Download - Indian Commodity Market
Prepared By:Dipa Shah
Nikita SanghviBharat Maheshwari
Krishna RajputMitesh Shah
Keyur Savalia
• Introduction• Commodities Traded• Participants• Functioning• Agricultural Commodity Market• Ground Nut• Indian Commodity Market• Conclusion
FLOW OF PRESENTATION
HISTORY OF COMMODITY MARKET
• Evolution• Indian Commodity Market -134 Year old• 1875-“Bombay Cotton Trade Association Ltd” • India -the largest consumer of Gold• Indian Retail Market estimated to cross Rs 10000
Billions by the year 2010
COMMODITY AND COMMODITY EXCHANGES
• Commodity • Commodity Exchange
– Global Commodity Exchanges– National Commodity Exchanges– Regional Commodity Exchanges
COMMODITY EXCHANGES
• Global Commodity Exchanges– NYMEX : New York Mercantile Exchange– LME : London Metal Exchanges– CBOT : Chicago Board of trade– SICOM : Singapore Commodity Exchanges– Kansas Board of trade and many more……
• National Commodity Exchanges1. NCDEX – National Commodity & Derivative
2. MCX - Multi Commodity Exchange
3. NMCEIL - National Multi Commodity Exchange India Ltd
4. ICEX – Indian Commodity Exchange
COMMODITY EXCHANGES
• Regional Commodity Exchanges
– Bombay Commodity Exchanges
– Kanpur Commodity Exchanges
– Ahmedabad Commodity Exchanges
– Rajdhani Oil & Seeds Commodity Exchanges
– The Chamber of Commerce
– E Sugar India Ltd. (Mumbai)
COMMODITIES
Fibres and Manufactu
rers
Spices
Edible Oilseeds and Oil
Pulses
Energy Products
Vegetables
Metals
Others
COMMODITIES TRADED IN INDIA
• Hedger
– Farmers, manufacturers, importers & exporter.
– Buys or sells in the futures market to secure the future
price of a commodity intended to be sold at a later date in
the cash market.
– Protect against price risks.
PLAYERS IN THE DERIVATIVES MARKET
Hedgers
• Buyers– They hold the long
position in futures contracts.
– They trying to secure as low price as possible.
• Sellers– They hold the short
position in futures contracts.
– They trying to secure as high price as possible.
Both parties try to reduce the risks associated with price volatility.
PLAYERS IN THE DERIVATIVES MARKET
Speculators
• They do not aim to minimize risk but to benefit from the inherently risky nature of the commodity market.
• They aim to profit from the very price change that hedgers are protecting.
They do the simultaneous buying and selling of assets in different market taking advantage of differing prices.
PLAYERS IN THE DERIVATIVES MARKET
Arbitrage
• Buyers & sellers
• Pricing mostly
• Contract states the price that will be paid and the date of
delivery.
• Almost all futures contracts end without the actual
physical delivery.
FUNCTIONING OF COMMODITY MARKET
0.00
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
80,000.00
2008-092009-10
TIME PERIOD - DATEWISE
VA
LU
E O
F T
RA
DE
IN
Rs.
CR
OR
E
TRADE IN AGRI-COMMODITY IN INDIAN COMMODITY MARKET
RICE WHEAT URAD POTATOES ONION SOYABEAN
4 3
27
71
32
17
5
14
75
60
42
2121
13
57
88
59
39
JAN 2000-DEC 2002 JAN 2003-DEC 2006 JAN 2007-DEC 2009
VOLATILITY IN MONTHLY SPOT PRICE INDICES : ESTIMATES OF STANDARD DEVIATIONS
0
5
10
15
20
25
30
35
40
India Consump-tionUS consump-tion
VA
LU
E I
N %
COMPARISON OF AGRI-COMMODITY CONSUMPTION BETWEEN INDIA AND US
2006-07
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
5
1.2531.086 1.103 1.003
0.693
0
1.217 1.294
4.958
1.002 1.106
1.8661.652
1.3171.543
1.108
1.397
0.992
00.00500000000000001
3.143
1.16
IndiaUSA
COMPARISON OF PROD/CONS RATIO BETWEEN INDIA AND USA (2006-07)
TRADING IN AGRI-COMMODITY- GROUNDNUT
- Major groundnut consuming countries.
- Groundnut exporting countries.
- Groundnut producing countries.
- Production of groundnut in India
GROUNDNUT
Weather conditions
Monsoon status
Price fluctuations
International price movements.
High consumption
MARKET INFLUENCING FACTORS
Bullion and other metals
Agriculture Energy Others0
5
10
15
20
25
30
1.8
3.9
0.0200000000000001 0
7.79
11.92
1.82 0.0200000000000001
21.29
13.17
2.310.001
26.24
9.41
5
0
COMMODITY GROUP-WISE VALUE OF TRADE
2004-05
2005-06
2006-07
2007-08
TR
AD
E V
AL
UE
ISN
Rs.
