naresh angel

SURVEY ON “INVESTORS' PERCEPTION OF COMMODITY FUTURES”

ARESEARCH PROJECT

ON“INVESTORS’ PERCEPTION OF

COMMODITY FUTURES”(Conducted for Pristine Angel Broking Ltd)

Submitted by

NARESH KARNAVATRoll No. 912

Enrollment No: 097210592053

K.J. INSTITUTE OF MANAGEMENTVADASMA

(Gujarat Technological University)July, 2010

0


GUIDE CERTIFICATE

I hereby declare that the research work embodied in this dissertation

entitled “INVESTORS PERCEPTION OF COMMODITY FUTURES” has been

undertaken and completed by KARNAVAT NARESH G under my guidance

and supervision. I also certify that he has fulfilled all the requirements under the

covenant governing the submission of dissertation to the GUJARAT

TECHNOLOGICAL UNIVERSITY for the award of MBA Degree.

Place: Palanpur

Date:

1


CERTIFICATE

This is to certify that Mr.KARNAVAT NARESHKUMAR G. a student of K.J.Institute

of Management, Vadasma has submitted his Summer Project titled “INVESTORS

PERCEPTION OF COMMODITY FUTURES” in the year 2010-2011 as a part of

curriculum of Gujarat Technological University.

Dr.R.K.Shrikhande

Director Project Coordinator

Date:

2


DECLARATION

I, hereby, declare that summer Project titled, “INVESTORS PERCEPTION OF

COMMODITY FUTURES” is original to the best of my knowledge and has not been

published elsewhere. This is for the purpose of partial fulfillment of M.B.A. degree

affiliated with Gujarat Technological University.

Student Name Signature

(KARNAVAT NARESH G.)

(ENROLLMENT NO: 097210592053)

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PREFACE

The MBA programme is specially designed professional course that enables and prepare

the students for the practical world. It offers various practical projects like the summer

internship projects that gives a chance to students to enter in industry and work with the

real professionals and help the students to understand how the industry is working and

what are the real problems and opportunities with which the industry actually deal.

It is also one of the important projects as in MBA program practical approach and

knowledge is equally important as theoretical issue. The summer report also provides an

important opportunity to students to relate their theoretical knowledge to practical issues

in real professional world.

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ACKNOWLEDGEMENT

I take this opportunity to extend my sincere gratitude to the respondents who

gave all the support and had been cooperative in providing all the valuable

required information without which I would not have completed my report. I

would also like to thank K. J. INSTITUTE OF MANAGEMENT, and

Mr.PARESH PATEL ( ANGEL BROKING ) for the constant guidance,

encouragement and motivation they extended throughout the study.

I also thank my parents and friends for their co-operation, support and

encouragement extended throughout the study.

Thank you

STUDENT NAME.

(KARNAVAT NARESH G.)

(ENROLLMENT NO: 097210592053)

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EXECUTIVE SUMMARY

As a partial fulfillment of my MBA curriculum I have undergone summer training in

“ANGEL BROKING” at PALANPUR branch from 1st June 2010 to 20th July 2010. The

Angel Group has emerged as one of the top 5 retail stock broking houses in India, having

memberships on BSE, NSE and the two leading commodity exchanges in the country i.e.

NCDEX and MCX. Angel Broking Ltd is also registered as a depository participant with

CDSL. Angel has exceeded customer’s expectations by providing world-class service. I

was placed under the Financial and Broking and I have learned a lot in carrying out

financial task for Angel Broking. I have done mainly to prove that commodity futures

can be used as a risk reduction instrument, I have also carried out a project during

summer training. The title of my project is “Investors’ Perception of Commodity Futures

in palanpur city area”

The questionnaire was used as data collection instrument and both open ended and close

ended type of questions were used as per the requirement. From the survey it was found

that Commodity future is a good investment opportunity prevalent in the market and Risk

can be reduced by commodity futures by using varies risk management techniques. More

details about the project are available in later part of this report.

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TABLE OF CONTANTS

CHAPTERS NO.

TOPIC PAGE NO.

Chap-1 INTRODUCTION TO THE TOPIC

The Indian financial system.

Guidelines by the RBI pertaining to commodity

future trading.

Security and exchange board of India.

SEBI guidelines for commodity futures trading.

8-17

811

1315

Chap-2 RESEARCH DESIGN

Objective of the study.

Research methodology.

19-21

1820

Chap-3 COMMODITY FUTURES

The history of trading

Definition of commodity.

Definition of commodity future.

Growth of commodity futures in India.

Commodity trading affects the economy.

Investor’s choice.

The role of the exchange in future trading.

22-25

Chap-4 RISK ASSCIATED WITH COMMODITY

FUTURES TRADING.26

7


TOPIC

PAGE NO.

Chap-5 THE VARIOUS RISK MANAGEMENT TECHINQUES USED IN COMMODITY FUTURES TRADING.

27

Chap-6 COMPANY PROFILE introduction angel group membership location angel intensive research process

28-30

Chap-7 SWOT ANALYSIS31

Chap-8 DATA ANALYSIS Angel Services. Guideline for risk management. Angel Product.

32-37

Chap-9 FINDING AND INTRERPRETATION Analysis & Interpretation

38-5657-62

Chap-10 CONCLUSION63-66

Chap-11 APPENDIX Questionnaire

BIBLIOGRAPHY72

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CHAP:-1 INTRODUCTION TO THE TOPIC

THE INDIAN FINANCIAL SYSTEM

The Indian financial system consists of many institutions, instruments

and markets. Financial and cheques, to the more exotic futures swaps of high

finance.

The Indian financial system is broadly classified into 2 Broad Groups:-

1. Organized Sector

2. Unorganized Sector

1. ORGANISED SECTOR:-

The organized sector consists of: -

Unorganized markets:-

The financial transactions, which take place outside the well-established exchanges or

without systematic and orderly structure or arrangements constitutes the

unorganized markets. They generally refer to the markets in the villages.

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The financial syst The Financial System

___________________________|__________________________ | | Organized sector Unorganized

Sector

| |__________|______________________________________| | | |

Financial Market

Services Institution Instrument

| | |_____

Other

Non-intermediaries

Intermediaries

Regulatory

Organized Unorganized Primary Secondary

__________|_____________ __________|____________ | | | | |

Capital market

Money market Short term

Medium term

Long term

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Money lender

Land lords

Pawn brokers

Traders

Indigenous


iii. Financial instruments:-

Financial instruments constitute of securities, assets and claims. Financial securities are

classified as primary and secondary securities.

The primary securities are issued by the companies directly to the ultimate savers as

ordinary shares and debentures.

While the secondary securities are issued by the financial intermediaries to the

ultimate savers as bank deposits, insurance policies so and on.

iv. Financial services:-

The term financial service in a broad sense means “Mobilizing and allocating

savings”. Thus, it can also be offered as a process by which funds are mobilized from

a large number of savers and make them available to all those who are in need of it,

particularly to the corporate customers.

2. THE UNORGANIZED SECTOR:-

The unorganized financial system comprises of relatively less controlled money

lenders, indigenous bankers, lending pawn brokers, land lords, traders etc. This

part of the financial system is not directly controlled by RBI.

