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A PROJECT REPORT
ONOVERVIEW OF COMMODITIES MARKET IN INDIA 2011
SUBMITTED TO
MAEER’s MIT SCHOOL OF BUSINESS
BY
VIJAY RATHIRoll No. 2804258
Batch No.28
IN PARTIAL FULFILLMENT OFPOST GRADUATE DIPLOMA IN MANAGEMENT (PGDM) Finance
MONTH, 200X-0Y
MAEER’s MIT SCHOOL OF BUSINESS PUNE
Table of C O N T E N T S
Chapter No. Title Page No. Declaration from student iiiCertificate from Company/Organisation ivCertificate from Guide vAcknowledgement viList of Tables viiList of Graphs viiiList of Charts ixList if Abbreviations, if any xExecutive Summary xi
I Introduction Approx No. of Pages. 5 - 10
1.1 Company profile 1.2 Objectives of the study 1.3 Limitations of StudyII Research Methodology Approx No. of Pages. 07-
10 2.1 Primary data - if applicable2.2 Secondary data – if applicable2.3 Sample design – if applicable2.4 Population – if applicable2.5 Sample size – if applicable2.6 Sampling method – if applicable2.7 Method of data collection - if
applicable2.8 Instrument for data collection - if
applicableIII Theoretical Background – as applicable
to the Project.Approx No. of Pages. 10-
15 3.1 Data- analysis techniques IV Data Processing and Analysis Approx No. of Pages. 20-
25V Management Lessons Approx No. of Pages. 05-
10VI Findings Approx No. of Pages. 02-
03VII Recommendations Approx No. of Pages. 01-
02VIII Conclusions Approx No. of Pages. 01-
02
Bibliography Appendices / Annexure
Note: Students are required to write minimum 30 management lessons.
DECLARATION
I, Mr. Vijay Rathi
Hereby declare that this project report is the record of authentic work carried
out by me during the period from 18th APRIL-2011 to 18th JUNE-2011 and
has not been submitted to any other University or Institute for the award of
any degree / diploma etc.
Signature
Vijay Rathi
Date
CERTIFICATE FROM THE COMPANY/ORGANISATION
(On the letterhead of the Company/ Organisation, given and signed by the concerned authority in the Company / Organisation where student has done the Summer Training. It should also have Company/ Organisation Seal /Stamp.)
CERTIFICATE
This is to certify that Mr. / Ms.-------------------------------------- of
MAEER’s MIT School of Business has successfully completed the
project work titled ------------------------------------ under the guidance of
Prof.----------------------- for partial fulfillment of requirement for the
completion of PGDM course as prescribed by the MAEER’s MIT
School of Business.
This project report is the record of authentic work carried out by
him/her during the period from ------- to -------.
He/She has worked under my guidance.
Signature
Name
Project Guide (Internal)
Date:
Signature
Name
Director
Date:
ACKNOWLEDGEMENT
I owe a great deal to MITSOB for laying the building blocks of logic and pragmatism in my life. This report in a way is a reflection of these values. The organizational Traineeship segment (OTS) provided us with a unique opportunity of working with an organization
I would like to express my gratitude and thankful to my faculty guide Mr. Prabhakar Krishna for his encouragement and guidance throughout the project.
I am highly indebted to Mr.Faiz Ahmed (Regional Manager) for providing me with exceptional opportunity of working for a dynamic organization like Kotak Commodities.
I sincerely thank to Ms. Ruchi Bajpai, Mr.Rahul sir, Mr. Guru Sir and other staff members of Kotak Commodities with whom I have interacted during the course of project, for offering their kind co-operation and providing us a very great and satisfying knowledge.
The report is the result of contributions of numerous people, too many to mention individually, I thank all those numerous who have contributed in their own way in driving this project to success.
VijayRathi MITSOB
ACKNOWLEDGEMENT
(To be written and signed by the individual student. Name and designation of the Project Guide (Internal) and Company/ Organisation Guide should be written correctly)
EXECUTIVE SUMMARY
Title : Overview of Commodities in 2011.Organization : Kotak Commodities Services Limited.Reporting Officer: Mr. Faiz AhmedCo-coordinator : Ms.Ruchi Bajpai & Mr. Rahul Muneshwar.Student’s Name : Vijay Rathi
OBJECTIVES: The objectives of the project are1) Amount of awareness regarding Commodities future trading.2) Potential market for different commodities.3) Satisfaction level of trading among people.4) Basic framework of commodities future trading.5) Study the past and present scenario of different commodities.
SCOPE OF THE STUDY: Study was conducted on selected bullions, metals and agricultural commodities.
METHODOLOGY: with the help of statistical tool the methodology had been analyzed.1) VOLATILITY2) SPECULATION3) CLIENT TRADED4) TREND ANALYSIS5) INCOME ELASTICITY
SOURCES OF DATA: Data is being collected through a mix of quantitive and qualitative methods. Primary data source – Survey of different clients. Secondary data source – Internet, Database address of clients from (Kotak commodities).
MAJOR FINIDINGS: on the basis of questions we had found that 76% of the people are investing in market. Of that only 7% are investing in commodities future market and 33% of commodities traders are trading on online platform.Major part of the trading is done in gold & silver.72% are interested in commodities awareness programmed only 22% people know the concept of hedging.People whose annual income is between 2.6 &5 lakhs & age between 31-35 years are more interested in commodities
1. Introduction
OVERVIEW OF COMMODITIES MARKET IN INDIA 2011
Introduction to commodities
Most people have the impression that commodity markets are very complex and difficult to understand and actually they are not. There are several basic facts that one must know and once these are understood one should have little difficulty understanding the nature of futures markets and how they function.
First a commodity futures market (or exchange) is in simple terms, nothing more or less than a public market place where commodities are contracted for purchase or sale at an agreed price for delivery at a specified date .these purchases and sales which must be made through a broker who is a member of an organized exchange are made under the terms and conditions of a standardized futures contract. The primary distinction between futures market and a market in which actual commodities are bought and sold either for immediate or later delivery is that in the future markets one deals in standardized contractual agreements only. These agreements (more formally called future contracts) provide for delivery of a specified amount of a particular commodity during a specified future month but involve no immediate transfer of ownership of the commodity involved.
In other words one can buy or sell commodities in a future market regardless of whether or not one has or owns the particular commodity in world then one deal in futures one need not to be concerned about having to receive delivery (for the buyer) or having to make a delivery (for the seller) of the actual commodity providing off course that one does not buy or sell a future during its delivery month one may at any time cancel out a previous sale buy an equal offsetting purchase or a previous purchase by an equal offsetting sale. If done prior to the delivery month the trades cancel out and thus there is no receipt or delivery of the commodity. Actually only a very a
small percentage usually less than two percent of the total futures contract that are entered into are ever settled through deliveries. For the most part they are cancelled out prior to the delivery month in the manner just described.
Why are Commodity Derivatives required?
India is among the top five producers of most of the commodities in addition to being a major consumer of bullion & energy products agriculture contributes about 22% to the GDP of the Indian economy .It employees about 57% of the labour force on a total of 163 million hectors of land. Agriculture sector is an important factor in achieving a GDP growth of 8-10%. All this indicates that India can be promoted as a major centre for trading of commodity derivatives.
It is unfortunate that the policies of FMC during the most of 1950s to 1980s suppressed the very markets it was suppose to encourage and nurture to grow with times. It was mistake other emerging economics of the world would want to avoid. However it is not in India alone that derivatives were suspected of creating too much speculation that would be to the detriment of the healthy growth of the markets and the farmers. Such suspicions might normally arise due to misunderstanding of the characteristics and role of derivative product.
It is very important to understand why commodity derivatives are required and the role they can play in risk management. It is a common knowledge that prices of commodities, metals, shares and currencies fluctuate over time. The possibility of adverse price changes in future creates risk for business. Derivatives are use to reduced or eliminate price risk arising from unseen piece changes. A derivative is a financial contract whose price depends on, or is derived from the price of another asset.
