaranteed clearing and settlement.
List of Commodity traded:Cardamom , Castor Seed, Oil & Oilcake , Chana ,Coffee ,Copra, Coconut Oil & Coconut Oil cake ,Cuminseed ,Gold Study ,Groundnut seed, oil & oil cake , Guar SeedS, Isabgul Seed ,Lin Seed ,Menthol Crystal ,Pepper ,Pulses ,Rape/Mustard Seed, Oil & Oil cake ,Raw Jute, Rubber ,Sacking ,Safflower seed ,Salient features of Oil ,Sesame Seed Silver Study ,Soy Seed, Oil & Oil cake ,Sugar ,Sunflower seed ,Turmeric Wheat
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The New York Mercantile Exchange (NYMEX):The New York Mercantile Exchange is the worlds biggest exchange for trading in physical commodity futures. It is a primary trading forum for energy products and precious metals. The exchange is in existence since last 132 years and performs trades trough two divisions, the NYMEX division, which deals in energy and platinum and the COMEX division, which trades in all the other metals.
Commodities traded: - Light sweet crude oil, Natural Gas, Heating Oil,
Gasoline, RBOB Gasoline, Electricity Propane, Gold, Silver, Copper, Aluminum, Platinum, Palladium, etc.
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London Metal Exchange:The London Metal Exchange (LME) is the worlds premier non-ferrous market, with highly liquid contracts. The exchange was formed in 1877 as a direct consequence of the industrial revolution witnessed in the 19th century. The primary focus of LME is in providing a market for participants from nonferrous based metals related industry to safeguard against risk due to movement in base metal prices and also arrive at a price that sets the benchmark globally. The exchange trades 24 hours a day through an inter office telephone market and also through a electronic trading platform. It is famous for its open-outcry trading between ring dealing members that takes place on the market floor.
The Chicago Board of Trade:The first commodity exchange established in the world was the Chicago Board of Trade (CBOT) during 1848 by group of Chicago merchants who were keen to establish a central market place for trade. Presently, the Chicago Board of Trade is one of the leading exchanges in the world for trading futures and options. More than 50 contracts on futures and options are being offered by CBOT currently through open outcry and/or electronically. CBOT initially dealt only in Agricultural commodities like corn, wheat, non storable agricultural commodities and non-agricultural products like gold and silver.
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Tokyo Commodity Exchange (TOCOM):The Tokyo Commodity Exchange (TOCOM) is the second largest commodity futures exchange in the world. It trades in to metals and energy contracts. It has made rapid advancement in commodity trading globally since its inception 20 years back. One of the biggest reasons for that is the initiative TOCOM took towards establishing Asia as the benchmark for price discovery and risk management in commodities like the Middle East Crude Oil. TOCOMs recent tie up with the MCX to explore cooperation and business opportunities is seen as one of the steps towards providing platform for futures price discovery in Asia for Asian players in Crude Oil since the demand-supply situation in U.S. that drives NYMEX is different from demand-supply situation in Asia. In Jan 2003, in a major overhaul of its computerized trading system, TOCOM fortified its clearing system in June by being first commodity exchange in Japan to introduce an in-house clearing system. TOCOM launched options on gold futures, the first option contract in Japanese market, in May 2004.
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maintains an account of all dealing parties in which the daily profit or loss due to changes in the futures price is recorded. Squiring off is done by taking an opposite contract so that the net outstanding is nil. For commodity futures to work, the seller should be able to deposit the commodity at warehouse nearest to him and collect the warehouse receipt. The buyer should be able to take physical delivery at a location of his choice on presenting the warehouse receipt. But at present in India very few warehouses provide delivery for specific commodities. Following diagram gives a fair idea about working of the Commodity market.
Today Commodity trading system is fully computerized. Traders need not visit a commodity market to speculate. With online commodity trading they could sit in the confines of their home or office and call the shots.
The commodity trading system consists of certain prescribed steps or stages as follows: I. Trading: - At this stage the following is the system implemented- Order receiving - Execution - Matching - Reporting - Surveillance - Price limits - Position limits II. Clearing: - This stage has following system in place- Matching
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- Registration - Clearing - Clearing limits - Notation - Margining - Price limits - Position limits - Clearing house. III. Settlement: - This stage has following system followed as follows- Marking to market - Receipts and payments - Reporting - Delivery upon expiration or maturity.