.

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GUIDELINES BY THE RBI* PERTAINING TO COMMODITY FUTURE TRADING

These guidelines cover the Indian entities that are exposed to commodity price risk.

1. A brief description of the hedging strategy

Proposed:-

Description of business activity and nature of risk.

Instruments proposed to be used for hedging.

Exchanges and brokers through whom the risk is proposed to be hedged and credit

lines proposed to be available.

The name and address of the regulatory authority in the country concerned may

also be given.

Size/average tenure of exposure/total turnover in a year expected.

2. Copy of the risk management policy approved by the Board of

Directors covering:-

Risk identification

Risk measurements

Guidelines and procedures to be followed with

respect to revaluation/monitoring of positions.

Names and designations of the officials authorized

to undertake transactions and limits.

3. Any other relevant information:-

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The authorized dealers will forward the application to Reserve Bank along

with copy of the Memorandum on the risk management policy placed before the

Board of Directors with specific reference to hedging of commodity price

exposure. .

i All standard exchanges traded futures will be permitted

ii. Tenure of exposure shall be limited to 6 months. Tenure beyond 6 months would

require Reserve Bank’s specific

approval.

iii. Corporate who wish to hedge commodity price exposure shall have to ensure

that there are no restrictions on import/export of the commodity hedged under

the Exim policy in force.

After grant of approval by Reserve Bank, the corporate concerned should

negotiate with off-shore exchange broker subject, inter alia, to the following:-

Brokers must be clearing members of the exchanges, with good financial

track record.

Trading will only be in standard exchange- traded futures

contract/options .

Source from www.rbi.org

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SECURITIES AND EXCHANGE BOARD OF INDIA

SEBI was setup in April 12, 1988. To start with, SEBI was set up as a non-statutory body.

It took 4 years for the government to bring about a separate legislation in the name of

securities and exchange board of India Act, 1992, conferring statutory powers over

practically all aspects of capital market operations.

Objectives of SEBI

To protect the interest of investors so that there is a steady flow of savings into the

capital market.

To regulate the securities market and ensure fair practices by the issuers

of securities, so that they can raise resources at minimum cost.

To provide efficient services by brokers, merchant bankers and the

other intermediaries, so that they become competitive and professional.

Functions of SEBI

Sec 11 of the SEBI act specifies the functions as follows:-

Regulation of the stock exchange and self-regulatory organizations.

Registration and regulation of stock brokers, sub-brokers, registrar to all

issue, merchant bankers underwriters, portfolio managers and such other

intermediaries who are associated with securities market.

Regulation and registration of the working of collective investment schemes

including Mutual funds.

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Prohibition of fraudulent and unfair trade practices relating to security

market.

Prohibit insider trading in securities.

Regulation substantial acquisitions of shares and take over of companies.

SEBI* GUIDELINES FOR COMMODITY FUTURES TRADING

There are many regulatory authorities, which are monitoring commodity

futures trading, one of them is SEBI. The following Report is one of the

regulatory frameworks for the commodity futures trading.

The following were the recommendations:-

1) Participation of Securities Brokers in Commodity Futures Market

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The committee was of the unanimous view that participation of

intermediaries like securities brokers in the commodity futures market is

welcome as it could inter-alia increase the number of quality players

infuse healthy competition, boost trading volumes in commodities and in

turn provide impetus to the overall growth of the commodity market.

Since the commodity market falls under the regulatory purview of a separate

regulatory authority viz., Forward Market Commission, to ensure effective

regulatory oversight by the Forward Market Commission, and to avoid any

possible regulatory overlap, the pre-condition for such entry by intending

participating securities brokers in the commodity futures market would be

through as separate legal entity, either subsidiary or otherwise. Such entity

should conform from time to time to the regulatory prescription of Forward

Market Commission, with reference to capital adequacy, net worth,

membership fee, margins, etc.

The committee took note of the fact that the existing provisions of the

Securities Contract (Regulation)Rules 1957 forbid a person to be elected as a

member of a recognized stock exchange if he is engaged as principal on

employee in any business other than that of securities, except as a broker or

agent not involving any personal financial liability. The Committee

recommended that the above provisions in the Securities Contract

(Regulations) Rules be removed/amended suitably to facilitate

securities brokers participation/engagement in commodity futures.

An important felt need was the necessity to improve market awareness of

trading and contracts in commodities. The committee there for

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recommendation the forward market commission take appropriate

initiatives in training the market participants.

2) Risk containment measures

In the background of the Forward Market Commission’s report on risk

containment measures currently obtaining in commodity markets and

the committee’s recommendation to permit security brokers’

participation in commodities markets only through a separate legal entity,

the committee consider ensuring strict compliance of the

regulatory prescriptions like net worth, capital adequacy, margins exposure

norms, etc., by the respective market regulators, and due oversight

would be an adequate safeguard ensure that the risks are not transmitted from

one market to the other.

3) Utilization of existing infrastructure of stock exchanges

On the issue of convergence/integration the securities market and

commodities market, that is of allowing stock exchanges to trade in

commodity derivatives and vice versa, the committee was of the view that in

the current statutory and regulatory framework existence of two separate and

established regulators, the issue of integration of the two markets would

require detailed examination, particularly for the purpose of defining clearly

the scope of regulatory purview and responsibility. Also, given the

concerns raised by a section of members that such integration may lead to

further fragmentation of volumes and liquidity in the nascent commodity

markets, the committee was of the view that the issue of markets could be

17


taken up for consideration at a future date as the two markets mature

further.

Source from www.sebi.com

CHAP ;-2 RESEARCH DESIGN

OBJECTIVES OF THE STUDY

Main objective of this study

To prove that commodity futures can be used as a risk reduction instrument and also as

an investment opportunity.

sub-objectives of this study

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http://www.sebi.com/


1. To study the various analysis tools used to make price movement predictions.

2. To study the growth of commodity futures trading.

3. To study the perception of investors of commodity futures (questionnaire).

OPERATIONAL DEFINITIONS

Short selling

Selling first is known better as ‘shorting’ or ‘short selling’. In futures trading, since one

is taking a future delivery, its just as easy to sell first and then buy later. To offset

the obligation to deliver, all one needs to do is to buy back the Contract prior to the

expiration of the Contract.

Margin

A margin refers to a good faith deposit made by the person who wants to buy or sell a

Contract in a futures exchange. It is a small percentage of the value of the

underling commodity represented by the Contract, generally in the neighborhood of 2

to 10%.

Leverage

Leverage is the ability to buy or sell $100,000 of a commodity with a $5000

security deposit, so that small price changes can result in huge profits or losses.

Maintenance margin

Maintenance margin is the amount which must be maintained in ones account

as long as the position is active.

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Margin call

If the equity balance in the account falls below the maintenance margin level,

due to adverse market movement, the account holder will be issued a margin call.

Lot

A lot refers to the number of Contract that one wishes to buy or sell.

Tick

A tick refers to the minimum price fluctuation, is a function of how the prices are quoted

and set by the exchange.

Float

Float refers to the concept, when an investor who has taken a position, but does not want

to liquidate his position at close of the market.