Two important derivatives are Futures and Options
1) Commodity Futures ContractA futures contract is an agreement for buying or selling a commodity for a predetermined delivery price at a specific future time. Futures are standardized contracts that are traded on organized futures exchanges that ensure performances of the contracts and thus remove the default futures
exchanges that ensure have existed since the Chicago board of trade (CBOT, www.Cbot.com) was established in 1848 to bring farmers and merchants together. The major function of futures markets is to transfer price risk from hedgers to speculators. For example, suppose a farmer is expecting his crop of wheat to be ready in two months time, but is worried that the price of wheat may be decline in this period. In order to minimize his risk, he can enter into a futures contract to sell his crop in two months time at a price determined now. This way he is able to hedge his risk arising from a possible adverse change in the price of his commodity.
2) Commodity Options Contract Commodity options contract like futures options are also financial instruments used for hedging and speculation. The commodity option holder has the right, but not the obligation, to but (or sell) a specific quantity of a commodity at a specified price on or before a specified date. Option contract involve two parties- the seller of the option writes the option in favor of the buyer (holder) who pays a certain premium to the seller as a price for the option. There are two types of commodity option: “a call” option gives the holder a right to buy a commodity at an agree price, while a “put” option gives the holder a right to sell a commodity at an agreed price on or before a specified date (called expiry date)Note: Currently this option is not traded in India it’s only traded in overseas Commodity.
Futures and option trading therefore helps in hedging the price risk and also provide investment opportunity to speculators who are willing to assume the risk for a possible return. Further futures trading and the ensuing discovery of price can help farmers in deciding which crops to grow. They can also help in building a competitive edge and enable business to smoothen their earnings because none hedging of the risk would increase the volatility of their quarterly earnings. Thus futures and options markets were performing important functions that cannot be ignored in modern business environment.
Commodities include following things
Base metals (COPPER, ZINC, NICKEL, ALUMINIUM, and LEAD)
Precious metals (GOLD, SILVER, PLATINIUM)
Oil & gas (CRUDE OIL/BBL & NATURAL GAS)
Agric commodities (FIBRES, SPICES, PULSES, EDIBLE OILSEEDS AND OIL)
Fibers: (Kapas, Kalyan Kapas, Sacking, Raw jute, Indian 28.5mm cotton)
Spices: (Coriander/Dhania, Cardamom, Turmeric, pepper, Red chilli, Jeera/cumin seed)
Pluses: (chana) Edible oil: (Crude palm oil, Mustar seed, Coconut oil,
Soyabean,Castor seed)
Investor approach in commodities
Commodities: Commodities are goods that are typically used as inputs in the production of other goods and services. Commodity prices are determined largely by supply and demand interactions in the global market place. Supply and demand Conditions may be influenced by factors like the weather, Geo-Political events and supply- side shocks (Eg wars, Hurricanes)Eg: Commonly traded commodities are energy products, like oil, natural gas, metals like gold, copper and nickel & agricultural products like sugar, coffee and soya bean.
BENEFITS
Diversification : Commodity returns have historically had low or negative correlations with the returns of other major asset classes and many to be used to diversify a portfolio. In this way diversification may improve risk adjusted returns.
Inflation protection : Changing macro economic factors like (Inflation) it is tend to impact commodities differently from other financial products. Prices of goods and services rise in economic cycle with input prices, while prices of the stocks and bonds tend to decline because of rising commodity input prices which put pressure on the economy and lower the value of future cash flows.
Hedge against event risk : Basically it protects events occurring like wars, and supply disruptions due to natural disaster like hurricane, droughts and floods may impact the supply of and increase the demand for certain commodities. Including commodities in a portfolio may act as a potential hedge against certain type of event risk.
Lock –in the price for your produce : If you are a farmer, there is every chance that the price of your produce may come down drastically at the time of harvest. By taking positions in commodity futures you can effectively lock in the price at which you wish to sell your produce.
Assured demand : Any excess in the market can make you wait unendingly for a buyer. Selling commodity futures contract can give you assured demand at the time of harvest.
Control your cost : If you are an industrialist, the raw material cost dictates the final price of your output. Any sudden rise in the price of raw materials can compel you to pass on the hike to your customers and you’re your products more unattractive in the market. By buying commodity futures, you can fix the price of your raw material.
Ensure Continuous supply: Any shortfall in the supply of raw materials can stall your production and make you default on your sale obligations. You can avoid this risk by buying a commodity futures contract by which you are assured of supply of a fixed quantity of materials at a pre-decided price at the appointed time.
1.1 KOTAK COMMODITIES SERVICES LTD
COMPANY PROFILE
About Company : Kotak commodity service limited (KCSL) is promoted by Kotak family that has decades of experience in commodities trading. It has a history of over 75 years of commodity in India(KCSL) is a trading- cum- clearing member of both the leading national commodities exchanges. MCX & NCDEX it is also a member of NCDEX SPOT Exchange. It has also associated with Cotton seed crushers Association, Cotton Association of India and the solvent Extractors Association of India. Mainly it includes Commodities Broking services, Hedging solutions and Arbitrage Desk to meet the requirements of all kinds of market participants.
They have a Full-Fledged research division involved macro and commodity complex research and commodity specific research.
Commodities Broking Services : It is related to the retail private investor segment.
Hedging Services : These services are offered through from their corporate desk to the producing/Consuming firms that have either direct or economic exposure to the underlying commodity. It is nothing but fixing the price as per expectations
MARKETS
MULTI COMMODITY EXCHANGE OF INDIA LTDMajorly Top 5 traded values are (MCX)1) SILVER2) GOLD3) SILVER M4) Copper5) Crude oil
1.2 OBJECTIVE OF PROJECT
These projects speak about “COMMODITIES” this is another way for doing business in terms of (Agriculture, Metals, and FIBRES etc). It had made easy for purchase and seller for trading on the basis of current market price they can trade in business (Time is money) here also it save the time of both the parties. It’s a kind of trade where both the parties are willingness to exchange their goods and price accepted through their choice.Eg : ( If any farmer produces a lum sum amount of wheat then he will directly contact to merchant and sell it with the current market price and probability to book high profit)With the help of commodities it guides the trader (purchaser & seller) about current price of their product in this way there will be no misrepresentation among trader parties. Commodities had made tremendous contribution to GDP. With the help of this all the valuable metal items prices we know easily. Goods can be trade in different quantities according to the business size of the trader. Clients can earn more profit with in quick time there is risk but if client properly studies the market condition then there will be less chances of lossCommodities guides the manufacturer (when to buy and when to sell) if the market shows decline then client can hold it and if it shows booming he will sold out his stock. It also shows in which country which product is traded at higher? It covers whole macro of the cosmos and guides the trader how to trade and earn profits.
RECENT DEVELOPMENTS IN INDIAThe advent of economic liberalization helped the cause of laying emphasis on the importance of commodity trading. By the beginning of 2002 there were about 20 commodities exchanges in India, trading in 42 commodities with a few commodities are being traded internationally. Commodities futures contracts and the exchanges they trade in are governed by the forward contracts (Regulation) act, 1952. The regulator is the forward market commission (FMC)
1.3 Limitations of study
Though the present study aims to achieve the above mentioned objectives in full earnest and accuracy it may be hampered due to certain limitations. Some limitation of this study is summarized as follows.1) Potential area is wide but time is very limited i.e. only 8 weeks.2) Area of analysis is wide but again the time constraints.3) Most of the people are not clearly aware of commodities future trading; hence they tried to ignore it.4) All the companies (stocks) of the particular industry related to studied commodities could not be analyzed. Hence the conclusion drawn may be approximately applicable for many companies but may not be true for each &every company’s stock.
II Research Methodology
DESIGN OF THE STUDYThe study was conducted in three major parts (planning &design of the study, Survey &data collection finally data analysis and interpretation.The details steps are as shown as follows
INTRODUCTION & BRIEFING RESEARCH PROPOSAL WAS PREPARED. PRIMARY & SECONDARY DATA COLLECTION DATA COLLECTION DATA ANALYSIS & INTERPRETATION
RESEARCH OBJECTIVES
Mapping the amount of awareness regarding commodities future trading.
Mapping potential markets for different commodities. Find the satisfaction level on online trading among people.