LA
KH
CR
OR
E
SOURCE: ECFT
PERFORMANCE ANALYSIS OF INDIAN COMMODITY MARKET
• Year 2003:
Starting with trade in 7 commodities till 1999, futures trading now
available in 95 commodities
54 prohibited commodities opened up for forward trading
establishment and recognition of three new national exchanges with
on-line trading and professional management
• The volume of trade had increased exponentially since 2003- 04 to
reach Rs. 36.77 lakh crore in 2006-07
GROWTH OF INDIAN COMMODITY MARKET
• Agricultural commodities - largest proportion of the total value of trade
till 2005-06 (55.32%)
• Growth in 2006-07
Bullion and metals (88.7%),
Agricultural commodities (10.7%)
• Reasons:-
Stringent regulations, like margins and open interest limits
dampening of sentiments due to suspension of trade in few
commodities
GROWTH OF INDIAN COMMODITY MARKET
• Significant decline in trade in agriculture commodities during the
year 2007-08, by 28.5%.
• Trade in Chana, Maize, Mentha Oil, Guar seed, Potato, Guar Gum,
Chillies and Cardamom, which accounted for 57.9% of total futures
trade in agricultural commodities in 2006-07, declined by over
66.4% during 2007-08 compared to previous year
GROWTH OF INDIAN COMMODITY MARKET
2%11%
6%
3%1%9%
66%
0%
Fibres and Manufactures
Spices
Edible Oil seeds and Oil
Pulses
Energy Products
Vegetables
Metals
OtherSOURCE: www.mcx.com
TRADING FROM APRIL 2007 - MARCH 2010 IN UNIT (AS PER MCX)
0.00
50,000.00
100,000.00
150,000.00
200,000.00
250,000.00
300,000.00
350,000.00
400,000.00
450,000.00
500,000.00
2008-092009-10
TIME PERIOD- DATEWISE
TR
AD
E V
AL
UE
IN
Rs.
CR
OR
E
SOURCE: www.fmc.gov.in
TREND OF INDIAN COMMODITY MARKET
• Total value of trade :
Fy 2008/09 INR52.49 lakh crore
Fy 2007/08 INR 40.66 lakh crore
• Growth of 29.09%, under challenging economic conditions globally
• Main drivers of growth :
MCX, NCDEX and NMCE along with two regional exchanges –
NBOT Indore and ACE, Ahmedabad – contributed to 99.61% of the
total value of commodities traded during 2008/09.
CURRENT SCENARIO OF INDIAN COMMODITY MARKET
• Turnover grew from 1.29 trillion rupees in 2003/04 to 52.49
trillion rupees in 2008/09
• Turnover bourses rose 49.80% to 73.51 trillion rupees in first
eleven-and-a-half months of fiscal 2009/10
• Active trade in gold, silver, copper and crude oil in the energy
and metals pack during March ’10 first fortnight
• Guar seed, chana, soybean, turmeric and jeera saw trade
among agricultural commodities
CURRENT SCENARIO OF INDIAN COMMODITY MARKET
• December 1952 -Forward Contracts (Regulation) Act, 1952,
enacted
• The Act provided for 3-tier regulatory system;
a) An association recognized by the Government of India on the
recommendation of Forward Markets Commission
b) The Forward Markets Commission (set up in September
1953)
c) The Central Government
REGULATORY FRAMEWORK
• Forward Contracts (Regulation) Rules were notified by the Central Government in
July, 1954.
• The Act divides the commodities into 3 categories with reference to extent of
regulation, viz.:
a) The commodities in which futures trading can be organized under the auspices of
recognized association.
b) The commodities in which futures trading is prohibited.
c) Those commodities which have neither been regulated for being traded under the
recognized association nor prohibited are referred as Free Commodities and the
association organized in such free commodities is required to obtain the Certificate
of Registration from the Forward Markets Commission.
REGULATORY FRAMEWORK
• Forward Markets Commission provides regulatory oversight
in order to ensure -
• financial integrity (i.e. to prevent systematic risk of default by
one major operator or group of operators),
• market integrity (i.e. to ensure that futures prices are truly
aligned with the prospective demand and supply conditions)
and
• to protect and promote interest of customers/ non-members.
REGULATORY FRAMEWORK
•Decade of commodities
•Global commodity market is greater than stock market
•India - Top producer of commodities
•Market has enormous progress in technology,transpereny,and
trading activity
•Supports developing price and price risk management policy to
decide upon prices of commodity
•Price risk management for future uncertainty
CONCLUSION