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The above things are only procedure in character and the risk involved and only after understanding the business, he wants to transact business.
important.
These are amongst the most important factors to calculate the credibility of commodity broker.
Broker:The Broker is essentially a person of firm that liaisons between individual traders and the commodity exchange. In other words the Commodity Broker is the member of Commodity Exchange, having direct connection with the exchange to carry out all trades legally. He is also known as the authorized dealer.
statutory/regulatory authority.
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Trends in volume contribution on the three National Exchanges:Pattern on Multi Commodity Exchange (MCX):MCX is currently largest commodity exchange in the country in terms of trade volumes, further it has even become the third largest in bullion and second largest in silver future trading in the world. Coming to trade pattern, though there are about 100 commodities traded on MCX, only 3 or 4 commodities contribute for more than 80 percent of total trade volume. As per recent data the largely traded commodities are Gold, Silver, Energy and base Metals. Incidentally the futures trends of these commodities are mainly driven by international futures prices rather than the changes in domestic demand-supply and hence, the price signals largely reflect international scenario. 43
Among Agricultural commodities major volume contributors include Gur, Urad, Mentha Oil etc. Whose market sizes are considerably small making then vulnerable to manipulations.
Pattern on National Commodity & Derivatives Exchange (NCDEX):NCDEX is the second largest commodity exchange in the country after MCX. However the major volume contributors on NCDEX are agricultural commodities. But, most of them have common inherent problem of small market size, which is making them vulnerable to market manipulations and over speculation. About 60 percent trade on NCDEX comes from guar seed, chana and Urad (narrow commodities as specified by FMC).
Pattern on National Multi Commodity Exchange (NMCE):NMCE is third national level futures exchange that has been largely trading in Agricultural Commodities. Trade on NMCE had considerable proportion of commodities with big market size as jute rubber etc. But, in subsequent period, the pattern has changed and slowly moved towards commodities with small market size or narrow commodities. Analysis of volume contributions on three major national commodity exchanges reveled the following pattern,
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Non Agricultural Commodities (bullion, metals and energy) Agricultural commodities with small market size (or narrow commodities)
Trade strategy:It appears that speculators or operators choose commodities or contracts where the market could be influenced and extreme speculations possible. In view of extreme volatilities, the FMC directs the exchanges to impose restrictions on positions and raise margins on those commodities. Consequently, the operators/speculators chose another commodity and start operating in a similar pattern. When FMC brings restrictions on those commodities, the operators once again move to the other commodities. Likewise, the speculators are moving from one commodity to other (from methane to Urad to guar etc) where the market could be influenced either individually or with a group.
LIMITATIONS:
Due to bad market conditions people are becoming more and more pessimistic about investing in the share market. After the Reliance IPO, SENSEX fell tremendously from 21000 to 15000. In this crash many people lost their money amounting from 2 Lakhs to 4-5 crore or even more. So when we approach them they tell us how much they used to trade in shares and how much money they have lost in the share market. They even tell us that we are doing our training (SIP) at very wrong time.
While telecalling sometimes the clients do not give positive response, may be because they are really busy or may be not interested in the demat accounts and mutual funds.
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While cold calling when we met the owners of big shops. They said that if they had spare money they will invest it in their shops and not in the share market. They don`t want to take risk.
There are some negative rumors in the market about Sharekhan ltd. some people have very bad experience with Sharekhan in terms of services and charges. This may not be the fault of the company but of some of the marketing executives who don`t disclose all the details about charges and products and once the demat account has been opened they don`t pay any attention to their old clients and thus fail to give proper services to the clients.
Sharekhan takes no charges for opening Demat accounts but there is a initial deposit of Rs.10,000/-. It is just a margin money which has to be kept with Sharekhan till the account opens. As soon as the account opens this money can be kept as it is in the demat account or it can be completely used for buying shares or it can be partially used and the rest of the amount can be withdrawn. But clients fail to understand this. They think that these are the charges they start suspecting it. So its very difficult to convince them to deposit that much amount and open a demat account.
