Project Report A Study Of Commodity Markets At Karvy Comtrade Ltd.

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CHAPTER -6 Fundamental and Technical Analysis

6.1.1 - DEMAND AND CONSUMPTION OF GOLD

Gold produced from different sources and demanded for consumption in form of Jewellery, Industrial applications, Government & Central bank Investment and Private investor, which has been worth US$ 38 billion on average over the past five years in world.

Total of world gold produced is mostly consumed by different sectors are Jewelers 80%, Industrial application 11.5% and rest of gold is used as investment purpose 8.5%. Considering the situation in India, the demand for Gold consumption is far more ahead than its availability through production, scrap or recycled gold. Where gold production in India is only 2tonnes, where demand is 18.7% of world gold consumption, which make India a leading consumer of gold followed by Italy, Turkey, USA, China, Japan. According to Countries wise demand, the following graph shows the demand in each country. Large part constitute by Jewelry consumption with 85.56% during 2004 by Indian consumers, who seem to spend a disproportionate percentage of their disposable income on gold and gold jewelry.

Gold fabrication for domestic and international market, also formed large part of business in India with 527 tones of gold fabricated in India in 2004, making world largest fabricator which is 60% more than its closest competitor Italy, Turkey, USA. But this Jeweler Fabrication is unable to generate much revenue, as most of its consumed in India (479 tones).

India consumed around 18% of world Gold produced. Even though it only contribute 1.6% of Global GDP.

“Traditionally, Gold has been a good safety net for Indian households. However, the sharp rise in gold imports over the last three years when the rupee has started appreciating, inflation is relatively low, banking facilities are improving And economic can confidence has picked up, is surprising” say Market watchers.(Source: -Economic Times, Article, “ Forget sensex, the Gold rush is on”, July 18 ‘05)

The demand is much that it consumed more than 1.5 times of US consumption of gold. Increasing by nearly 60% in 2003-04, but during this fiscal Gold imports increased by another 58%, with Import of gold and silver account around $11 billion consumption increased by 88% during March’05quarter.

USES OF GOLD

6.1.2 - Uses of Gold

1. Jewellery fabrication: The largest source of demand is the jewelry industry.

India is the world's foremost gold jewellery fabricator and consumer with fabricator and consumption annually of over 600 tons according to GFMS. Measures of consumption and fabrication are made more difficult because Indian jewellery often involves the re-making by goldsmiths of old family ornaments into lighter or fashionable designs and the amount of gold thus recycled is impossible to gauge. Estimates for this recycled jewellery vary between 80 tons and 300 tons a year. GFMS estimates are that official gold bullion imports in 2001 were 654 tons. Exports have increased dramatically since 1996, and in 2001 stood at over 60 tons. The US accounted for about one third of total official exports. Manufacturers located in Special Export Zones can import gold tax-free through various registered banks under an Export Replenishment scheme.

2. Industrial applications: Besides jewelry, gold has many applications in a variety of industries including aerospace, medicine, electronics and dentistry. The electronics industry needs gold for the manufacture of computers, telephones, televisions, and other equipment. Gold's unique properties provide superior electrical conducting qualities and corrosion resistance, which are required in the manufacture of sophisticated electronic circuitry. In dentistry, gold alloys are popular because they are highly resistant to corrosion and tarnish. For this reason gold alloys are used for crowns, bridges, gold inlays, and partial debenture.

3. Governments and central banks: The third source of gold demand is governments and central banks that buy gold to increase their official reserves. Central banks holds 28,225.4 tons, the holdings of Reserve Bank of India are only a modest 397.5 tons.

4. Private investors: Finally, there are private investors. Depending upon market circumstances, the investment component of demand can vary substantially from year to year.

DEMAND AND SUPPLY

· Gold demand in 2010 reached a 10-year high of 3,812.2 tones, worth US$150billon, as a result of;

· strong growth in jewellery demand;

· the revival of the Indian market;

· strong momentum in Chinese gold demand and

a paradigm shift in the official sector, where central banks became net purchasers of gold for the first time in 21 years.

· China was the world's largest gold producer with 340.88 tones in 2010, followed by the United States and South Africa.

· In 2010, India was the world's largest gold consumer with an annual demand of 963 tones.

· The total supply of gold coming onto the market in 2010 reached 4,108 tones, a rise of 2% from 200 levels.

