Passive Investors and Managed Money in Commodity Futures Part 1: Participation Levels
Investors perception towards the commodity market
13
INVESTORS PERSPECTIVE OF COMMODITY MARKET IN INDIA G. HUDSON ARUL VETHAMANIKAM Doctorial Research Scholar, Alagappa Institute of Management, Alagappa University, Karaikudi – 630 004
Transcript of Investors perception towards the commodity market
INVESTORS PERSPECTIVE OF COMMODITY MARKET IN INDIA
G. HUDSON ARUL VETHAMANIKAMDoctorial Research Scholar,
Alagappa Institute of Management, Alagappa University,Karaikudi – 630 004
Introduction It is a product whose value is derived from the value of one or more basic variables
Underlying Assets:1. Equity2. FOREX3. Commodity
The most direct way of investing in commodities is by buying into a futures contract. The investors‘ purposes there are currently about 50 major commodity markets worldwide that facilitate investment trade in nearly 100 primary commodities.
Definition
A security derived from a debt investment, share, loan whether secured or unsecured, risk instrument or contract for difference or any other from of securities.
A contract which derives its value from the prices or index of Prices of underlying securities.
Commodity Market
Every commodity that is produced must eventually come to a market place where it can be bought and sold. It is in this marketplace that are the elements of commerce will come together to settle a price at which the commodity will get traded.
The two core participants in a commodity market are the seller and the buyers. The meet each other in the market, with seller representing the supply side and buyers representing the demand side of this market.
Commodity Market Soft commodities / Agricultural commodity
Hard commodity / Non- Agricultural commodity
Types of Commodity Soft commodities
1. Oil 2. Oil seeds 3. Spices4. Pulses 5. Cereals 6. potato 7. plantations 8. Fibres 9. sugar livestock and so on.
Hard commodity
1. Industrial Commodity: Copper, nickel, zinc, aluminium, palladium, lead, Tin, Steel.
2. Precious metal: Gold, silver, platinum.
3. Energy: Crude oil, natural gas, furnace oil, power.
STRUCTURE OF COMMODITY MARKET IN INDIA
Ministry of Finance (Govt. of India)
Forward Market Commission (FMC)
Commodity Exchanges
National Exchanges Regional Exchanges
MCX NCDEXXX
Other Regional Exchanges ICEX
NMCE
Stock Exchanges
1. MCX - Multi-Commodity Exchange
2. NCDEX - National Commodity and Derivatives
Exchanges
3. ICEX - Indian Commodity Exchange
4. NMCE - National Multi Commodity Exchange
TURNOVER OF COMMODITIES IN MCX
Year Non Agriculture commodities
Agriculture commodities
Total Turnover of MCX index
2004 - 05 85.10 14.90 100
2005 - 06 84.80 15.20 100
2006 - 07 93.50 6.50 100
2007 - 08 96.90 3.10 100
2008 - 09 99.30 0.70 100
2009 - 10 98.90 1.10 100
2010 - 11 98.80 1.20 100
2011 - 12 98.70 1.30 100
2012 - 13 98.20 1.80 100
2013 - 14 98.00 2.00 100
Source: www.mcxindia.com (figures in brockets indicate percentage to total)
NON-AGRICULTURAL COMMODITIES TURNOVER OF MCX
Year Precious Non precious Energy Total
2004 – 05 98.32 0.34 1.34 100
2005 – 06 76.80 1.39 21.81 100
2006 – 07 70.87 18.52 10.61 100
2007 – 08 54.30 29.30 16.39 100
2008 – 09 64.53 13.28 22.19 100
2009 – 10 48.47 27.10 24.43 100
2010 – 11 53.14 25.79 21.07 100
2011 – 12 64.70 17.60 17.70 100
2012 – 13 53.44 21.48 25.07 100
2013 – 14 50.52 20.45 29.03 100
Total 635.09 175.25 189.64 ---
Mean 63.509 17.525 18.964 ---
SD 15.39731 9.986197 8.028039 ---
Source: www.mcxindia.com (figures in brockets indicate percentage to total)
CONCLUSION Agriculture commodity derivatives were this instruments helps in effective price discovery and price risk management at the time of volatile price fluctuation and it also integrated price structure throughout the country by eliminating unforeseen price change in the agricultural products.
The investors should keenly watch the situation like market price, economy, returns, and the risk involved in a commodities before taking decision on a particular commodity. The investors know the commodity market and technical analysis thus can succeed in the market.
Queries
• H