Find future prospectus of commodities future trading in India. Study the basic framework of commodities future trading Study the past and present scenario of different commodities.
Commodities Scope: Study was conducted on selected bullions, metals and agricultural commodities.
DATA SOURCE: Primary data source
1) Survey of mandi. 2) Survey of C.A. 3) Survey of businessmen & others.
Secondary data source1) Internet.2) Database address of clients.
DATA COLLECTION:In these project surveys of random numbers of clients were done. The questionnaire were prepared to find out how much they are interested in commodities & what is their area of interest. It also includes about the concept of hedging and what is the pattern of trading whether they do online trading or offline trading. Survey was conducted in different areas of Pune city like market yard, Kothrud, Camp. Where targeted individuals are C.A, Businessmen, & retired persons.
A) Studying the local grain markets/agricultural produce marketing committee (APMC)/ mandi this will help in providing
What is the potential in terms of average turnover of commodities market?
Who are the major buyers of farmers produce?
Making analysis of Participants
What income group of people is investing more in commodities future trading?
In which commodity investors are investing in bulk? People of which occupation are investing more in commodities future
trading.
Classification of sample clients
Occupation NumbersChartered Accountant 25Businessmen 75Retired 10Total 110
Methodologies
Speculation : In these project speculations is to be done on the basis of “forecasting” method investor can speculate how the market is going to be performed while investment is to be done or not. Forecasting is nothing but on the basis of previous records future will be predicated same thing is to be done in commodities.
Ex: In commodities the goods traded at lum sum amount suppose today price of silver is Rs (67000) .so on the basis of past records it will show the guideline to investor whether it will increase more or decrease there will be possibility of steady line... So Forecasting play a major role in commodities on the basis of past & present record investor will decide where he wants to park his money.
Volatility : Volatility is nothing but it shows the fluctuations of stock. In bullish market we can see that continuously stock are (moving up’s and down).Generally it cover all the domestic and international market position. In abroad commodities (COMEX, HANGSHANG, DOWJONES) researcher use six sigma tools to maintain the stability of stock they find out mean and standard error with the help of
standard deviation they land up to one fixed figure that will be breakeven point it’s kind of fixation value of stock below that the stock price value will not fall so it will secured investor as well as commodity exchanges. With the help of these methods the stock will be shows there fluctuation movement and it can be stabilize.
Clients Traded: In commodities clients are traded at randomly people trade in bulk quantity so there is a formation of queue if any client does not purchase any stock then there are no limitations any client can come any purchase it because the arrival will be on random based in this task Queuing model had used because it consist of two things i.e.( Arrival & Service rate) basically it shows the arrival of customer are in queue for on line trading and the services given to client at what rate means time taken for providing service to clients
Ex: If any client is purchasing pulses online so he will inform the commodity to purchase that order that in his a.c and the person takes few minutes to do the necessary transactions. In these way queuing model applicable here. There are no restrictions of clients can come on “FIRST COME FIRST SERVE” In these way clients are traded with queuing model.
Trend Analysis : By the observation of moving stock on daily basis we can see the moving trend how the stock in market is moving the continuous movement of stock show the trend whether it is inclining or declining i.e.( Trend it shows the movement of stock and stabilization of stock on the basis of trend analysis client get an rough idea how the market will be performed).Basically it guides which specific product is showing movement of up’s & down it shows all the national as well as international market position of trade ( MCX,COMEX,HANGSHANG etc….) on the volatility of all these commodities trend performed and investor will know how the trend is going on they will get good returns or they have to hold their stock.
Income Elasticity : In the overall economy of the country gold has the highest income-elasticity relative to silver and merchandise. The estimate of the income –elasticity of demand for silver imports is negative &calls for an explaination.Firstly it is possible that the true value is small though positive & the estimate is affected much by
Sampling it is also reasonable to suppose that when income rises without any change in prices, People regard silver of demand as an inferior commodity. As in natural price elasticity of demand for imports of gold & silver or merchandise are negative an increase in price of any of these items reducing the demand for it. Cross- Price elasticity of gold & silver are both positive &hence they are substitute for each other.
“Comparison between GOLD & SILVER” Contracts to be followed in following commodities
Gold: 9 months contract (April – Dec) Silver: 10 months contract (March _Dec) Gold & Silver major: By month contract. Gold &Silver mini: By Successive contract
Chart of 2010 & 2011
GOLD
(2010)
(2011)
Comparison between gold charts
From the above chart we can see that market has performed well as compare to previous year from the movement of chart we can see in the year 2010 it had started from US PER OUNCE 1100 in the month of Jan and within six month it show at 1250 but suddenly it came down 1200 and as the year ended it show at peak i.e. (1425).
In 2011 the market had performed tremendously high as compare to previous year the market had done trading from 1425 but in the month of jan & feb it show more volatile it reaches upto 1325 then slightly it show incline and in the month of april it had shown upto 1500 so in these year there is more demand in gold investor are buying more and more as we compare to previous chart day by day gold price is increasing and investor were getting more returns..
SILVER
(2010)
(2011)
Comparison between silver charts
In previous year silver had started trading at the mark of 15 USD OUNCE it shows incline but very in less movement in the month of Feb it reaches up to its original position i.e. 15 USD OUNCE. It reaches two peak points in the month of November and December i.e. (28 & 31 USD OUNCE) & at the year ended it closes on 29 USD OUNCE.
In the year 2011 the silver had performed well as compare to Gold because it had shown more progress & in the month of April it touches up to 71000 in Indian market but suddenly it volatile in between (66000 to 71000) and if we observe US chart also we will see the same trend. The regression line volatile in between (25 to 35 USD OUNCE) and in the month of April i.e. on 18th April it reaches up to 43 USD OUNCE the movement of silver is showing continuously volatile but it showing positive effect investor had really enjoyed there trading and book their profits. As per as market Scenario investor had more invest in silver as compare to gold because if we see the future contract gold is not too much volatile there is volatility only in between hundred points current price of Gold m is in INR (21939) and it will be slightly volatile as per as investor point of view they can earn more in silver as compare to gold because in silver there is volatile in directly thousand points so there is more fluctuations
Hence both the commodity had shown better result as compare to previous year
PRICE GET VOLATILEGenerally price get volatile when any big news came then suddenly market get volatile recently we heard in news that “the master mind Osama” dead this news affect in commodities silver price fall down i.e. (5000) thousand points it is currently booming on 71000 points but with these news it fall down to 66000 points and in gold it fall down to 300 points. So we can see how the commodities affect on global economy and trading prices also.
Calculation of circuitIn every commodities there is circuit it shows how the price will be lower down on gold initial circuit is 3% & on silver initial circuit is 4% after that circuit flow will be half of initial margin and it goes increasing (4 half of 4 is 2 then 2nd circuit will be 4+2=6 then half of 6 is 3 then 3rd circuit will be 6+3=9 in these way circuit calculated in gold and silver.
III Theoretical Background
Structure and current status of the Commodity markets in India
NATIONAL COMMODITY & DERIVATIVE EXCHANGE:
This exchange was originally promoted by (ICICI BANK,NATIONAL STOCK EXCHANGE,NATIONAL BANK FOR AGRICULTURE AND RULAR DEVELOPMENT, LIFE CORPORATION OF INDIA) it is basically popular for trading in agricultural commodities.
MULTI COMMODITY EXCHANGE:
This exchange was originally promoted by (Financial Technologies Limited), limited, a software company in the capital markets space. MCX is popular for trading in metals and energy Contracts.
Ministry of Consumer Affairs.
Commission
NCDEX MCX NCME Other regional exchanges
NATIONAL MULTI COMMODITY EXCHANGE OF INDIA:
This exchange was originally promoted by Kailas gupta an Ahmadabad based trader and central ware housing corporation. This exchange is popular For trading in spices and plantation crops especially from Kerala a southern state of India.
In terms of market share, MCX is today the largest commodity futures exchanges in India with a market share of close to 70%. NCDEX follows with a market share of around 25%, leaving the balance 5% for NMCE.