Limit up/down

It refers to the maximum amount that the market can move above or below the previous

day’s close in a single trading session. If the price moves up it is known an ‘limit up’,

when the price moves down its is known as ‘limit down’.

RESEARCH METHODOLOGY

20


In this study primary analytical research method is used, which includes

questionnaire, tabulation analysis. This is one of the most important methods.

SOURCES OF DATA

The various sources of data are:

1. Primary Sources, which includes questionnaire, and a survey.

TOOLS FOR DATA COLLECTION

The questionnaire is the tool used for data collection.

ANALYSIS AND INTERPRETATION

The various tools for analysis used are graphs, charts, percentage growth, secondary data.

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CHAP:-3 COMMODITY FUTURES

THE HISTORY OF TRADING

Although the first recorded instance of future trading Occurred with rice in

17th century Japan, there is some evidence that there may also have been rice futures

traded in China as long as 6000 years ago.

Futures trading are a natural outgrowth of the problems of maintaining a year-round

supply of seasonal products like agricultural crops. In Japan, merchant stored rice in

warehouses for future use. In order to raise cash, warehouse holders sold receipts

against the stored rice. These were known as “rice tickets”. Eventually, such rice tickets

became accepted as a kind of general commercial currency. Rules came into being to

standardize the trading in rice tickets.

In the United States, futures trading started in the grain markets in the middle of

the 19th century. The Chicago Board of Trade was established in1848. In the 1870’s

and 1880’s the New York coffee, cotton and produce exchanges were born. Today there

are ten commodity exchanges in the United States. The largest are the Chicago Board

of Trade the Chicago Mercantile Exchange, the New York Mercantile Exchange, New

York Commodity Exchange and the New York Coffee, Sugar and Cocoa Exchange.

Worldwide there are major futures trading exchanges in over 20 countries including

Canada, England, France, Singapore, Japan, Australia and New Zealand. The products

traded range from agricultural staples like Corn and Wheat to Red Beans and Rubber.

22


What is a commodity?

Corn coffee silver soybean

Commodities are agreements to buy and sell virtually anything except, for some

reason, onions. The primary commodities that are traded are oil, gold and agricultural

products. Since no one really wants to transport all those heavy materials, what is

actually traded are commodities futures contracts or options. These are agreements to buy

or sell at an agreed upon price on a specific date.

What is a commodity future?

Commodities futures, or futures contracts, are an agreement to buy or sell a commodity at

a specific date in the future at a specific price. Just like the price of bananas at the

grocery store, the prices of commodities can change on a weekly or even daily basis.

If the price goes up, the buyer of the futures contract makes money, because he

gets the product at the lower, agreed-upon price and can now sell it at the higher,

market price. If the price goes down, the seller makes money, because he can buy the

commodity at the lower market price, and sell it to the buyer at the higher,

agreed-upon price. Of course, if commodities traders had to actually deliver the

product, very few people would do it. Instead, they can fulfill the contract by

delivering proof that the product is at the warehouse by paying the cash difference or by

providing another contract at the market price. Futures contracts perform two

important functions : price discovery and hedging of price risk in a commodity.

In international bourses traders can also use financial instruments like call

and put options, not yet allowed in India. Futures contracts are useful for the

producer because he can get an idea of the price likely to prevail and thereby help

them quote a realistic price and hedge risk

23


Growth of commodity futures in India

Investment in India has traditionally meant property, gold and bank deposits. The

more risks taking investors choose equity trading. But commodity trading never forms a

part of conventional investment instruments. As a matter of fact Future trading in

commodities was banned in India in mid 1960’s due to excessive speculation. India has

three national level multi commodity exchanges with electronic trading and settlement

systems. The National Commodity and Derivative Exchange (NCDEX). The Multi

Commodity Exchange of India (MCX) and the National Multi Commodity Exchange of

India (NMCE) the National Board of Trading in Derivatives (NBOT), offers trading on

a national level, but is not completely online.

Commodity trading affect the economy

Commodity trading impacts the economy by making public the analysts forecasts of

future prices of the most important market goods. For example, one of the most widely

watched commodities is oil. The price of oil changes daily, which has an impact on

every good and service produced in the U.S economy. As traders take into

account all information regarding oil supply and demand, as well as geopolitical

considerations, this affects oil prices. It is these assumptions behind oil prices that

affect the economy so significantly.

Investor’s choice

The futures market in commodities offers both cash and delivery- based settlement.

Investors can choose between the two. If the buyer chooses to take delivery of

the commodity, a transferable receipt from the warehouse where goods are stored is

issued in favor of the buyer. On producing this receipt, the buyer can claim the

commodity from the warehouse. All open contracts not intended for delivery are

cash settled. While speculators and arbitrageurs generally prefer cash settlement,

commodity stock list and wholesalers go for delivery. The options to square of the

deal or to take delivery can be changed before the last date of contract expiry. In the

case of delivery- based trades, the margin rises to 20-25% of the contract value and the

seller is required to pay sales tax on the transaction.

24


The Role of the exchange in futures Trading.

1) Risk Transfer:-

In a futures transaction , risk is inherent part of doing business. The exchange

provides a setting where risk can be transferred from the hedgers to the speculators.

2) Liquidity:-

If risk is to be transferred efficiently, there must be a large group of individuals

ready to buy or sell. When a hedger wants to sell futures contracts to protect his

business position, he needs to know whether he can effect the transaction quickly.

The futures exchange brings together a large number of speculators, thus making

quick transaction possible.

3 ) Standardization:-

The exchange writes the specifications for each contract, setting standards of grading,

measurement methods of transfer, and times of delivery. By standardizing the

contracts in this manner, the exchange opens the futures market to almost anyone

willing to hedge risk. In the pits, then, the auction process is facilitated because only the

price must be negotiated.

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TYPES OF RISK

OPERATIONAL RISK MARKET RISK LIQUIDITY RISK

TYPES OF RISK

OPERATIONAL RISK MARKET RISK LIQUIDITY RISK


CHAP:-4 RISK ASSOCIATED WITH COMMODITY

FUTURES TRADING

The different types of risks in Commodity Futures

Operational risk:-

The risk that, errors (or fraud) may occur in carrying out operations, in placing

orders, making payments or accounting for them.

Liquidity risk:-

Although commodity futures markets are liquid mostly, in few adverse situations, a

person who has a position in the

market, may not be able to liquidate his position.

Market risk:-

It is the risk of adverse changes in the market price of a commodity future.

26


CHAP:-5 The various risk management techniques used in

Commodity Futures Trading.

There are mainly 3 techniques ,

1. Averaging

2. Switching

3. Locking

Averaging:-

Averaging is a technique used when there is an existing position, and the price

moves adversely. And then at that particular price, enter into a similar new position.

Then take the average of these 2 prices. And when the price moves to that price

liquidate the position.

Switching:-

Switching is yet another risk management technique, when, there is an existing

position, and the prices move adversely and gives all indication that it will go in the same

direction for still some while. Then we have to liquidate the first position and enter a

new and opposite position at the same price.

Locking:-

Locking is yet another risk management technique, where, when there is an existing

position, and the prices move adversely and give an indication that it will move in

that direction, but it will come back to its original position. Here two processes are

involved ‘locking and ‘unlocking’. It is the process where there is an existing position,

and the price moves adversely, we ‘lock’ by entering into a new opposite position.