Other Survey was conducted across Udaipur City to judge the awareness of peoples 7% regarding investment in Commodity Market.
23%
1. Investors preferences: -
43%
27%
Commodity Market
Analysis of data revels that majority of people prefer investment in Real Estate (28.81% of total sample) which specified in other category investment and it is greater than share market investment preference.
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13% Know
Very few people heard of commodity market. Vast majority of people are unaware about Commodity Market.
Interested
50%
50%
Not Interested
Though some people heard of commodity market due to lack of complete knowledge about it half of then are not interested in investing in Commodity Market.
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30%
Above data revels that majority of commodity investors like to invest in Bullion (Gold & Silver).
Analysis of data shows that majority of people who are aware about commodity market; feel that investment in commodity market is very risky. So efforts should be done to minimize the risk in commodity investment and make peoples about minimum risk in commodity investment.
No t Info rmative
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There is no second opinion amongst commodity investors, that commodity market advertisements do not give all the necessary information.
ANNEXURE
Terms and Definitions related to Commodity Market: Accruals:- Commodities on hand ready for shipment, storage and manufacture At the Market: - An order to buy or sell at the best price possible at the time an order reaches the trading pit. Basis:
- Basis is the difference between the cash price of an asset and futures
price of the underlying asset. Basis can be negative or positive depending on the prices prevailing in the cash and futures. Bear: Bid:
- A bid subject to immediate acceptance made on the floor of exchange - A quick decline in price.
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Bulging: Bull:
- A quick increase in price. - To buy at the end of trading session at the price within the - To buy at the beginning of trading session at a price
- An option that gives the buyer the right to a long position in the
underlying futures at a specific price, the call writer (seller) may be assigned a short position in the underlying futures if the buyer exercises the call. Close:
exchange during which all transactions are considered made at the close. Closing price:
- The price (or price range) recorded during the period - A concern that buys and sells actual commodities or
agriculture commodities, warehouse receipts covering such commodity, in settlement of futures contract. Some contracts settle in cash (cash delivery). In which case open positions are marked to market on last day of contract based on cash market close. Delivery month:
- Specified month within which delivery may be made - A notice for a clearing members intention to deliver a
an underlying asset. (Underlying assets can be equity, commodity, foreign exchange, interest rates, real estate or any other asset.) Four types of derivatives are trades forward, futures, options and swaps. Derivatives can be traded either in an exchange or over the counter.
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Exchange: - Central market place for buyers and sellers. Standardized contracts ensure that the prices mean the same to everyone in the market. The prices in an exchange are determined in the form of a continuous auction by members who are acting on behalf of their clients, companies or themselves. Futures Contract:- It is an agreement between two parties to buy or sell a specified and standardized quantity and quality of an asset at certain time in the future at price agreed upon at the time of entering in to contract on the futures exchange. It is entered on centralized trading platform of exchange. It is standardized in terms of quantity as specified by exchange. Contract price of futures contract is transparent as it is available on centralized trading screen of the exchange. Here valuation of Mark-to-Mark position is calculated as per the official closing price on daily basis and MTM margin requirement exists. Futures contract is more liquid as it is traded on the exchange. In futures contracts the clearing-house becomes the counter party to each transaction, which is called novation. Therefore, counter party risk is almost eliminated. A regulatory authority and the exchange regulate futures contract. Futures contract is generally cash settled but option of physical settlement is available. Delivery tendered in case of futures contract should be of standard quantity and quality as specified by the exchange. Hedging: - Means taking a position in futures market that is opposite to position in the physical market with the objective of reducing or limiting risk associated with price. Investment Commodities: - An investment commodity is generally held for investment purpose. e.g. Gold, Silver Limit:
- The maximum daily price change above or below the price close in
a specific futures market. Trading limits may be changed during periods of unusually high market activity. Liquidation:
short position, but more often used by the trade to mean a reduction or closing out of long position. Margin: - Cash or equivalent posted as guarantee of fulfillment of a futures contract (not a down payment).