Product traded at commodities and their description
GOLD (MCX): GOLD FIELD’SMINERALS SERVICES
Percentage stake51%: Jewelry18%: official reserves17%: Investment12%: Industrial purposes2%: unaccounted for
Major producers of Gold:USA, AUSTRALIA, PERU
World gold markets:(OTC) over the counter market at London (LBMA) London bullion market association.
Gold derivative exchange at various places:NEW-YORK - CME (COMEX)TOKYO- (TOCOM)MUMBAI-(MCX)
GOLD AN ASSET
Gold is monetary assets and partly a commodity. More than 2/3rd of gold’s total accumulated holdings relating to
“value for investment” is with central banks reserves private players and high karat jewelry
Gold market is highly liquid Gold held by central banks other major institutions and retail jewelry
is re-invested in the market.
WORLD GOLD HOLDINGS
(USA, GERMANY, IMF, ITALY, FRANCE, CHINA, SWITZERLAND, JAPAN, NETHERLAND, RUSSIA)
COMPARISION BETWEEN SUPPLY AND DEMAND IN GOLD
SUPPLY
Mine Production
Net Producer Hedging
Total mine supply
Official Sector’s Sales
Old gold scraps
DEMAND
Fabrication
Jewelry
Industrial
Subtotal of above fabrication
Coin retail investment
Chart description: countries Tonnes %USA 8134 68.7GERMANY 3408 64.6IMF 2452 63.4ITALY 2435 64.2India 6.4
The above chart indicates that in world gold holding India lacks very behind as compare to other countries. Chart specifies each and every detail of each country and their holding in gold in percentage…
For conversion of gold to other commodities
TRYOUNCES: (COMEX) USA GRAMS: (MCX) MUMBAI
Conversion from tryounce to gram 1Tryounces = (MULTIPLY by 31.01)
Conversion from gram to tryounce 1gram = (MULTIPLY by 0.0321)
KARAT: Pure gold is defined as 24 karat.
FITNESS: Parts per thousand
Thus for fitness for (18, 22, 24) karat we have to certain calculation i.e.(18/24) Th of 1000 parts = 750 fineness
There are three types of gold which are majorly traded1) Gold mini (100 Gms)2) Gold major3) Gold Guinea
Gold trading time
Monday to Friday : 10am to 11.30 pm Saturday: 10am to 2.00 pm
Trading unit: 1kgMaximum order size: 10kgDaily price limit: 3%Initial margin: 4%To calculate margin we have to calculate the current market price of gold here we assume that price will be (21600*100) =21, 60,600 *4%= (86400)The amount we have got after full flesh calculation (86400) this will be the margin.
SILVER:
Silver demand is based on 3 main pillars1) Industrial uses2) Photography and jewelry3) Silver wave(MEXICO, PERU, AUSTRALIA, U.S) these are the major largest producing countries)
Primary mines
27% -World silver 73%- By product of gold, copper lead and zinc mining
2/3rd of total silver fabrication is in the industrial and photographic sectorsEx: In manufacturing companies it uses fighter plans
Following are the countries producing silver:
Countries PercentagePERU 118.3MEXICO 104.2CHINA 82.8AUSTRALIA 61.9CHILE 44.9POLAND 38.9RUSSIA 36.1USA 36India 7
DEMAND AND SUPPLY OF SILVER
DEMAND PERCENTAGE SUPPLY PERCENTAGEINDUSTRIAL APPLICATIONS
447.2 MINE PRODUCTION
680.9
PHOTOGRAPHY 104.8 NET GOVERNMENT
30.9
JEWELARY 158.3 OIL SILVER SCRAP 176.6SILVERWAVE 57.3COINS & MEDALS 64.9TOTAL FABRICATION
832.6
PRODUCER DE-HEDGING
5.6
TRADING UNITS: 30KGDAILY PRICE: 4%INITIAL MARGIN: 5%
Here we calculate the initial margin by assuming the silver current market price i.e. 63400*30*5% =95100. The last calculation we got i.e. (95100) is initial margin of silvers.Trading timing is same as gold trading
COPPER :
Copper is a special metal used for industrial applications. It is mainly used such as powers cables and wires jelly filled cables, Air conditioning and refrigeration etc……
Chile is the world’s biggest producer followed by USA.
COPPER VALUE CHAIN:
Ore extraction Concentrating and crushing Impure copper Refining Fabrication/Industrial use.
Current ScenarioIndian copper market is majorly a copper ore import market dominated by 3 producing Hindustan copper, Sterlite & Birla copper. Whereas on the consumption end wire & cable industry is the biggest consumer followed by telecom consumer durables, construction etc.
Future ProspectusIndian per capita copper consumption is very low as compared to other developing countries with increased economic activity and development huge scope of copper consumption does exist. Due to the change pattern has shifted from eastern countries to Asian countries.
Factors influencing prices Demand and supply dynamic’s. External factor such as currency, Macro Economic factors. Stock’s movement’s designates exchange warehouses. Relevant periodical data estimates & facts published by various
agencies
Calculation for margin(By assuming 4155.55*1000*6%= 24933). The last calculation we got initial margin i.e. (24933) in copper we have to take a lot of (1000 kg) for margin calculation.
CREDIT LIMIT PROVIDED TO CLIENT
Limit is given only on margin amount. Company takes a risk of client on the basis of client ac balance or Exchange margins Client ledger shows all the necessary transactions.
AGRI PRODUCTS
CHANA: It is important pulse crop that grows as a seed of a plant named cicer. It proteins, contains 25% which is the maximum provided by any pulse &60% carbohydrates. It placed 3rd importance list of the legumes that are cultivated throughout the world.
2types of chana
DESI: 95-105 (maturity period)KABULI: 100-110(maturity period)
Chana suited to those areas having relatively cooler climatic conditions& a low level of rainfall.
Chana value chain:FARMERAGENT/STOCKISTDAL MILLER – (WHOLESELLER DAL)WHOLESELLER CHANA _ (RETAILER) = CONSUMER(India is largest importer of chana in the world. India imports mainly 3-4 lakhs tons i.e. 30% of the total world imports.India produces around 6 to 8 million tonnes & contributes around 70% of the total world production.
FACTORS INFLUENCING PRICES Rainfall level & level of moisture in the soil. Obstruction in the in the information movement. Crop situation in the country from where India imports the crop. Prices of the other competitive pulses produced.
CRUDEOIL
LIGHT SWEET CRUDE OIL
Crude oil is a mixture of chemical compounds. Extracted from the earth’s crust. It is refined into a variety of usable petroleum products
Crude oil are often evaluated (By traders analysis etc) on the basis of their
API (GRAVITY) Sulphur CONTENT
Light sweet crude oil also known as (WEST TEXAS INTERMEDIATE) is the benchmark used for pricing oil imports into the US the world largest oil consumer.
WTI is a blead of a crude oil produced in the fields of Texas, new Mexico, Oklahoma & Kansas it is a pipeline crude and deliveries are made at the end of the pipeline system in Cushing, Oklahoma
Light sweet crude oil futures are traded internationally on (NEWYORK MERCANTILE EXCHANGE) (NYMEX) as well as on intercontinental exchange (ICE)
CRUDE OIL CHAIN
Exploration (new oil resources) Production ( bringing oil to the surface) Transportation ( to refineries) Refining (Converting to finished product’s) Marketing (distribution &selling of refined products to end users)
India consumed nearly 3 million barallel on daily basis making it the 4 th
largest consumer of oil in the world.
FUTURE PROSPECTUS
Due to the rising in oil consumption today India is majorly dependant an importance to meet its petroleum demand
FACTORS INFLUENCING
Geopolitical situation, particularly in the Middle East & Africa.
Economic data / Indicators of USA, CHINA and other big consuming nations
Natural factor’s like hurricanes.
Transportation / Logistical issues like destruction of pipelines shipping issues etc…
MARKETS SPECIFICATION
INDIAN COMMODITY MARKET SIZE: (SPOT MARKET)
(YEARLY TURNOVER) BULLION: RS 40,000 CR BASE METALS: RS 60,000 CR AGRI COMMODITIES: RS 5, 00,000 CR ENERGY: RS 5, 00,000 CR
SPOT MARKET: Spot market means (current market price)In market we see the auction of food grains i.e. (spot market). Trading is to be done on the basis of current market price.