World Gold Holdings march 2012

(In tones)

Source- world gold council (WGC)

Source – World gold council

6.2 - TECHNICAL ANALYSIS

Prices of the commodities in the commodity market fluctuate daily because of the continuous buying and selling of the commodities. Prices of the commodity prices move in trends and cycles and are never stable. An investor in the commodity market is interested in buying commodities at a low price and sells them at a high price, so that he can get good return on his investment. He therefore tries to analyze the movement of the share prices in market. There are two approaches that we use for analyze the price of the commodities. One of these is the fundamental analysis wherein the analyst tries to determine the true worth or intrinsic value of the commodity when its market price is below its intrinsic value. The second approach to analyze the commodity is technical analysis. It is an alternative approach to study the commodity price behavior.

6.2.1 Dow Theory

Whatever is generally being accepted today as technical analysis has its roots in the Dow theory. The theory is so called because it was formulated by Charles H. Dow who was the editor of the wall street journal in U.S.A. Charles Dow formulated a hypothesis that the commodity market does not move on a random basis but is influenced by three distinct cyclical trends that guides its direction. According t this theory, the market has three movements and these movements are simultaneous in nature. These movements are primary movements, secondary reactions and minor movements.

The primary movements are a long range cycle that carries the entire market up or down. This is the long – term trend in the market. The secondary reactions act as a restraining force on the primary movement. These are in the opposite direction to the primary movement and last only for a short while. These are also known as correction. For example, when the market is moving upwards continuously, this upward movement will be interrupted by downward movements of short durations. These are called secondary reactions. The third movement in the market is the minor movements which are the day – to – day fluctuations in the market. The three movements of the market have been compared to the tides, the waves and the ripples in the ocean.

According to Dow Theory, the prices of the commodities can be identified by the means of a line chart. In this chart, the closing prices of the commodities may be plotted against the corresponding trading days. The below diagram shows a line chart of closing prices of the commodity in the market, The primary trend is said to have three phases in it, each of which be interrupted by a counter move or secondary reaction which would retrace about 33 – 66 % of the earlier rise or fall.

Primary trend and secondary reactions

Bullish Trend

During a bull market (upward moving market), in the first phase the prices would advance with the revival of confidence in the future of business. The future prospects of business in general would be perceived to be promising. This would prompt the investors to buy the commodities. During the second phase, prices would advance due to inflation and speculation. Thus during the bull market the line chart would exhibit the formation of three peaks. Each peak would be followed by a bottom formed by the secondary reaction. According to Dow theory, the formation of higher bottoms and higher tops indicates a bullish trend.

Three Phases of bull market

Bearish Trend

The bear market is also characterized by three phases. In the first phase the prices begin to fall due to abandonment of hopes. Investors begin to sell their commodities. In the second phase, the prices fall due to increased selling pressure. In the final phase, prices fall still further due to distress selling.

The theory also makes certain assumptions which have been referred to as the hypotheses of the theory. The first hypothesis states that the primary trend cannot be manipulated. It means that no single individual or institution or group of individuals and institutions can exert influence on major trend of the market. The second hypothesis states that averages discount everything. The third hypothesis states that the theory is not perfect. The theory is concerned with the trend of market and has no forecasting value as regards the duration or the likely price targets for the peak or bottom of the bull and bear markets.

Three Phases of a bear market

BASIC PRINCIPLES OF TECHNICAL ANALYSIS

The basic principles on which analysis is based are as follows:

1. The market value of the commodity is related to demand and supply factors operating in the market.

2. There are both rational and irrational factors which surrounded the supply and demand factors of a security.

3. Commodity prices behave in a manner that their movement is continuous in a particular direction for some length of time.

4. Trends in a commodity prices have been seen to change when there is a shift in the demand and supply factors.

5. The shift in demand and supply can be detected through charts prepared specifically to show market action.

6.2.2 Line, bar and candlesticks charts

Line Chart

It is the simplest price chart. In this chart the closing prices of the share are plotted on the XY graph on a day to day basis. The closing price of each day would be represented by a point on the XY graph. All these points would be concerned by straight line which would indicate the trend of the market. A line chart is illustrated below.