And then when the second price reaches a point where it will bounce back, we

‘unlock’ by liquidating the second position and book profits, and then finally when the

price reaches somewhere near the first position, liquidate the position, whereby

we can minimize the loss.

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CHAP:- 6 COMPANY PROFILE

INTRODUCTION

Angel broking trust with excellence in customer relation began more than 20 year

ago. Today Angel broking has emerged as premium investment sub-broker and

wealth management house with an absolute focus on real business and commitment to

provides real value for money to all its clients. Promoted by MR.DINESH THAKKAR,

Angel started in 1987 As sub broker is a present across the country provide equity

investment solution to individual clients through multiple channel retail, phone ,

trade and internet platform. The commitment to provides world - class broking service to

the Indian investor and a customer centric work culture has led to several innovation in

the areas of the technical, quality management , HR process giving Angel unique work

culture and edge over the players in the industry. Clients value Angel of its strong

research led investment ideas superior clients service track record and exceptional

execution skill.

ANGEL GROUP MEMBERSHIPS

BSE

NSE

NCDEX AND MCX COMMODITIES.

Angel has the largest NO of NSE registered Sub – brokers.

We have the third largest volume on BSE.

28


ANGEL WAS AWARED THE CONVETED

“MAJOR VOLUME DRIVES.”

TROPHY FOR 3 CONSECUTIVE YEAR.

2007 – 2008

2008 – 2009

2009 – 2010

LOCATION

In a span of less than 20 year. Angel has emerged as a leading retail broking group with a

nation side presence through its:

15 Regional Hubs and 82 branches.

3800 + intermediaries.

Direct team strength of 3000 +.

3.8 lac + customers.

Angel Research team:-

( A ) Angel broking limited is the first broking house in the county To have initiated

retail focused research since the year 2000.

( B ) 50 + member team doing fundamental , technical ,Commodities analysis.

( C ) One of the largest research teams in the industry for small And mid-cap.

29


ANGEL INTENSIVE RESEARCH PROCESS

Industry wise specialized teams:-

( A ) Top down approach:-

Identifying promising sectors and then companies with Good valuations.

( B ) Bottom-up approach:-

Identifying under-valued stocks with sound management.

Company visits and interaction with top and second line of managers.

Through analysis of company financial data and industry trends.

Estimates for future year earnings based on industry trends and Company business

plans.

30


CHAP:-7 SWOT ANALYSIS

The SWOT analysis is an extremely useful tool for understanding and

decision-making for all sorts of situations in business and organizations. SWOT is an

acronym for Strengths, Weaknesses, Opportunities and Threats.

ANGEL BROKING SWOT ANALYSIS:-

STRENGTHS

Financial resources.

Product skill.

Angel broking team is experienced in the trading.

WEAKNESSES

Service

Lack of skill with staff

OPPORTUNITIES

Several additional client groups.

Faster market growth.

Entry into new market.

THREATS

Other trading company.

Other banking service

31


CHAP:-8 DATA ANALYSIS

SERVICES

PROTFOLIO MANAGEMENT SERVICES:-

Successful investing in Capital Markets demands ever more time and expertise.

Investment Management is an art and a science in itself.

Professional Investment Management Services are no longer

the privilege of only large institutional investors.

Portfolio Management Services (PMS) is one such service

that is fast gaining eminence as an investment avenue

of choice for High Net worth Investors like you. PMS is

a sophisticated investment vehicle that offers a range of

specialized investment strategies to capitalize on

opportunities in the market. The Portfolio Management

Service combined with competent fund management,

dedicated research and technology, ensures a rewarding

experience for its clients. Angel PMS brings with it years of

experience, expertise, research and the backing of India's

leading stock broking house. At Angel, experienced portfolio

management is the difference. You will enjoy a relationship with a portfolio

manager equipped to design and implement a portfolio around your unique needs.

We will advise you on a suitable product based on factors such as your investment

horizon return expectations and risk tolerance. By entrusting the management of

your Portfolios to Angel, you can enjoy convenience without compromising on

quality.

32


PRIVATE CLIENT GROUP:-

Angel offers personalized advisory services to affluent HNI investors and actively

assists them in managing their portfolio. PCG can seek guidance on specific stocks

in their portfolio and can get active advice for timely exit and fresh investments. Here

we also design customized products and services for our clients based on there risk

profile, returns need and time horizon. Our experienced research team in-depth

analysis and customized value added products and services give us an immense

advantage in assisting you to generate wealth on a longer and consistent basis.

INVESTMENT ADVISORY:-

To derive optimum returns from equity as an asset class requires professional

guidance and advice. Professional assistance will always be beneficial in wealth

creation. Investment decisions without expert advice would be like treating ailment

without the help of a doctor.Strong research has always been our forte. Our investment

advisory department is backed by an experience research team. This team comprises

of 12 sector special analysts and a Research Head. Their vast experience and

expertise in spotting great investments opportunities has always been beneficial for our

clients.

33


( A ) Expert Advice:-

Our expert investment advisors are based at various branches across India to

provide assistance in designing and monitoring portfolios.

( B ) Timely Entry & Exit:-

Our advisors will regularly monitor your investments and will guide you to book

timely profits. They will also guide you in adopting switching techniques from one

stock to another during various market conditions. Our advisors will regularly monitor

your investments and will guide you to book timely profits. They will also guide you in

adopting switching techniques from one stock to another during various market

conditions.

( C ) De-Risking Portfolio:-

A diversified portfolio of stocks is always better than concentration in a single

stock. Based on our research, we diversify the portfolio in growth oriented sectors and

stocks to minimize the risk and optimize the returns.

DEPOSITORY SERVICES:-

You must be aware that Angel Broking Ltd has started its depository services by

registering with CDSL. There are various benefits of holding your demat account

with us but the biggest advantage is that you shall be ensured of a risk free, prompt and

efficient depository process.

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DIFFERENCE BETWEEN ANGLE DEPOSITORY SERVICES &

OTHER DEPOSITORY SERVICES.

Since our association is slated for a long time, we are in a much better position to

know your requirement regarding your holding and transfer of securities.

No physical instructions are required for your sell obligations. We also offer to our

clients the automated pay in facility for trade done through Angel Broking Ltd / Angel

Capital and Dept Market Ltd. The transaction charges that are being levied by us are the

lowest in the industry as we believe in providing quality services at the most

affordable costs.

You have an option of choosing the products offered by CDSL:-

( A ) Easy facility :-

You can view, download and print the updated holding of your demat account along

with valuation of holding.

( B ) Easiest facility :-

You can, by using this facility, submit your own delivery instructions on the

internet without the intervention of your DP. This is in addition to all the facilities

provided under the 'Easy' facility.

We would like you to know that the state of art technology being arranged for you is

the best in the industry and all this is done so that you have convenience of

accessing information from any desired location.