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Margin call: - Demand for additional funds or equivalent because of adverse price movement or some other contingency. Net position: - The difference between the open contracts long and the open contracts short held in any commodity by any individual or group. Offer: - An offer indicating willingness to sell at a given price (opposite of bid). Open contracts: - Contracts which have been brought or sold without the transaction having been completed by subsequent sale, repurchase or actual delivery or receipt of commodity. Open interest:
purchases or sales and never to their combined total. Option: - It gives right but not the obligation to the option owner, to buy an underlying asset at specific price at specific time in the future. Position: - An interest in the market in the form of open commodities. Premium: - The amount by which a given futures contracts price or commoditys quality exceeds that of another contract or commodity (opposite of discount). In options, the price of a call or put, which the buyer initially pays to the option writer (seller). Price limit:
permitted during one trading session, as fixed by the rules of a contract market. Purchase and sales statement: - A statement sent by FMC to a customer when his futures option has been reduced or closed out (also called P and S) Range:
- The difference between high and low price of the futures contract
during a given period. Settlement price: - The official daily closing price of futures contract, set by the exchange for the purpose of setting margins accounts. Spot Markets:-Here commodities are physically brought or sold on a negotiated basis. Spot price: - The price at which the spot or cash commodity is selling on the cash or spot market. 53
Questionnaire
COMMODITY MARKET (Questionnaire for Investors) Name:-.. Address: ... Phone No. :-..
1. a. YES Do you have any investment plan? b. NO
(If no move to question no. 4) 2. If, yes, where you would like to invest/trade your money? b. Share Market d. Other (specify). 54
3.
5. a. YES 6.
Do you aware about Commodity Market? b. NO Are you willing to invest in Commodity Market?
(If no move to question no 12) (If in Q. 2 Commodity Market, skip this question) a. If YES, why? --------------------------------------------------------------------------------------------------------------------------------------------------b. If NO, why? ---------------------------------------------------------------------------------------------------------------------------------------------------(If no move to the Question no.10) 7. a. MCX If yes, which Commodity Exchange you will prefer for investment? b. NCDEX
c. NMCE d. Other (specify). f. Cant Say 8. Why you prefer specific Commodity Exchange for investment?
9.
In which Commodities you will prefer to Invest? And why? b. Agricultural c. Metals d. Fossils/Energy
a. Bullion
---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------10. What is your perception about Commodity Market? a. Less Risky b. Risky c. Very Risky
11. What you think Commodity Market Advertisements (hoardings, prints etc) are explanatory enough to give needed useful information? a. YES 12. Gender a. Male b. Female b. NO
13. Age Group a. Below 21 Years c. 31 years 40 years e. Above 50 years 14. Occupation a. Govt. Job b. Private Job c. Business d. Other (specify) 15. Income Group (Per month) a. Nil c. 1,20,000 2,40,000/e. Above 3, 60,000/ b. Below 1,20,000/d. 2,40,000 3,60,000/b. 21 years 30 years d. 41 years 50 years
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Conclusions
Commodity market in India is still in a nascent stage. It should be given a helping hand by the concerned authorities to increase its depth. The infrastructure facilities like warehouses, transportation etc. should be improved so that the genuine buyers can take physical delivery of goods instead of settling transaction in cash. This may also control speculation to an extent. There is also an urgent need for an independent regulator for these markets. Instead of bureaucratic Ministry of Consumer Affairs & Food, professional agency like Forwards Market Commission (FMC) needs to be at the helm. Apart for these more products like Commodity Options need to be introduced. This will further help deepen the market & would help in increasing the popularity of such exchanges. This will finally lead to a wider investor base & lesser power in the hands of ruthless traders & speculators.
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Taking these few but firm steps, I believe, there is a bright future ahead for the Futures Market.
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2. Having good Career Scope. 3. This Should be promoted and awareness should be among public. 4. Training programme should be organized .
BIBLIOGRAPHY
http://commodities.in http://finance.indiamart.com/markets/commodity/ http://www.commoditiescontrol.com http://www.mcxindia.com http://www.ncdex.com www.sharekhan.com
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