Line chart of closing prices

Bar Chart

It is perhaps the most popular chart used by technical analysts. In this chart the highest price and the lowest price and the closing price of each day are plotted on a day – to – day basis. A bar is formed by joining the highest price and the lowest price of a particular day by a vertical line. The top of the bar represents the highest price and the bottom of the bar represents the lower price and the small horizontal hash on the right of the bar is used to represents the closing price of the day. Sometimes the opening price of the day is marked as a hash on left side of the bar. This can be explained by taking 10 days Gold prices.

10Days Highest, Lowest and closing prices of Gold (in Rs)

( Month - June’12 )

Date High Prices	Low Prices	Close prices
01/06/2012 30029	29020	29432
02/06/2012 30156	30018	29994
04/06/2012 30110	29883	30099
05/06/2012 30119	29953	29918
06/06/2012 30295	30040	30011
07/06/2012 30070	29834	30065
07/06/2012 30070	29214	30065
08/06/2012 29588	29106	29317
09/06/2012 29609	29534	29560
11/06/2012 29784	29527	29544

Fig – bar chart of gold

Japanese Candlestick Charts

The Japanese candlestick chart shows the highest price, the lowest price, the opening price and the closing price of the commodities on day – to – day basis. The highest price and the lowest price of a day are joining by a vertical bar. There are mainly three types of candlesticks, like the white, the black and the doji or neutral candlestick. A white candlestick is used to represents a situation where the closing price of the day is higher than the opening price. A Black candlestick is used to represents a situation where the closing price of the day is lower than the opening price. A White candlestick indicates a bullish trend while a black candlestick indicates a bearish trend. A doji candlestick is the one where the opening price and the closing price of the day are the same. This can be expressed below by taking prices of Gold i.e., (opening, closing, high, low)

Gold prices

Date Open price High Price	Low Price	Close price
1/6/’12 29380 30029	29020	29432
2/6/’12 30042 30156	30018	29994
4/6/’12 30011 30110	29883	30099
5/6/’12 29956 30119	29953	29918
6/6/’12 30093 30295	30040	30011
7/6/’12 30070 30070	29834	30065
7/6/’12 30070 30070	29214	30065
8/6/’12 29235 29588	29106	29317
9/6/’12 29608 29609	29534	29560
11/6/’12 29549 29784	29527	29544

Japanese candlesticks chart of gold

Compared to traditional bar charts, many traders consider charts more visually appealing and easier to interpret. Each candlestick provides an easy-to-decipher picture of price action. Immediately a trader can compare the relationship between the open and close as well as the high and low. The relationship between the open and close is considered vital information and forms the essence of candlesticks. Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled Candlesticks where the close is less than the open, indicate selling pressure.

The hollow or filled portion of the candlestick is called "the body" (also referred to as "the real body"). The long thin lines above and below the body represent the high/low range and are called "shadows" (also referred to as "wicks" and "tails").

Long versus short shadow

The upper and lower shadows on candlesticks can provide valuable information about the trading session. Upper shadows represent the session high and lower shadows the session low. Candlesticks with short shadows indicate that most of the trading action was confined near the open and close. Candlesticks with long shadows show that prices extended well past the open and close.

Candlesticks with long upper shadow and short lower shadow indicate that buyers dominated during the session, and bid prices higher. However, sellers later forced prices down from their highs, and the weak close created a long upper shadow. Conversely, candlesticks with long lower shadows and short upper shadows indicate that sellers dominated during the session and drove prices lower. However, buyers later resurfaced to bid prices higher by the end of the session and the strong close created a long lower shadow.

CHART PATTERNS:

When the price bar charts of several days are drawn close together, certain patterns emerge. These patterns are used by technical analysts to identify trend reversal and predict the future movement of prices. The chart patterns may be classified as support and resistance patterns, reversal patterns.

1. Support and resistance patterns:

Support and resistance are the price levels at which the downtrend or uptrend in price movements is reversed. Support occurs when price is falling but bounces back or reverses direction every time it reaches a particular level. When all these low points are connected by a horizontal line, it forms the support line. In other words, support level is the price level at which sufficient buying pressure is exerted to stop the fall in prices. Resistance occurs when the commodity price moves upwards. The price may fall back every time it reaches a particular level. A horizontal line joining these tops forms the resistance level. Thus, resistance level is the price level where sufficient selling pressure is exerted to halt the ongoing rising in the price of a share.