DERIVATIVE MARKET: In derivative i.e. (MCX).In derivative market future lot trading is to be done.
MAJOR COMMODITY DERIVATIVES EXCHANGE
USA: Chicago Board of trade New York Mercantile Exchange New York Board of Trade
EUROPE /UK: London Metal Exchange London Intl Financial Futures International Petroleum Exchange
ASIA: Tokyo Commodity Exchange Singapore Derivative Exchange Hong Kong Future Exchange The Dalian Commodity Exchange ( CHINA)
India: NCDEX MCX
PROCEDURE FOR DELIVERY
(PURCHASE)
Open broking and DP accounts. Purchase the commodity. Request for delivery the option for delivery is sellers and not Buyer’s. If seller give delivery & you are marked for receiving delivery by the
exchange you will receive delivery. The delivery will be given to you vide entry into your D P account. Position will be squared up at the settlement close out price.
(SALES)
Open Broking and DP accounts. Sell the Commodity. Request for giving delivery if the seller is giving delivery the buyer
has to accept it if his position is outstanding on the settlement date. Seller will take goods to notified ware house. Warehouse will intimate registrar who will make entry in the sellers
D.P a/c. Now Seller is ready to deliver.
BASIS IN COMMODITY FUTURES:
The difference between the local spot price (CASH PRICE) &the relevant futures prices of a commodity is called the commodity basis.
MARGIN SCHEME & BROKERAGE SLAP FOR KOTAK COMMODITY (ONLINE)
ACCOUNT TYPES MARGIN AMOUNT A/C OPENING CHARGES
Kotak commodity(Gateway a/c)
Rs 30,000 & above but less than 5,00,000
Rs 750+margin (single cheque)
Kotak commodity( Privilege circle Amount)
Rs 5,00,000 & above No changes
BROKERAGE SLAB FOR DERIVATIVE SEGMENT
AVG MONTHLY VOLUMES (ASSUMING 22 WORKING DAYS)
INTRADAY BROKERAGES
SETTLEMENT (EACH SIDE)
< 2cr 0.07 0.09 (Gateway a/c)2-5.5 cr 0.045 0.0735.5- 10 cr 0.036 0.04610-25 cr 0.027 0.046(Price overall)25 cr & above 0.023 0.032
BASIS = Spot price – Future price
Ex : Spot landed price of gold in march is Rs 9450/10 gm & the april gold futures price is 9400/10gm, then the basis is Rs 50/10gm (9450-9400) Basis can be positive or negative.
FUTURE PRICES = Spot price+ Cost of carry
The cost of carry is the cost of carrying commodity from the current month to the month of the delivery these include cost of storage, insurance interest etc.Thus usually the price of futures contract is higher than the prevailing spot.
BASIS MARKET CONDITION
Spot price< Future price
Negative Contango or Normal
Spot price> Future price
Positive Backwardation or Abnormal
IV DATA PROCESSING AND ANALYSIS
ANALYSIS
Today in this modern era each and every one has to lives a luxurious life and to enjoy luxurious life INVESTMENT & SAVING plays a major role one type of investment & saving can be done in commodities. It’s a place where people can make higher profit naturally there will be higher risk it can give returns much more as compare to other investments (Equity, Banking sector, Mutual funds etc). In commodities it’s a big house of those products which were used in our day to day life. As compare to equity, commodities can give more returns. In equity there is less investment so there will be lesser profit there is one time investment in commodities if people have throughout knowledge and continuously market watch then there will be less chances of loss. Mainly trading can be done in base metals, crude oil, Agri products and many more. On the performance of these markets economy of the country depends. if the market performs well then country economy will perform better. In commodity market generally the business men trade or such kind of person whose financial condition is extremely good because if we see the other investment market generally each & every class of person can trade.
Commodities provide all the relevant information including all the product leaflets it’s a kind of easiest way to make money its guide the people how the trading is to be done it saves time as compare to
Mandi there is auction and bidding procedure take place and if any goods purchased by clients then they had to wait for the payment for both the side (PURCHASER as well as SELLER) and after that the whole trading is to be done. As we see another scenario with the help of MCX on line trading buyer can purchase instant goods and sell as per his desire and transaction can be done very fast within fraction of seconds goods & money can be transferred from one ac to other ac in these way its save the time of clients.
As compare to mandi in MCX online there is benefit for clients to “STOPLOSS” there figure it’s a kind of “BREAKER” for the clients that they can afford to share the loss up to specific figure if it crosses below that then they are not responsible. In base metals i.e. (GOLD & silver) commodities is the only place where client can book higher profit as per as market price because many times it happens if clients having physical gold’s & silver & they having a desireness to sell then they will rush to Jewelry shop but at the high movement jeweler refuse to pay high rates but in commodities there is no such scene whatever be the price it can be sold as per the current day market price.
“Working of MCX Commodity”
Following is the chart of mcx online trading generally it covers all the basic metals prices the chart shows all the daily transactions as per as intraday is concern & it shows all the position of clients while trading no of buyers and seller and in the chart the main figure is “LAST TRANSACTION” when any client ask the rate of any product as per as month or dated then we had to tell that figure on that figure client will know the price of product the following chart is known as (ODIN) open dealer integrated network it is applicable to dealer & client also if any client want to open on line account then there is a necessity to open his (ODIN) ac in this way client can trade from their respective place.
ODIN shows all the transaction % of change how much there is low &high position of stock so on that basis client can fix their stop loss also it show the opening price of product when market started & closing price when market is over by the help of MCX client can get overall information.
The figures which show in Blue & Red it’s a kind of indicator the color specify where it shows red color it means that there is movement in negative in that stock & in terms of blue color it shows totally vice versa. In the odin 3rd column it shows the expiry of that product it means on that particular day the contract get over generally all these base metal are traded on the basis of contract purpose. In this way MCX trading is to be done
(ODIN)
Exchange Symbol Ser/ExpBuy Qty
Buy Price
Sell Price
Sell Qty
Last Traded Price
% Change High Low Open Close
NCDEX EXCHRATE 45.25 44.96 44.96
MCX NATURALGAS 25-May-11 11 191.3 191.4 47 191.4 0.1 192.1 190.9 191.5 191.2
MCX NATURALGAS 27-Jun-11 1 195.4 195.5 2 195.5 0.21 197 195 196.1 195.1
MCX GOLDM 04-Jun-11 2 22242 22244 6 22244 0.32 22264 22121 22121 22172
MCX NICKEL 31-May-11 1 1051 1050.8 1 1051 -1.34 1064 1045 1060 1065
b
MCX GOLD 04-Jun-11 1 22239 22240 2 22240 0.33 22263 22183 22197 22167
MCX GOLD 05-Aug-11 1 22452 22455 3 22452 0.28 22471 22378 22378 22389
MCX SILVER 05-Jul-11 1 53257 53268 1 53257 -0.04 53450 52843 53100 53278
MCX SILVER 05-Sep-11 1 53941 53970 1 53956 -0.04 54024 53550 53963 53976
MCX SILVERM 30-Jun-11 2 53280 53290 6 53288 -0.02 53499 52864 53063 53301
MCX SILVERM 31-Aug-11 1 53962 53985 1 53991 0 54052 53550 54000 53991
MCX COPPER 30-Jun-11 8 404.8 404.85 1 404.9 -1.52 410.5 403.5 410.5 411.1
MCX COPPER 30-Aug-11 1 410.4 410.55 3 410.5 -1.48 414.6 409.2 414.5 416.7
MCX CRUDEOIL 20-Jun-11 4 4466 4467 42 4466 -0.89 4495 4453 4495 4506
MCX SILVERMIC 30-Jun-11 1 53305 53314 1 53310 -0.04 53450 52893 53200 53333
MCX LEAD 31-May-11 11 111.1 111.1 5 111.1 -1.72 112.6 110.7 112.6 113.1
MCX LEADMINI 31-May-11 9 111.1 111.1 1 111.1 -1.72 112.8 110.7 112.8 113.1
MCX ZINC 31-May-11 5 95.85 95.9 10 95.85 -1.29 96.5 95.5 96.5 97.1
MCX ZINCMINI 31-May-11 20 95.85 95.9 17 95.9 -1.24 97.05 95.5 97.05 97.1
MCX ALUMINIUM 31-May-11 3 12.3 112.3 1 112.3 -0.4 112.6 111.9 112.2 112.8
MCX ALUMINI 31-May-11 2 112.3 112.3 2 112.3 -0.44 112.6 111.9 112.5 112.8
Screen Snap Shot
“GREEN TRADE: COMMODITY TO CLEAR AIR.”