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MUTUAL FUND:-

The Angel Mutual Fund distribution and advisory division offers you the

opportunity to diversify your investment portfolio. By offering a choice of investment

schemes from all major mutual fund providers we have taken our 100% retail-focused

philosophy a step further. Angel Mutual Fund offers options catering to investors with

varying risk-return profiles. We also help investors to choose the best mutual fund, based

on their investment needs.

EMOTIONS

( A ) SELF DISCIPLINE:-

The greatest cause of loss in trading commodities is lack of self-discipline – lack of

self-discipline to follow your game plan; lack of self-discipline to be patient; lack of

self-discipline to take a loss or profit, lack of discipline to follow money management

concepts. "Luck might play a part in the short-run, but in the end, only those players

who play the game better will triumph. Acting in a disciplined manner is essential for

success. "

( B ) TAKE PROFITS:-

Tremendous amounts of money can and are being made in the commodities

markets. Profits are there for the making, but the real key to trading commodities is

not making money; it is keeping it. It is not basking in the elation of success; it is

taking your profits and looking over your shoulder.

36


( C ) BALANCE:-

Trading commodities is a game of psychology. It is a game of balance.

Emotional extremes create an imbalance. In your elation at being successful, you will

make mistakes of greed. In your reluctance to take a loss, you will make mistakes

of fear. The tremendous emotional release one feels after closing out a big losing

position is amazing. Fighting the market, yet knowing it was going to go against us,

but wanting it to go in our direction - pushing it, hoping for it, worrying about it.

After a few days or a few weeks of that, it felt as though the weight of the world was

taken off our shoulders when we finally take the loss.

( D ) PROFIT & LOSS CYCLES:-

Most often, meeting a margin call will only increase your loss. A margin call

means you are wrong in the market and your position should be closed out. Margin calls

are met because people do not want to admit being wrong and take a loss; because they

hope the market will eventually go in their direction. Avoid meeting margin calls.

37


CHAP-9:- FINDINGS & INTERPRETATION

To study the perception of investors towards commodity futures:-

In this section the data obtained through the questionnaire from the investors in

commodity futures is analyzed.

SECTION :- A

Q-1 :- INVESTMENT RESPONDENTS FROM MALE & FEMALE

Particulars No. of Respondents %

Male 121 80.67

Female 29 19.33

Total 150 100

Male Female0

20

40

60

80

100

120

140

121

29

Q.1

Gender

No.

of r

espo

ndan

ts

Findings

From the above table and chart, it can be seen that 80.67% of the respondents were

male, and 19.33% were female.

Interpretation

It can be concluded that mainly males invest in commodity futures.

38


Q-2: INVESTORS’ RESPONSE FROM FOLLOWIG AGE GROUP:-


20 to 30 years 75 50.00

30 to 40 years 14 9.33

40 to 50 years 45 30.00

Above 50 years 13 8.67

Total 150 100

Findings

From the above table and chart, it can be seen that 50% of the respondents were

in the age group of 20-30 years, 9.33% were in the age group of 30-40 years, and 30%

were in the age group of 40-50 years and 8.67% in the age group of 50 years and above.

Interpretation

It can be concluded that mainly the young people have invested commodity futures.

Q-3 INVESTERS RESPONES FROM EDUCATION PROFILE:-

39

20-30 30-40 40-50 Above 500

10

20

30

40

50

60

70

80

78

14

45

13

Q. 2

Years

Resp

onda

nts


Particulars No. of Respondents %Secondary 00 -

Higher Secondary 02 1.33Graduation 69 46.00

Post Graduation 44 29.33Any other 35 23.33

Total 150 100

Findings

From the above table and chart, it can be seen that 46% of the respondents were

in the Graduate group, 29.33% were in the post graduate group, 23.33% were in

the Any other group and 1.33% in the higher secondary group invested in commodity

futures.

Interpretation

It can be concluded that mainly the young graduates have invested commodity futures.

40

Secondary Higher Secondary Graduation Post graduation any other0

10

20

30

40

50

60

70

0 2

69

4435

Q. 3

Education

Resp

onda

nts


Q-4 INVESTERS RESPONES FROM OCCUPATION:-

Occupation No. of Respondents %Government employee 64 42.66

Self employee 9 6.00Commodity futures Investor 48 32.00

Private sector employee 21 14.00Other Businesses 8 5.33

Total 150 100

0

10

20

30

40

50

60

7064

9

48

21

8

Ques 4

occupation

resp

onda

nts

Findings

From the above table and chart, it can be seen that 42.66% of the respondents

were in the Government employee group, 6% were in the Self employee group,

32% were in the Commodity futures Investor group , 14% in the Private sector

employee group invested in commodity futures and 5.33% in the Other Businesses group

invested in commodity futures

Interpretation

It can be concluded that mainly the Government employee group have invested

commodity futures.

Q- 5 INVESTERS RESPONES FROM INCOME PROFILE:-

41


Income Group No. of Respondents %Below 4 lakh 62 41.33

4-10 lakh 45 30.0010-25 lakh 38 25.33

25 lakh above 5 3.33Total 150 100

Below 4 lacs 4-10 lacs 10-25 lacs Above 25 lacs0

10

20

30

40

50

60

70 62

4538

5

Ques 5

Income

No

of R

espo

ndet

s

FINDINGS

From the above table and chart, it can be seen that 41.33% of the respondents in the

income group of below Rs. 4 lakh, 30% were of the income group of Rs. 4-10 lakh and

25.33% were in the income group of Rs. 10-25 lakh

INTERPRETATION

It can be concluded that most of the people who have invested commodity futures are in

the income group of below Rs. 4 lakh

42


SECTION:- B

Q.1 Have you invested in commodity futures?

Particular No. of Respondents %

Yes 150 100

No 00 -

Total 150 100

Yes No0

20406080

100120140160

150

2.5

Que 1

Investment in Commodity Futures

Resp

onde

nts

Findings

From the above table and chart, it can be seen that 100% of the respondents have

invested in commodity futures, and 0% have not invested in commodity futures.

Interpretation

It can be concluded that most of the respondents have invested in commodity

futures.

43


Q. 2 Have you invested in any other securities.

Yes No0

20

40

60

80

100

120

108

42

Q.2

Investment in other Securities

Resp

onde

nts

Findings

From the above table and chart, it can be seen that 72% of the respondents have invested

in other securities, and28% have in any other security.

Interpretation

It can be concluded that most of respondents have invested in other securities also.

Q. 3 Do you have any other investment? (Excluding commodity futures)

44

Particular No of Respondents %

YES 108 72NO 42 28

Total 150 100


Particular No. of Respondents (Multiple Choices) %

Shares 57 19.86

Mutual funds 39 13.59

Bonds 29 10.10

Bank Deposits 49 17.70

Real estate 23 08.01

Jewels (Gold) 56 19.51

Insurance 34 11.85

Total 287 100

Shares Mutual Funds

Bonds Bank Deposits

Real Estate Jewels Insurance0

10

20

30

40

50

6057

39

29

49

23

56

34

Q. 3

Other Investments

Resp

onde

nts

Findings

It can be seen that, out of the respondents who have invested in other securities,

19.86% of them have invested in shares, 13.59% Mutual funds, 10.10% in Bonds,

17.70% have invested in bank deposits. 08.01% in real estate, 19.51% have invested

in jewellery and the rest 11.85% have invested in insurance.