If the scrip were to break the support level and move downwards it has bearish implications signaling the possibility of a future fall in prices. Similarly, if the scrip were to penetrate the resistance level it would be indicative of a bullish trend or a future rise in prices

35 days highest, lowest and close price of gold (May & June ’12)

Days	High	Low	close
1	28974	28701	29075
2	28847	28691	28852
3	28756	28725	28752
4	28757	28725	28752
5	28774	28531	28753
6	28562	28380	28618
7	28578	28267	28512
8	28967	28440	28357
9	29339	28988	28902
10	29347	29228	29264
11	29489	29310	29329
12	29499	29180	29369
13	29410	28842	29412
14	29436	29207	29311
15	29299	29120	29237
16	29318	29271	29271
17	29387	29242	29280
18	29471	29186	29317
19	29231	29174	29219
20	29518	29100	29219
21	29562	29312	29488
22	30029	29020	29432
23	30156	30018	29994
24	30110	29883	30099
25	30119	29953	29918
26	30295	30040	30011
27	30070	29834	30065
28	30070	29214	30065
29	29588	29106	29317
30	29609	29534	29560
31	29784	29527	29544
32	29823	29744	29765
33	30040	29680	29765
34	30168	29915	29968
35	30168	29915	29968

Fig- Support and resistance levels

Support

Resistance

6.3 MATHEMATICAL INDICATORS

Commodity prices do not rise or fall in a straight line. The movements are unpredictable. This makes the investors difficult for the analyst to measure the underlying trend. We can use the mathematical tool of moving averages to smoothen the unpredictable movements of the commodity prices and highlight the underlying trend.

Moving Averages: moving averages are mathematical indicators of underlying trend of price movement. There are two types of moving averages (MA) are commonly used by the analyst.

1. Simple Moving Average.

2. Exponential moving average.

1 Simple Moving Average

A simple, or arithmetic, moving average that is calculated by adding the closing price of the security for a number of time periods and then dividing this total by the number of time periods. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slow to react.

If we plotted a 5 period simple moving average on a 1-hour chart, we would add up the closing prices for the last 5 hours, and then divide that number by 5. We have the average closing price over the last five hours! String those average prices together and we get a moving average. Instead of just looking at the current price of the market, the moving averages give us a broader view, and we can now gauge the general direction of its future price. With the use of SMAs, we can tell whether a pair is trending up, trending down, or just ranging. There is one problem with the simple moving average and it's that they are susceptible to spikes. When this happens, this can give us false signals. We might think that a new trend may be developing but in reality, nothing changed.

Calculation of gold price 5 days simple moving average (SMA)

Days	Close prices (Rs)	Total prices of 5 days	5 days moving average
1	29075	-	-
2	28852	-	-
3	28752	-	-
4	28752	-	-
5	28753	144184	28836.8
6	28618	143727	28745.4
7	28512	143387	28677.4
8	28357	142992	28598.4
9	28902	143142	28628.4
10	29264	143653	28730.6
11	29329	144364	28872.8
12	29369	145221	29044.2
13	29412	146276	29255.2
14	29311	146685	29337
15	29237	146658	29331.6
16	29271	146600	29320
17	29280	146511	29302.2
18	29317	146416	29283.2
19	29219	146324	29264.8
20	29219	146306	29261.2
21	29488	146523	29304.6
22	29432	146675	29335
23	29994	147352	29470.4
24	30099	148232	29646.4
25	29918	148931	29786.2
26	30011	149454	29890.8
27	30065	150087	30017.4
28	30065	150158	30031.6
29	29317	149376	29875.2
30	29560	149018	29803.6
31	29544	148551	29710.2
32	29765	148251	29650.2
33	29765	147951	29590.2
34	29968	148602	29720.4
35	29968	149010	29802

In the above table , the first total of 144184 in column 3 is obtained by adding the prices of the first 5 days i.e. (29075+28852+28752+28752+28753).The next total of 143727 in column 3 is obtained by adding 6^th day & deleting 1^st day price from the first total i.e.(144184+28618-29075) this process is continued. The moving avg. in col.4 is obtained by dividing the total figure in column 3 by the number of days i.e. 5.

2 Exponential moving averages (EMA)-

It is calculated by using the following formula:-

EMA = (Current closing price- Previous EMA) x factor + previous EMA

Where Factor = 2/ n+1 and n = number of days for which the average is to be calculated

There are three steps to calculating an exponential moving average. First, calculate the simple moving average. An exponential moving average (EMA) has to start somewhere so a simple moving average is used as the previous period's EMA in the first calculation. Second, calculate the factor. Third, calculate the exponential moving average. The formula below is for a 5-day EMA.