Now the industry is well versed with commodities like steel, copper, gold, sugar, wheat, oil, etc.Now it will get to know environmental commodities. It’s a kind of new term being used to describe in addition to green house gases, air/ water pollutants causing harmful effects the mitigation of which is expected to result in a vibrant market a few years down the line. As per the experts estimate the size of the environmental commodities market to be in the range of (Rs20000 crore to Rs 40000 crore) in the next few years which will continue to expand depending on how successfully the government’s schemes are implemented to create a trading platform.
These on line trading had been started for the expansion of business of clients instead of mandi client can directly trade from online its shows that in next few years commodity will be a big hub for investor if we see daily trading of clients then there is a average of 100-150 clients traded from any franchise & nearly in every month there is a an average turnover of Rs (2- 3 cr) so we can see that it’s generating very huge revenue with in very short time span clients are also getting more profit that why the turnover of commodity had shown continuous expansion.
Generally as compare to Equity market Commodity market perform on the future contract in equity market there is no contract it can be traded at any time during working hours. In commodity if the contract get over & still client had not sell then automatically the position of that client get square off it means if he had buy position then the position will be sold for a time & on next day when contract get for renewal then he can buy on the same price for future date.
From the above all the findings we had analyze that most of the traders trade in gold & silver & if we see the other side of i.e. (Agri product) majorly people were interested in Chana & Sugar these two product were heavily traded we had done the comparison of charts for last year and current year from that we had found that in these year the market is too much volatile those client who already traded in equity they are more interested in commodity because in commodity this year silver had shown the price of (75000) and recently in gold new variety had launched in mcx commodity i.e. ( GOLD PETAL) its initial margin is (Rs 95) for one gram so traders automatically attracted its shows that due to high demand in base metals
Those people who want to invest in gold at a lower price they can also enjoy the trading and gain some returns as per the market these is correct time to
invest in gold petal because initially it is launched and it’s a part of base metal so in coming years it will rise its price and people will enjoy more profit initially it was launched at (Rs 2000) with in 1(1/2) month it had shown hike by (Rs 250) so we can see slowly these metal had made a grip stronger in market. Commodity it’s a very huge for investment and customers were traded in bulk quantity.
In commodities Natural gas & Crude oil these two products are very risky it’s kind of that higher risk higher profit it totally depend upon refineries & market condition recently there is a hike in fuel prices by (Rs 5) & Gas is going to be hike by (Rs 35) it shows those person who had already invested in these two product they can earn more profit in future but the role of these product also played vice versa many times its happen in US market the prices of these product suddenly fall down & client loses their hard earned money. To invest in these choppy market people had to understand the market very deeply and proper strategy to be followed.
Functions for punching the order For last transaction (Command F8)For Buying the order (Command F1 “+”)For Selling the order (Command F2“ –“)For net position (ALT F6)
In different countries market were traded at different timing following is the list of international market & their timing as per these schedule market were traded. Mainly international market had more momentum as compare to Indian market because on International market Indian market perform If there is any holiday in International market then there is no more momentum in Indian Market.
International Market & Their Trading Time
MARKETS OPEN TIMING (IST) CLOSE TIMING
(IST)COMEX COPPER 6:40 P.M 12:20 A.MCOMEX GOLD 6:50 P.M 12:30 A.MCOMEX SILVER 6:55 P.M 12:35 A.MNYMEX CRUDE OIL 8:30 P.M 2:10 A.MNYMEX NATURAL GAS
8:30 P.M 2:10 A.M
Concept of Arbitrage between two Commodities
Market Arbitrage involves purchasing and selling the same security at the same time in different markets (MCX & COMEX) to take advantage of a price difference between the two separate markets. A market arbitrageur would short sell the higher priced commodity and buy the lower priced one. The profit is the spread between the two assets.
Example:
Suppose a client own 1 lot of XYZ commodity. One trading day client notice that Silver is trading at 150 on the MCX and 145 on the Comex. Client can sell their lot on the Comex at 150 in these case client profit will be Rs 5 and there will be less brokerage.
Market performance of all major commodities
Silver Continues to fall. Gold Regains Value
1) SILVER:
The CME Group, owners of Comex, has increased the margin payment that is required to be deposited to brokers for speculating on silver futures by 84 percent in two weeks. The margin is set to further increase to USD $ 21600 per contract. This move was done in order to cool down the hyper-speculation which had been occurring in the market since the past few weeks. With many investors unable to meet the margin and still maintain sufficient profit levels, there has been huge selling off, which has brought the price of silver down to much saner levels
2) GOLD:
The other factor which bought about an increase in gold was the fact that since gold touched USD $ 1462.50 an ounce, it induced investors to buy more of it in order to take advantage of when gold would get nearer to the USD $ 1500 mark. An increased level of buying ultimately led to gold making advances.
3) NATURL GAS:
From the following chart we can see the Liquefied natural gas capacity production it shows top 20 “LNG” producers and there capacity up to 2020 from below statistics graph we can see that Our “INDIAN” oil producer “Bharat petroleum” its current capacity oil production in 2010 is 10.5 million tonnes and in the year of 2020 it will reach up to 11 million tonnes it shows that according to the demand of customers they had to increase their stake in production race as compare to other major producer .Its play an vital role in commodity majorly very big investor invest in these type of commodities because it is very risky as compare to other commodity In charts 2 colors are mentioned i.e. (blue & yellow) in blue color it
Show producers& in yellow color it shows production capacity in few years
`
4) PEPPER & SPICES
As per the market trend in commodities pepper & spices shows more volatile so more Intraday trading should be avoided. According to the spices board of India exports of pepper from India during April 2010- March 2011 stood at 18850 tonnes as compared to 19750 tonnes in 2009-2010 it shows decline of 5%
5) SUGAR
Around 160M metric tons of sugar are produced every year, with the largest producers in Brazil, India and the European Union the primary driver of sugar prices is government regulation. Many governments heavily subsidize their sugar manufacturers, to "dump" cheaply-priced sugar in the market Since sugar is a good source for ethanol production, oil prices and the demand for ethanol are also impact the international price of sugar; prices increased by more than 20% in response to rising gasoline prices.
Sugar Imports/Exports in North America and Asia
Region YearTotal production
Total Imports
Total Exports
Total use
North America 2007/2008 13374 4019 938 16324 2008/2009 12136 4455 1132 16690 2009/2010 12598 4360 913 16166 Asia 2007/2008 69097 13731 16153 63574 2008/2009 52724 15740 10897 64914 2009/2010 54906 19383 11161 64916
From the above table we can see that in the region of North America & Asia ion by the year production from 2007- 2010 it shows all the (Imports, Exports & Consumed) as per sugar market is concern these two region play very vital role.
Following are the three main reasons to invest in Agri commodities
1) Rising global demand from emerging economies and low worldwide supplies
2) Shifts in world diets
3) Greater demand for alternative energy.
6) CRUDE OIL
Explanation:
From the above diagram we can see that currently crude oil prices were above U S $100 as per the inflation the crude oil prices were adjusted. Annul world demand for the Crude Oil today is about 82 to 84 million barrels a day. OF which OPEC has set itself to produce about 38 million barrel a day. Most of the OPEC oil is in Middle East and a bit in Latin American countries. Europe & newly industrialized Asia (Including China and India) import as much as 30 to 60% of its Oil needs.
Oil Prices Spurt in last Five Years
The following political events impacted the Oil prices
September 11 attack the World Trade Center
Gulf War II begins and end in early 2003
Insurgency in Iraq takes a toll on Iraqi oil production (2003 to 2006)
Iranian Nuclear debacle, which started in 2005 with no end in sight.
