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.

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