SMA : 5 Period sum / 5

Factor: (2 / Time periods + 1) = (2/ 5+1) = 2/6 = 0.3333, (33.33%)

EMA: (Close – EMA previous day ) x factor + EMA (Previous day)

Calculating a 5 days exponential moving average

Days	Closing prices (A)	Previous days EMA (B)	Closing price-Previous day’s EMA (A) – (B) = (C)	Difference times the factor (C ) x 0.3 = (D)	Five day EMA = Previous days EMA + (D)
1	29075	-
2	28852	-
3	28752	-
4	28752	-
5	28753	28836.8 *	-83.8	-25.14	28811.66
6	28618	28811.66	-193.66	-58.098	28753.562
7	28512	28753.562	-241.562	-72.4686	28681.0934
8	28357	28681.0934	-324.0934	-97.22802	28583.87
9	28902	28583.87	318.13	95.439	28679.309
10	29264	28679.31	584.69	175.407	28854.717
11	29329	28854.717	474.283	473.983	29328.7
12	29369	29328.7	40.3	12.09	29340.79
13	29412	29340.79	71.21	70.91	29411.7
14	29311	29411.7	-100.7	-30.21	29381.49
15	29237	29381.49	-144.49	-43.347	29338.143
16	29271	29338.143	-67.143	-20.1429	29318.0001
17	29280	29318.0001	-38.0001	-11.40003	29306.60007
18	29317	29306.60007	10.39993	3.119979	29309.72
19	29219	29309.72	-90.72	-27.2160147	29282.504
20	29219	29282.504	-63.504	-19.0512	29263.453
21	29488	29263.453	224.547	67.3641	29330.82
22	29432	29330.82	101.18	30.354	29361.2
23	29994	29361.2	632.8	189.84	29551.04
24	30099	29551.04	547.96	164.388	29715.43
25	29918	29715.43	202.57	60.8	29776.23
26	30011	29776.23	234.8	70.44	29846.7
27	30065	29846.7	218.3	65.5	29912.2
28	30065	29912.2	152.8	45.84	29958
29	29317	29958	-641	-192.3	29317
30	29560	29317	243	72.9	29390

* Five day simple moving average.

3) (ROC) Rate of Change is calculated as:

(Closing price[today] – Closing price[ n days ago])/ Closing price[n days ago] x 100

This causes the indicator to fluctuate as a percentage around the zero line.

EXAMPLE-

Day	Closing price	Closing price (5days ago)	5 day Momentum	5 day ROC [ Mom/ CP 5 days ago]x100
1	29432	-	-	-
2	29994	-	-	-
3	30099	-	-	-
4	29918	-	-	-
5	30011	-	-	-
6	30065	29432	633	2.15%
7	30065	29994	71	0.2367%
8	29317	30099	-782	- 2.598%
9	29560	29918	-358	- 1.1966%
10	29544	30011	-467	- 1.556%
11	29765	30065	-300	- 0.9978%
12	29968	30065	-97	-0.3226%
13	30036	29317	719	2.4525%
14	30113	29560	553	1.8707%
15	30125	29544	581	1.9665%

Oversold

Overbought

1. Go short [S] when ROC turns down above the overbought level, place a stop loss above the recent high.

2. Go long [L] when ROC turns up from below the oversold level. Place a stop below the latest low.

3. Go short [S].

4. Go long [L]. This proves a false signal as price falls below the recent Low - stopping out the position.

The ROC values may be positive, Negative and also be zero. An ROC chart is shown above where the X – axis represents the time and the Y – axis represents the values of the ROC. The ROC values oscillate across the zero line. When the ROC line is above the zero line, the price is rising and when it below the zero line, the price is falling.

Ideally, one should buy a commodity that is oversold and sell a commodity that is overbought. In the ROC chart, the overbought zone is above the zero line and the oversold zone is below the zero line. Many analysts use the zero line for identifying buying and selling opportunities. Upside crossing (from below to above the zero line) indicates a buying opportunity, while a downside crossing (from above to below the zero line) indicates a selling opportunity.

The ROC has to be used along with the price chart. The buying and selling signals indicated by the ROC should also be confirmed by the price chart.