Interpretation

It can be concluded that other than commodity futures, most of the respondents have

invested in shares.

Q. 4 how often do you trade in commodity future?

45



Everyday 14 9.33

Once a week 77 51.33

Trade when good prices 59 39.33

Total 150 100

Everyday Once a Week When Good Prices0

10

20

30

40

50

60

70

80

14

77

59

Q. 4

Trading of Commodities

Resp

onde

nts

Findings

It can be seen that out of the investors in commodity futures, 9.33% of them trade

everyday, 51.33% of them traded once a week and 39.33% traded only when there is

good price.

Interpretation

It can be concluded that most of the investors trade in commodity futures only

when there traded once a week.

46


Q. 5 what is your objective when trading in commodity futures?


Less risky investment 28 18.67

Diversification of portfolio 92 61.33

Very good returns 25 16.67

Others 05 3.33

Total 150 100

Less Risky In-vestment

Diversification Very Good Returns Other objective0

102030405060708090

100

28

92

25

5

Q. 5

Trading Objectives

Resp

onde

nts

Findings

It can be seen that out of the investors in commodity futures, 18.67% of them have

invested with the objective a less risky investment, 61.33% of them invested with

the objective of diversifying hid portfolio and 16.67% of them due to the

expectation of very good returns and 3.33% have invested due to other reasons.

Interpretation

It can be concluded that most of the investors in commodity futures, have invested with

the objective of diversifying their portfolio.

47


Q.6 what is the amount you have invested in commodity futures?


2 Lakhs 43 28.67

2-3 Lakhs 66 44.00

3-5 Lakhs 36 24.00

5-10 Lakhs 04 02.67

10 Lakhs more 01 00.66

Total 150 100

2 Lakhs 2-3 Lakhs 3-5 Lakhs 5-10 Lakhs Above 10 Lakhs0

10

20

30

40

50

60

70

43

66

36

4 1

Q. 6

Investment Amount

Resp

onde

nts

Findings

It can be seen that out of the investors, 28.67% of them had invested Rs. 2 lakhs, 44%

of them had invested between Rs. 2-3 lakhs, 24% had invested between Rs. 3-5 lakhs

and 02.67% had invested between Rs. 5-10 lakhs.

Interpretation

It can be concluded that most of the investors had invested between Rs. 2-3 lakhs in

commodity futures.

48


Q. 7 Which commodities have you traded in the most?


Wheat 70 46.67

Cotton 69 46.00

Coffee 07 04.67

Corn 04 02.66

Total 150 100

wheat cotton coffee corn0

10

20

30

40

50

60

70

70 69

7 4

Q-7

commodities

RESPONDENTS

Findings

It can be seen that out of the investors in commodity futures, 46.67% investor invest in

wheat, 46% investor invest in cotton, 4.67% investors invest in coffee, and 2.66%

investors invest in corn.

Interpretation

It can be concluded that the mostly traded commodity is wheat and coffee.

49


Q. 8 what percentage of savings have you invested in commodity futures?


0-10% 12 8

10-20% 48 32

20-30% 66 44

30-50% 6 4

50% above 18 12

TOTAL 150 100

0-10% 10-20% 20-30% 30-50% 50% above0

10

20

30

40

50

60

70

12

48

66

6

18

Q-8

Investment from Saving

Resp

onde

nts

Findings

It can be seen that, 44% of the investors have invested between 20-30% of their savings

in commodity futures, 32% of them have invested between 10-20% of their savings,

12% of them have invested above 50% of their savings, 8% of them have invested

between 0-10% of their savings and 4% of them have invested between 30-50% of

their savings.

Interpretation

It can be concluded that most of the investors have invested between 20-30% of their

savings in commodity futures.

50


9) How do you come to know about ‘Commodity Futures Trading’?

Particular No. of Respondents %Friends 17 11.33Media 64 42.67

Self- research 56 37.33Other 13 8.67Total 150 100

Friends Media Self- research Other0

10

20

30

40

50

60

70

17

6456

13

Q-9

knowelage of investment

Resp

onde

nts

Findings

It can be seen that, 11.33% of the investors got to know about commodity futures

through their friends/family, 42.67% got to know through media and 37.33% of the

investors got to know through self-research.

Interpretations

It can be concluded that most of the investors got to know about commodity futures

through media.

51


Q.10 which is the risk management technique, which you use mostly?


Switching 23 15.33

Averaging 70 46.67

Locking 48 32.00

Cut Loss 09 06.00

Total 150 100

Switching Averaging Locking Cut Loss0

10

20

30

40

50

60

70

23

70

48

9

Q. 10

Risk Mgt. Techniques Usage

Resp

onde

nts

Findings

It can be seen that out of the risk management techniques, 32% of the investors use

locking, 15.33% use switching and 6% use cut loss technique & 46.67% averaging

Interpretation

It can be concluded that is the mostly used averaging risk management technique.

52


Q. 11 what do think about the felicitation fee charged by your company?

Very high High Reasonable Low0

10

20

30

40

50

60

70

80

37

78

25

10

Q. 11

Felicitation Charges

Resp

onde

nts

Findings

It can be seen that, 16.67% of the investors feel that the facility fee charged by their

company is reasonable, 52% of them feel that the facility fee charged by their company

is high and 24.67% of the investors feel that it is very high.

Interpretations

It can be concluded that most of the investors feel that the facility fee charged by their

company is high.

53

Particular No of Respondents %

Very high 37 24.67High 78 52.00

Reasonable 25 16.67Low 10 6.67Total 150 100


Q. 12 What do you think of the return derived from commodity futures?

Good Reasonable Bad0

1020304050607080

68 71

11

Q. 12

Returns Derived from commodity

Resp

onde

nts

Findings

It can be seen that, 45.33% of the investors feel that they got good returns from

commodity futures trading, 47.33% of them feel that they got reasonable returns

commodity futures, 7.33% of the investors felt they got bad returns from commodity

futures.

Interpretations

It can be concluded that most of the investors got reasonable returns from commodity

futures.

54


Good 68 45.33

Reasonable 71 47.33

Bad 11 7.33

Total 150 100


Q. 13 Do you think risk can be reduced by commodity futures?

Yes No0

20

40

60

80

100

120

140

139

11

Q. 13

Can Risk be reduced by Commodity Futures?

Resp

onde

nts

Findings

It can be seen that 92.67% of the investors feel that risk can be reduced through

commodity futures, and 7.33% of the Investors feel that risk cannot be

reduced through commodity futures.

Interpretation

It can be concluded that most of the investors feel that “risk can be reduced” through

commodity futures trading.

55

Particular No. of Respondents %Yes 139 92.67No 11 7.33

Total 150 100


Q.14 Do you think commodity future is a good investment opportunity?

Yes No0

20

40

60

80

100

120

140

132

18

Q. 14

Is commodity future is good investment opportunity?

Resp

onde

nts

Findings

From the above table and chart, it can be seen that 88% of the investors feel that

commodity futures is a good investment opportunity and 12% investors feel that

commodity futures is not a good investment opportunity.

Interpretation

It can be concluded that most of the investors feel that commodity futures is a

“good investment opportunity”.