Impact of all these Events on Developing Countries
Developing countries like India and China with rapidly growing economies and rising oil demand are not well placed to weather this situation. Oil import bill has sky rocketed. China with its manufacturing capability has tried to minimize the impact. In India this storm is being weathered with remittance from abroad. Both these economies will be hard pressed to sustain in high growth environment for too long. Other developing counties are facing acute shortage of foreign exchange.
The prices of crude oil were specially hiked in developing countries due to the major problem of natural resources they have to import crude oil at very high price & for the recovery of high prices government raises the price of oil. India is not so much developed in resources even today USA have that much capacity that they can consume it for fifty years.
Recently Crude oil prices were hiked continuously because there is more consumption of oil it shows there is more demand but supply is less this is the main reason & due to the hike of crude oil prices people were more addicted to do the commodity trading to book profit.
7) COPPER
From the above graph we can see with in past few years copper had shown positive growth no doubt progress had been done very slowly but it had been reach up to the peak level currently copper is trading at the value of “403” initially the lot size is 1thousand tones and its initial margin is 22000 so we can say that people were more interested in trading if we see average in every year the price of copper had been increased by 100 points this happens because there is heavy demand in base metal.
V MANAGEMENT LESSON
Patience : At very first day of my office I had to wait for my co-coordinator at the reception counter I had wait for a one hour and after that known by office boy that the person is on leave and I had to report to some other person. So very first day I had learned to keep patience and work with cool mind.
Convenience to customer : Many time while trading we had to convenience to customer for the verification of stock details many times clients argue with us but we have to convenience them and provide right information we have to calm them from their anger mood and convenience.
Regular mail to supervisor : By the time of trading each and everything has to mail to supervisor at what time the trading had done these all details had to be kept for future references if any problem occurs then for employees and clients these will guide and sort their problem.
Meeting with different clients : If any new client wants to open his account with franchise then we had to meet the client as per as there flexibility and have to provide each and every thing about commodities.
Reporting time should be before 15 min : As we know time is money but in these commodities we have to be very punchutual and
arrived to office at 15 minutes before because commodity market start at sharp 10, clock so before 10am employee should be present at their terminal.
Communication should be properly done : While trading or taking any message from client message should be communicated properly misinformation can create a problem for both the parties. One of the clients had told to lock stop loss but when employee is already busy
with different client on a call then he can handle only one trader at a time and due to this hurry the miscommunication had occur.
One time one work should be done : The work which is allotted to you should be completed first then move to another work if employee will handle two traders at a time then definitely problem will occur.
Maintain CRM (Customer relationship Management) : In commodities we have to maintain the relationship with clients. Suppose if the person wants to open a new franchise then from the head office any superior person should visit that person and guide him how he should work in these way person will confident about his business and it will give support to clients in these way it will build more bonding in business as well as relations.
Quick service feel happier to customers : If employees provide good service to client then it will definitely build more strong relation. Normally we observe when the client placed an order then employee had to give fast service while taking an order of clients when any problem occur i.e. when limit is over while trading then they had to placed order of client through risk department and for that client has to be kept on hold and employee provide fast service then he feel more happy.
Employee had to be very alert on terminal: If a client order had placed then on terminal then employee must be seated at terminal itself if he moves somewhere then the price of that order fluctuate and the client had already told the stop loss value and suddenly it fall in absence of employee these will create a big problem for client and employee also so at terminal employee must be present while trading.
Investor are very much addicted to invest: Most of the time we had seen some investor are continuously keep eye scan on market positions many times they are using their own gadget like (I PHONE) to see the market scenario so it teaches if any query occur to such clients then the query should be rectified as soon as possible because it shows these clients are very much particular regarding their trading.
Services in Brokerage Rate : Many new clients wants to open an account in commodities but there trading demand is that they need less brokerage clients are ready to give as much margin company wants it teaches that sometimes company has to give them extra perk to that client otherwise client will tell he will open his account to other commodity firm.
Motivation : Employee should be motivated once they are motivated then there will be automatically rise in sales and will more contributed to revenue for company if employees are happy then they will explain the product thoroughly & treat them as family member motivation changes negative thing into positive & keep the Environment happy.
Moral & Ethics : Moral & ethics play a major role in business In commodities Employee had to follow all the ethics of business while trading they should provide correct information to client by all the ethics of business they should not having the intention to provide wrong information to clients when clients give feedback to employees they should rectified it and not to do the same mistake again.
Cross Verification : For counter check the clients this procedure follows basically when any client wants to open an account with franchise then cross checked has to be done employees check credibility of that person from their colleague by making a call to know that previously client had not have any bad debt.
Deep Knowledge: - I learnt that one cannot sustain in the stock market unless and until stock analysis has deep and complete knowledge of the shares in which he is dealing in. He must keep up-to-date records and must have all the answers of the client’s questions. Clients in the stock market have some knowledge about the stock exchange, so stock analysis can’t give answers without any back up.
Planning: - During my internship, I was lucky enough that my organizational head, Mr. Faiz ahmed, made me to work as an employee and entrusting me some of the important activities like client retention, counseling for certain events, etc which involved proper planning and dedication to complete the job in the prescribed given time. The way our organization planned the things in a time bound manner made me confident about organizing any event independently.
Idea Hunting: - I learnt how to hunt for the ideas for the clients. Different clients have different views for a particular share. So it is very important to take the views and opinions of every client and to give the right information to the clients. A stock analysis can’t force any client in purchasing or selling the shares, he can only give the idea. The final decision is always of the clients and same was repeatedly made to understand to the clients.
Safety And Security: - The main aim of a stock analysis is to provide safety and security to their clients. Clients usually are scared of the losses. Every time they want profits with less risk factor. I learnt from my project guide that he uses to give highest priority to the safety and
security with respect to trading of the stocks. The main aim behind this approach was to earn less profit by investing in secured stocks than simply speculating on the sentiments of the day. I learnt that for the safety and the security purposes, the stop loss concept was employed so that the clients do not suffer unbearable losses.
Affordability: - There is an old saying that one should purchase the cloth as per the requirement which means that although there is lot of choices available in the market but one must see that what type of share is to be purchased. During my internship, I observed that some clients use to invest in the share market which they can’t afford and so use to take loans from bank and invest in the market. This is in my opinion is not the right approach because depending on the uncertainty of the market, some of the clients suffered losses. So
Affordability has to be emphasized on the clients who lack the sense of affordability.
Confidence: - Confidence is a virtue by which a manager gains a sense of self reliance, certainty and boldness. It leads to firm decision taking ability and mutual trust with each other. I observed that during the course of interaction over a long period of time almost all the clients had gain full confidence in their stock analysis (my internal guide) and clients used to highly value his suggestions. The confident environment in the work place rubs to other employees and it leads to very healthy environment. I gained a lot of confidence during my internship course by working under a confident team leader who uses to lead from the front. Even during my short tenure of internship, some of the clients had also started showing confidence in my analytical decisions. I value highly my internship programmed in this respect
Experienced Professional Team : - In Kotak commodities, we have team of professionals consists of individuals with significant experience in commodity trading, trading technology and portfolio management. They have a strong experience in trade execution and understanding of order flow dynamics. I learnt that it is very important
to have a team of experienced professionals for the easy flow of work and achievement of goals.
Leadership: - leadership is the art of directing an organization in such a way that positive results are achieve in a time bond manner. It involves clear cut communication, motivation, supervision, organization, planning and forecasting. During my internship course, the leadership qualities were effectively used by my internship guide and thus, the organization used to run in a very smooth manner. E.g.: every member had a clear cut goal to achieve and my internship guide used to direct them properly. Any event to be organized use to be properly planned and organized accordingly for achieving the ultimate goals and event of increasing the membership drive was organized
and in which our esteemed clients were invited for participation and Requested to introduce their other friends and colleagues to the organization.
Honesty: - I learnt that a stock analysis has to do investments for his clients in such a manner as if he is investing his own money. It is very important to be honest in advising the clients for the long term relationship. It was seen that although the decision is always of the client but honest guidance by the stock analysis plays a very crucial role in the decision making process of the client who is going for the investment in the stock market.