CHAPTER-7 Research Methodology

7.1 Sampling units –

To define sampling unit, one must answer the question that who is to be surveyed. In this project sampling units are commodity traders and private employees.

7.2 Sample size

The sample size of the survey was 80 people

7.3 Methods of Data Collection

The assignment entails that data has been collected from both primary and secondary sources.

Secondary information -Secondary information has been collected from:

Ø Journal articles, and reports available on national spot exchange, forward market bulletins by FMC, commodity Exchanges and commodity derivative trading

Ø Web Resources of World gold council, Forward Market Commission ,Domestic Commodity Exchanges ( MCX and NCDEX ) ,diet Odin software (screen shot)

Primary information - In order to gather the primary data associated with my survey commodity traders and private employees over selected regions in Bhilai, I have undergone a fieldwork. The basic purpose of the fieldwork was, obviously, to record responses of target people.

Ø Structured questionnaire survey of 67 member who were involved in the commodity Trading.

Ø In – depth interview of Market Traders who had prior experience of commodity trading.

Ø The rationale behind was to understand the limitations and constraints associated with commodity futures trading and physical market trader.

7.4 LIMITATIONS

This survey was restricted to Bhilai city.

The sample size for the survey of people was limited to 80 respondents, which might not be representing the whole country or a state.

The results are totally derived from the respondent’s answers. There might be a difference between the actual and projected results.

Research also depends on surveyors’ bias & his/her ability to analyze the data & draw conclusion.

The time duration to carry out the survey of all the regions of Bhilai was very short.

CHAPTER -8 Data analysis

(1) Gender ratio :

MALE	FEMALE
49	31

(2)Age:-

age	20-30	30-40	Above 40
	28	30	22

(3)Educational qualification:

Qualification	Graduate	Postgraduate	Under graduate
	40	30	10

(4)Occupation:-

Professional	Businessman	Employee of private sector	Employee of govt .sector
17	15	30	18

(5)Interested pattern of the people:

Securities	Numbers
Banks	16
Mutual funds	8
Insurance	12
Real Assets	8
Govt. Bonds	7
Gold Silver	10
Stock Market	9
Others(IPO)	1

Interpretation:-As above we have seen that most of the people like to invest in banks real assets ,gold/silver &insurance as many people get scared with their money risk they scare to invest in stock market.

(6)People preference category to invest in stock market:-

Instruments	No.
Equity	38
Derivatives	26
Commodity	16

Interpretation –

When ask the people about investment in stock market most of people give his first preference in Equity and second preference in derivatives and last preference in commodity. Because many people don’t know about commodity, so there is lack of awareness about the commodity.

(7) Factors which people take in consideration while they are taking the decision to deal with commodity?

Factors	No. of people
Tips from experts	22
Tips from friends /relatives	7
Business channels	17
Newspapers	16
Others(self analysis)	18

Interpretation-

When we ask the respondents that how they take decision about investment, most of respondent give his first preference to “tips from expert” and “Self analysis” after that other factor which are Business Channels, Newspapers and Others. Thus respondent reach at their own decision.

(8) Factors which play a crucial role when they make decision to invest in stock market?

Factors	No. of people
Risk reduction	24
Speculative motive	9
Leverage Benefit	20
Investment	12
Arbitrage benefit	15

Interpretation-

After investigating the factors which have been given the maximum importance by investors which trading in commodities we have come up with “risk reduction” as the first priority with 24 People while 20 people have considered it as a “leverage benefit”. So in future there is possibility of growth in commodity market.

(9) Duration of attachment with commodity market?

Duration	No. of people
Less than 1 year	26
1 to 5 years	29
5 to 10 years	15
Above 10 years	10

Interpretation-After asking about the duration of attachment I know that most of investor is connect with commodity about 1 to 5 Years but not satisfied change in present figure. So first of all try to aware the investor about commodity.

(10) Products which are mostly preferred by investors?

Product	No of people
Metal	21
Crops	6
Oil	8
Cereals and pulses	5
Spices	7
Energy	14
Bullions	18
Others	1

Interpretation-As we see that most of respondent gives first priority to Metals and second priority to Bullions. And after that they give priority to Energy, Spices, Oil, etc. But also some of people give his preference to other product.