56

Particular No. of Respondents %Yes 132 88No 18 12

Total 150 100


Analysis of Findings and Interpretation

Calculation of sample size:- Total population: 350000

Assume maximum sample =350 customers

p = 350/350000 =0.001

q = 1- p = 1- 0.001 = 0.999

It is assumed that there is 5% of error and 95% of level of significance,

Z = 0.95/2 = 0.475, by seeing in z- table in reverse we will get 1.96

s = z 2 pq = (1.96) 2 × 0.001 × 0.999

e2 (0.05)2

= 1.54 = 2.

So, we can take our sample between Min. 2 to Max. 350 customers

So, I have taken my sample as that is between 2 to 350.

U can take any figure between 2 to 350........

Chi-Square Analysis:

57


A fundamental problem is genetics is determining whether the experimentally

determined data fits the results expected from theory.

Karl Pearson and R.A. Fisher developed the “chi-square” test.

The chi-square test is a “goodness of fit” test: it answers the question of how well do

experimental data fit expectations.

The “Χ” is the Greek letter chi; the “∑” is a sigma; it means to sum the following

terms for all phenotypes. “obs” is the number of individuals of the given phenotype

observed; “exp” is the number of that phenotype expected from the null hypothesis.

Note that you must use the number of individuals, the counts, and NOT proportions,

ratios, or frequencies.

exp

exp)( 22 obs

Critical values for chi-square are found on tables, sorted by degrees of freedom and

probability levels. Be sure to use p = 0.05.

If your calculated chi-square value is greater than the critical value (Tabulated Value)

from the table, you “reject the null hypothesis”.

If your chi-square value is less than the critical value, you “fail to reject” the null

hypothesis (that is, you accept that your genetic theory about the expected ratio is

correct).

A critical factor in using the chi-square test is the “degrees of freedom”, which is

essentially the number of independent random variables involved.( If CV > TV,

Reject H0 & Accept H1, Vice- versa).

58


Chi-Square Test for Occupation and Investment (Q.5 A and Q. 6 B)

H0: Investment is independent of Occupation.

H1: Investment is dependent of Occupation.

Investment

Occ

upati

on

Particulars Below 2 Lakh

2 to 3 Lakh

3 to 5 Lakh

5 to 10 Lakh

Above 10 Lakh

Total

Government Employee 23 25 15 1 0 64Self Employed 4 4 1 0 0 9

Commodity Future Investor 14 19 13 2 0 48Private sector Employee 2 13 6 0 0 21

Other Businessmen 0 5 1 1 1 8Total 43 66 36 4 1 150

2 = (fo-fe) 2 fedf = (r-1) (c-1)

r = No. of rows

c = No. of columns

Frequency Expected

59

Fe = (ni*nj) 64*43 = 18.35 N 150

2 = (fo-fe) 2 (23-18.35) 2 = 1.18fe 18.35

NO. Frequency Expected(fe) 2

11 18.35 1.1812 28.16 0.35513 15.36 0.00814 1.71 0.29315 0.43 0.42721 2.58 0.78222 3.96 023 2.16 0.62324 0.24 0.2425 0.06 0.0631 13.76 0.00432 21.12 0.21333 11.52 0.1934 1.28 0.40535 0.32 0.3241 6.02 2.68442 9.24 1.5343 5.04 0.18344 0.56 0.5645 0.14 0.1451 2.29 2.29352 3.52 0.62253 1.92 0.44154 0.21 2.90155 0.05 16.803

Total 150 33.257


Calculated Chi-Sq = 33.258, DF = 16

Tabulated Chi-Sq is = 26.39 (20.05, 16) from Chi-Square table

Interpretation:-

The observed value of Chi-Sq, 33.25, is greater than the tabulated value, 26.39.

Therefore the null hypothesis is rejected as the Investment is independent of Occupation.

This concludes that the investment decision is more dependent on Occupation and this information will help out to company to for market decision.

60

1.645 4.09 443.94

P=.30

Rejection Area

Non- rejection Area

0.5 0.5


CALCULATION OF HYPOTHESIS:- [QUES: 12]This test is used validly only when there is sample size is large enough such that n*p> 5 and n*q> 5.STEP-1H0:P = 30% of Investors believe good return from commodity future

H1:P > 30% of believe good return from commodity future

STEP-2Assumed if error rate is 5% then α=0.05

STEP-3 0.5-0.05=0.45 Z value is: 1.645 (0.5-0.05=0.45)

STEP-4

In this question the sample size is n=150 and p=0.30

Therefore n*p=150*0.30 which is greater than 5.

P^= sample proportionp= population proportionq= 1-p

P¿= xn

= 68

150 = 0.4533

Z= P−P

√ pq /n

= 4.0978

The Observed Value 4.0978 is greater than tabulated value 1.645. Therefore the null

hypothesis is rejected. Therefore it concludes that > 30% of Investors believe good return

from commodity future.

61

1.645 2.63 443.94

P=0.85

Rejection Area

Non- rejection Area

0.5 0.5


CALCULATION OF HYPOTHESIS:- [QUES: 9]

This test is used validly only when there is sample size is large enough such that n*p> 5 and n*q> 5.STEP-1

H0:P= 85% investor believe that commodity future can reduce risk

H1:P≧85% investor believe that commodity future can reduce risk

STEP-2Assumed if error rate is 5% then α=0.05

STEP-3 0.5-0.05=0.45 Z value is: 1.645 (0.5-0.05=0.45)

STEP-4In this question the sample size is n=150 and p=0.85Therefore n*p=150*0.85 which is greater than 5.

P^= sample proportionp= population proportionq= 1-p

P¿= xn =

139150 = 0.9266 ≈ 0.93

Z= P−P

√ pq /n

= 2.63

The Observed Value 2.63 is more than tabulated value 1.645. Therefore the null

hypothesis is rejected. Therefore it concludes that > 85% of Investors believe that risk can

be reduced by commodity future.

62


CHAP:-10 RESEARCH FINDING & CONCLUSION

The prime objective of this study is to attempt to prove that commodity futures can be

efficiently used to reduce risks of a person who is directly involved with the trading

of the commodity. Another objective was to prove that it was a sound investment

opportunity.

In order to prove both the objectives, a few sub objectives were earmarked and analyzed.

The first being the trading system of commodity futures. The trading system included the

exchange where the trade takes place the clearinghouse which ensures that the money

is transferred to the right person at the right time. The trading system also includes

trading and intermediary participants, who ensure the correct price discovery. Thus the

trading system is one of the factors which reduce the risk in commodity futures.

Commodity futures trading included the intermediary and trading participants likes

brokers who make use of the various technical analysis tools in order to make

predictions of the price movement’s they also take into consideration the fundamental

analysis. Thus with the help of the various analysis tools, efficient price predictions can

be made, where the investors in commodity futures can benefit from the price

movements. There was also an objective to analyze the growth of commodity future.

From the analysis, it can be Concluded that, commodity futures trading is experiencing

tremendous growth. This can be emphasized by the fact that there has been an increasing

trend in the volume traded in most of the commodities. Thus, commodity futures are a

growing market. To find out the investors perception towards commodity futures,

questionnaire survey was conducted, where in various parameters were taken into

consideration. From the questionnaire, it could be concluded that most of the

respondents felt that risk could be reduced through commodity futures and

that it was a sound investment opportunity.