Client Focus: - client relationship is the core of the business. We have to value each client, no matter what size, as a long-term relationship. Also at the same time, each client should get his own space to think and to do trading himself. I was having around 15 clients in my span of internship and each and every client was equally important to me. The main motto of Kotak commodities is to have a relationship beyond brooking. The good relationship with the clients results in the increased membership of the clients for the organization.
Winning Combination : - I learnt during my internship that in commodity market, one has to analyze the day to day events of the market that it results in the winning combination for the clients in the
long run. Winning combination is achieved by stressing on and application on good advice and regular interactions. My internal guide used to analyze a few commodities for long term investment programmed and accordingly advised the clients for the long term investments so that their investments can give better results than the short term investments. i used to pick up the analytical basis for deciding the future planning strategies from my guide so that it may result in the winning combination for the clients which is the main objective of a commodity analysis. I observed that those persons who have long term investment strategies in their mind end up earning good returns on their capital.
Strategy and strategic choice: - During my internship programmed, I learnt that to manage a unit or organization, one has to develop short term as well as long term strategies to achieve the desired goals. Although, there may be number of units at different locations under one organization, effort has to make to convert each unit into an independent profit center. For this, strategic choice and planning suitable to the organization’s basic philosophy has to be accomplished for achieving the goals. I learnt from my internship guide that by avoiding unnecessary overhead charges on a daily basis, one could make a substantial savings over a monthly basis for the unit.
Budgeting: - Budgeting is very important for any organization. I learnt this management lesson from my internship guide, Mr. Faiz ahmed He always use to maintain a daily record of the expenses and incomes of the office and a budget document for the financial year stands prepared and all the expenses regulated as per the budgetary provisions.
Working environment : - One of the main objectives of any business organization is to provide smooth and healthy working environment for its employees so that the maximum output from the employees is achieved. During my internship programmed, I observed that healthy working environment is created in the organization by the leader who is responsible for all the decisions to be taken for achieving the set goals. A good human relationship plays a key factor in this regard. Understanding the difficulties being faced by a sub-ordinate in his
assigned tasks and coming out with a suitable suggestion for the same creates a good working environment. I was lucky enough to work with my guide who guided me in such a manner I felt completely at a ease and I got easily going with all the other employees at my workplace.
VI FINDING
Challenges for commodities marketCommodity derivatives have achieved one of the fastest growth rates, probably the highest among any other development initiatives undertaken either in agricultural sector or in financial sector of a developing economy like India. But certainly this achievement is not just erecting a stronghold in air. Reasons are deep rooted. Indian traders have century old experiences in trading commodity derivatives. Compared to the 130 years old stock market, the commodity market is in its hopeful stage. It is very much in consensus that by the advent of commodity derivatives trading, a silent revolution is building up in the economy. Though trading volumes in this new market is gradually catching up that in the stock market, yet commodity exchanges are facing challenges that need to be addressed now.
Investment in different commodities
INVESTMENT IN DIFFERENT COMMODITIES %
GOLD 30
SILVER 19
CHANA 6
TUR 13
URAD 19
CRUDE OIL 13
DIAGRAM
Explanation: From the above diagram we can say that how the investor had done investment in different commodities as compare to other commodities major investment had done in gold, silver, crude oil & Tur. These are the major components of commodities more weight age is given to gold silver and crude because gold and silver are monetary assets people can book more profit on this. In future also the price of these commodities will give them higher profit these both commodities can help in bad situation when customer in need of money he can easily sell and get a hard cash that’s why people will prefer more investment in these commodities.
From the question we had done the analysis of questions that people are more investing in commodities as compare to through equity because there is a drastic change in silver commodity so we found that most of the investors are investing in commodity they are skipping from equity to commodity.
The market is too much volatile in Silver & gold commodities suddenly the silver points are continuously showing decline in (2000-18000) points so we can see there is lot of momentum in market so in silver commodity investors are more attracted it had shown its high time in 3months i.e. (73000) now currently investor are grabbing this opportunity at the price of (52000) people are doing more investment & in the market already having a news that silver will reach up to (100000) points. So investor can book their high time profit.
In commodities there are 2 types of ac in which trading are to be done i.e. (Online & offline) so people are more happy with online ac because they can trade their own portfolio basically in which broking firm the client having ac they provide separate ac for their trading by client code in they can trade by online instead of calling to terminal they can see direct terminal and trading can be done it will save time
and there will be no mistake & no miss communication that’s why people are more happy by online trading.
Commodity play a major role they had contributed to economy i.e. 50% because commodity is concerned in that product which are uses in our day to day life so its show how the price will affect on global economy we had seen the bad effects i.e. (INFLATION) it shows general rise in products it basically related to supply and demand when there is more supply then there is less demand & when demand is more supply is less so we can see how the price will affect on economy.
In commodities people are more investing in Gold, Silver,& in Agric product because gold & silver are monetary asset if people are doing more investment in these commodities because in future these Commodity price will rise so investor think that they will earn more profit if they sell at higher price.
People invest in gold because it’s a kind of liquid asset many people’s do investment to save the tax gold is most precious metal it can be used in emergency & it can be easily converted into cash majorly it uses in marriages or as well as festive seasons so most of the people invest in gold.
VII RECOMMENDATION
The Company should increasing presence in corporate segments to increase volumes.
The brokerage should be variable for different clients which could increase revenues.
The commodities broking organizations should approach the FMC to introduce option trading.
The company should look at the agri-business and agree commodities.
Commodities can grow equal to equity markets if all the franchises in network start dealing in commodities.
Commodities business also depends on the offerings like margin financing and Agri lending so these facilities should be variable to the clients
CONCLUSION
From the above project here we conclude that there will be wider scope for commodities. Day by day investor were increasing as compare to equity investor were more interested in commodity clients those who having equity account they were interested to open Commodity account. Today in these modern era each and everybody wants to make money very fast no doubt as per as banking saving commodity market will provide them more benefit.
We had seen that so many people’s get attracted to commodity market there were some clients which were continuously addicted for trading. Commodity is place where people can make huge money & also went into debt before trading in commodities precautions should be taken in every commodity there is a risk but it can be avoided by proper study of the market because on the basis of market only commodity perform
Hence we can say before “It’s too late decision should be taken”
The above proverb belongs to all the investor who had made profit and other side for those people who had made loss.
In the next coming years Commodity will be a big hub for investment If we compare to abroad markets Indian markets will require some time to trade all the commodity products. It’s a very easy way for getting higher returns only need to study about the market trend and the economy of the country with the help of modern technology trading can be done from anywhere. In this way commodity market had made tremendous progress.
Conclusion based on data analysis and findings
Volume of the company increases with the increase in the period of operation since more and more people are aware, about commodity trading.
Majority of the broking firms do business on the domestic exchange (MCX and NCDX) with negligible amount of business on the international exchange.
The average daily turnover of the MCX is found to be higher than at the national commodities and Derivatives Exchange (NCDX)
Conclusion based on Experience
The summer internship at Kotak Commodities is purely learning experience for me. This project not only enriched my knowledge on commodity markets, but also taught me how to carry out an effective research project.
This project at Kotak Commodities provided me the practical exposure to the work environment in today’s corporate world. For me it is the important learning I got while tackling problems and dealing with the people at different levels in order to collect data required for my research project.
The topic assigned (overview of commodities market in India 2011) was interesting, and not only did I gained knowledge but also provided me with the opportunity to understand the practicality of commodity markets.
The project has an added advantage for me as it was completed under the guidance of highly knowledgeable and experienced people at Kotak commodities who constantly directed me in the successful completion of my research project.
ANNEXURE – I
QUESTIONNAIRE:
1. What is the importance of trading in commodity futures?
2. What factors influence commodity market?
3. What is the delivery procedure for gold?
4. What are the types of gold?
5. Why Silver price is rising?
6. How does commodity affect Global Economy?
7. What is the impact of silver price rise on Indian Economy?
8. What is the average turnover of different professionals?
9. In which commodities investor is investing?
10.What is the satisfaction level of people for online future trading?
11.Why people invest in gold.