(11) Mostly People prefer to deal with:-

Type of trading	No. of people
Square up mode	20
Arbitrage	8
Intraday	18
Hedging	7
Delivery based	10

Interpretation-After investigate to respondent, I know that most of investor like to “square up mode” (to settle the position) in commodity market and after that their second priority is “intraday”. So this is the types of trading which is preferred by investor.

(12) Which exchange prefers to deal by people?

Name of the exchange	No. of people
MCX	47
NCDEX	33

Interpretation-After investigate to respondent; I know that most of investor like to invest in MCX and after that their second priority goes to NCDEX.

(13) As an investor how do you view yourself?

Investor type	No. of people
Trader	22
Speculator	26
Short term investor	32

Interpretation-After getting response from respondent I see that most of investor view their selves as “ Short Term Investor” and others view themselves as “speculators” and “trader “.

(14) In which of the following co. people prefer to deal more and more time for commodities?

Name of the company	No. of people
Karvy comtrade	20
Anand rathi	22
Motilal oswal	12
India info line	14
India bulls	10
others	2

Interpretation- After getting response from respondent I know that most of my respondent prefers company to invest Karvy comtrade ltd. And after that some of prefers India info line and Anand rathi.

Chapter -9 Findings and Recommendations

Ø Commodity derivatives have a crucial role to play in the price risk management process. Especially in any agriculture dominated economy. Derivatives like forwards, futures, options, swaps etc are extensively used in many developed as well as developing countries in the world. However, they have been utilized in a very limited scale in India

Ø The production, supply and distribution of many agricultural commodities are controlled by the government and only forwards and futures trading are permitted in certain commodity items.

Ø People who knows, they believe that operators and big players in the market drive this future commodity market.

Ø For the process of taking or giving delivery in future commodity market is lengthy, costly, and required so many documents.

Ø The option trading is still not allowed in commodity market so the risk management process is incomplete. Because we all know that future trading has its own limits.

Ø People still considering that to invest in commodity market is very risky.

Ø People still considering commodity market for speculation rather than business purpose.

Ø The delivery centers of commodities are very less in India compare to other developed countries.

Chapter -10 Appendix

10.1 - Questionnaire

(Please give me your precious time and fill this questionnaire for my project work)

(1) NAME-

(2) ADDRESS-

(3) CONTACT NO.

(4) PROFESSION

(5) GENDER (6) AGE (7) EDUCATION-

(6) Where do you invest your saving?

Bank Mutual fund Govt. bonds

Insurance Real assets Stock market

Gold / Silver

(7) If you invest in stock market where do you invest your savings?

Equity Derivatives Commodity

(8) How do you reach at investments decisions?

Tips from experts From Friends/relatives

Business channels Newspapers others (specify)

(9) Which factor plays a crucial role when you make a decision to invest in stock market?

Risk reduction Speculative motive Leverage benefit

Investment Arbitrage benefit

(10) Duration of your attachment with commodity market?

Less than 1 year 1 to 5 yrs 5-10 yrs

More than 10 yrs

(11) Which of the following products would you prefer for your investments?

Metals Crops Oil

Cereals & pulses Spices Energy

Bullions If others please specify

(12) Which type of trading you prefer to deal with?

Square up mode Arbitrage Intraday

Hedging Delivery based

(13) Which exchange you would prefer to deal with?

MCX NCDEX

(14) How do you view your self?

Trader Speculator Short term investor

(15) In which of the following company you would like to deal more and more time?

Karvy comtrade Anand rathi India bulls

Motilal oswal India Info line others (specify)

10.2 Bibliography

[1] National stock exchange of India limited, commodities market module.

[2] Forward market bulletin Jan-march 2012 issued by forward markets commission, dept. of consumer affairs, Ministry of consumer affairs, food and public distribution govt. of India.

[3] “Commodity insights yearbook, a PWC and MCX joint Endeavour.

[4] Red herring Prospectus dated February 10, 2012 of Multi commodity Exchange of India limited.

[5] Daily market report of national spot exchange.

[6] Annual commodity report 2011, karvy special reports, karvy comtrade.

[7] Karvy comrades invest and harvest magazine on commodities futures market.

A Study Of Commodity Markets At Karvy Comtrade Ltd. Project Report - Part 4

6.1.1 - DEMAND AND CONSUMPTION OF GOLD

6.1.2 - Uses of Gold

It is calculated by using the following formula:-