63


SUGGESTIONS & RECOMMENDATIONS

“Risk control is an essential part of trading successfully. Effective risk management

requires not only the careful monitoring of risk exposure, but a strategy to

minimize losses as well. Understanding how to control risk exposure allows the trader,

beginner or veteran, to continue trading even when the inevitable losses occur.

While every trade involves a degree of risk, some general principles of risk management,

if applied, reduce the potential for loss. A few of the generally accepted market axioms

for controlling risk are noted below and are applicable to anyone who has ever

traded or ever considered trading”

Trade with the trend:-

You will be less likely to incur a loss if you are following the market trend. The direction

of the market does not matter as long as you are positioned for the trend that occurs. If

you are not well positioned, then systematically reduce your risk exposure.

Diversify:-

Portfolio risk is reduced through diversification. Don’t bet everything on one trade.

Diversify your risk exposure by trading no more than 1% to 5% of your capital on any

one position. (Contracts on different maturities of the same commodity count as

one position.) To be effective diversification must involve commodities that are

not highly correlated (that is, that do not move in the same direction at the same time).

High positive correlation reduces the benefits of diversification. Predetermined

stop orders limit your risk exposure and will cut your losses in fast moving markets.

Adopt a rigid stop-loss rule (for example, get out of a trade quickly if it loses 5-7%)

64


Don't overtrade:-

Reduce your risk exposure by cutting down on the number of trades you make and

keeping your bets small. Be selective about the risks you take. Restrict your trades to the

ones that are the most attractive. This forces you to do your homework and reduces

impulsive and emotional trades. Because there will be fewer trades, you will have to be

much more patient.

Risk management basically involves four essential steps:-

Fully understanding the risks of the trade.

Eliminating unnecessary risks where possible.

Being selective about which risks to take.

Acting quickly to reduce risk exposure if the market moves against you

Common mistakes made by traders:-

(A) Lack of a Game Plan:-

One of the most important moves a futures trader can make is to develop a game plan

consisting of basic guidelines.

(B) Meeting Margin Calls:-

Most often, meeting a margin call will only increase your loss. A margin call means you

are wrong in the market and your position should be closed out. Margin calls are met

because people do not want to admit being wrong and take a loss; because they hope the

market will eventually go in their direction. Avoid meeting margin calls.

65


( C ) Lack of Money Management:-

Good money management means you know your profit objective and the odds of

being right or wrong, and control your risk with stops. You are better off with a trade

where you might lose 1000 if you are wrong, or make 1000 if you are right, that

would work six times out of ten, than to take a trade where you would make 1500 if

you are right and lose only 500 if you are wrong, but works only one time out of

three.

( D ) Increasing Your Commitment With Success:-

One of the most dangerous mistakes you can make in trading commodities is to

increase your exposure, as you become more successful. Just by being successful you

will risk more per trade because you have more money. But, because you have

more money (and confidence) when successful, you are also likely to take larger

percentage risks. Not surprisingly, this ruins more futures traders than a series of small

losses. You can overcome this mistake by not allowing your percentage commitment to

increase as you realize profits and by maintaining your stop/loss discipline.

66


ANNEXURE

ANGEL BROKING LTD

KNOW YOUR CLIENT (KYC)

1. ARE YOU AWARE ABOUT THE FOLLOWING SERVICES

OF ANGEL BROKING LTD?

SR.

NO

PRODUCT NOT AT

ALL

PARTIAL

FULL

1. NSE, BSE, FO

2. DEMAT ACCOUNT

3. MCX, NCDX

4. PMS

5. INSURANCE

6. MUTUAL FANDS

PLEASE TICK ONE OF THE FOLLOWING STATEMENTS:

[ ] I am totally satisfied & don’t want to switch.

[ ] I am satisfied but expect more improvements in service.

[ ] I am totally dissatisfied and switch over.

DO YOU HAVE ANY COMPAIN OR SUGGESTION FOR US?

___________________________________________________________________

________________________________________________________________________

________________________________________________________________________

_____________________.

CLINT ID:- ___________________

CLINT NAME:-________________

CLINT SIGNATURE:-___________

67


QUESTIONNAIRE

PART – A

(PLEASE TICK WHICHEVER IS APPLICABLE)

1) Name:- __________________________________

2) Sex:

Male:-

Female:-

3) Age:

20-30 Years:- 30-40 years:-

40-50 Years:- Above 50 years:-

4) Education:

secondary:-

Higher secondary:-

Graduation:-

Post-graduation:-

Any other:-

5) Occupation:

Government employee:-

Self-employee:-

Commodity futures investor:-

Private sector employee:-

Others Businessman:-

6) Income:

Below 400000:-

4,00,001 – 10,00,000:-

10,00,001 – 25,00,000:-

Above 25,00,000:

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PART – B

1) Have you invested in commodity futures?

Yes:-

No:-

2) Have you invested in any other security?

Yes:-

No:-

3) Which are the investments you have made (excluding commodity futures)?

Shares:-

Bonds:

Mutual funds:-

Bank deposits:-

Real estate:-

Jewellery:-

Others:

4) What is your experience in your previous investment (excluding commodity

futures)?

Good:-

Reasonable:-

Bad:-

5) How often do you trade in commodity futures?

Every day:-

Once a week:-

Trade only when there is a good price:-

69


6) What is your objective when trading in commodity

futures?

Less risky investment:-

Diversification of portfolio:-

Very good returns:-

Others:-

7) What is the amount you have invested in commodity

futures?

2,00,000:-

2,00,000-3,00,000:-

3,00,000-5,00,000:-

5,00,000-10,00,000:-

Above 10,00,000:-

8) Which commodities have you traded in the most?

Wheat:-

cotton:-

Coffee:-

Corn:-

9) What percentage of savings have you invested in

commodity futures?

0-10% :-

10-20%:-

20-30%:-

30-50%:-

50% and above:-

10) How did you get to know about commodity futures trading?

Friends/family:-

Self-research:-

Media:-

Others:-

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11) Which is the risk management technique, which you use mostly?

Switching:-

Averaging:-

Locking:-

Cut loss:-

12) What do you think about the felicitation fee charged by your company?

Very high:-

High:-

Reasonable:-

Low:-

13) What do you think of the return derived from commodity futures?

Good:-

Reasonable:-

Bad:-

14) Do you think risk can be reduced by commodity futures?

Yes:-

No:-

15) Do you think commodity future is a good investment opportunity?

Yes:-

71


BIBLIOGRAPHY

BOOKS:-

The Indian Financial System - Vasanth Desai

Financial Markets and Services – Gordon & Natarajan

Business Statistics for Contemporary Decision Making (4th Edition) – Ken Black

WEBSITES:-

www.rbi.org

www.sebi.com

www.barchart.com

www.angeltraed.com

www.angelcommodity.com

72

http://www.angelcommodity.com/

http://www.angeltraed.com/

http://www.barchart.com/

http://www.sebi.com/

http://www.rbi.org/

naresh angel

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