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Minor Project Report on
A Study on Financial Investment in Indian CommodityMarket
Submitted in partial fulfilment of the requirement of the
Bachelor of Business Management Degree
Offered by Jain University during the year 2012
By
Name: Charanpreet Singh
Reg No: 11bbm20051
Semester: IIIrdSection: F
Under the guidance of
R.Ratchana
M.com (CA), M.phil, MBA
#1/1-1, Atria Tower, Palace Road, Bangalore560001, India
Phone: +91 80 43430200 |Fax: +91 80 22353215
E-mail:[email protected] | Website:www.cms.ac.in
mailto:[email protected]:[email protected]:[email protected]://www.cms.ac.in/http://www.cms.ac.in/http://www.cms.ac.in/http://www.cms.ac.in/mailto:[email protected] -
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Certificate
Awarded to Charanpreet Singh
This is to certify that the Minor Project entitledA Study on Financial
Investment in Indian Commodity Market has been submitted in partial
fulfilment of the requirement for the Degree of Business Management of Jain
University.
Date: Head
Place: JU-CMS
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Certificate
This is to certify that the project titledA Study on Financial Investment inIndian Commodity Marketis a record of the original and independent work
carried byCharanpreet Singhunder my guidance and supervision.
This has not previously formed the basis of the award of any degree/diploma
or other similar title of recognition.
Date :
Place: Guide Signature
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Declaration
I, hereby declare that this minor project titledA Study on Financial Investment
in Indian Commodity Market for is prepared by during the academic
year 2012 under the guidance of Ms.R. Ratchana
This project is not based on any previously submitted project for the award of
any degree or diploma offered by any University. It is the result of my own
effort.
Name:Charanpreet Singh
Sem:III rd SEM
Reg No:11BBM20051
Date:
Place: Bangalore Signature
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Contents
Chapter 1Introduction
Chapter 2Company profile, specifically % of business when
compared to competitors. Highlights of financials of the
company annual report a minimum of two years.
Chapter 3Methodology of the study/Design of the study of
minor projectThe student should take one major problems in
any one functional area like Finance, Marketing, Production,
Human Resource and Systems and make a detailed study on
that area.
Chapter 4Data analysis and interpretation
Chapter 5Summary of findings, suggestions and conclusions
Annexure
Bibliography
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Chapter 1
INTRODUCTIONThe world has changed and so has investing. The market is shell shocked and
yesterdays momentum stocks are todays slow-motion stocks. But in the new reality
of low-growth investing, commodities are hot and getting hotter. A rapidly
industrializing and urbanizing Asia will be demanding lots more copper, zinc, iron ore,
coal, fertilizers, gold and oil to transform their societies. Commodities are it and thats
great news for investors who want to profit from the next great bull market in
commodities. In fact, commodities may be about the only asset class that is likely to
outperform the broad market in the future.
Although they are without a doubt important to the global economy, commodities are
among the most misunderstood of all asset classes. Stocks, bonds and real estate all
have legions of followers and plenty of experts agree on their importance within an
investment portfolio, but venture into the world of commodities and you are into an
area thats intimidating to the average investor, where suspicions run deep and
understanding is limited. As a result, commodities get short-shrift in most investment
accounts and investors miss out on some important opportunities.
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Most people have the impression that commodity markets are very complex and
difficult to understand. 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 orless 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 a futures market and a market in which actual
commodities are bought and sold, either for immediate or later delivery, is that in the
futures market one deals in standardized contractual agreements only. These
agreements (more formally called futures 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 and sell commodities in a futures market regardless of
whether or not one has, or owns, the particular commodity involved. When one deals
in futures one need not be concerned about having to receive delivery (for the buyer)
or having to make delivery (for the seller) of the actual commodity, providing of
course that one does not buy or sell a future during its delivery month. One may at any
time cancel out a previous sale by an equal off setting purchase, or a previous
purchase by an equal offsetting sale. If done prior to the delivery month the tradescancel out and thus there is no receipt or delivery of the commodity.
Actually, only a very small percentage, usually less than two percent, of the total
futures contracts 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
Indian markets have recently thrown open a new avenue for retail investors and
traders to participate: commodity derivatives. For those who want to diversify their
portfolios beyond shares, bonds and real estate, commodities are the best option.
Till some months ago, this wouldn't have made sense. For retail investors could have
done very little to actually invest in commodities such as gold and silver or oilseeds in
the futures market. This was nearly impossible in commodities except for gold and
silver as there was practically no retail avenue for punting in commodities.
However, with the setting up of three multi-commodity exchanges in the country,
retail investors can now trade in commodity futures without having physical stocks!
Commodities actually offer immense potential to become a separate asset class formarket-savvy investors, arbitrageurs and speculators. Retail investors, who claim to
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understand the equity markets, may find commodities an unfathomable market. But
commodities are easy to understand as far as fundamentals of demand and supply are
concerned. Retail investors should understand the risks and advantages of trading in
commodities futures before taking a leap. Historically, pricing in commodities futures
has been less volatile compared with equity and bonds, thus providing an efficientportfolio diversification option.
In fact, the size of the commodities markets in India is also quite significant. Of the
country's GDP of Rs 13, 20,730 core (Rs 13,207.3 billion), commodities related (and
dependent) industries constitute about 58 per cent.
Currently, the various commodities across the country clock an annual turnover of
Rs 1, 40,000 cores (Rs 1,400 billion). With the introduction of futures trading, the size
of the commodities market grows many folds here on.
Like any other market, the one for commodity futures plays a valuable role in
information pooling and risk sharing. The market mediates between buyers and sellers
of commodities, and facilitates decisions related to storage and consumption of
commodities. In the process, they make the underlying market more liquid.
Instability of commodity prices has always been a major concern of the producers as
well as the consumers in an agriculture dominated country like India. Farmers direct
exposure to price fluctuations, for instance, makes it too risky for many farmers to
invest in otherwise profitable activities. There are various ways to cope with thisproblem.
Apart from increasing the stability of the market, various factors in the farm sector
can better manage their activities in an environment of unstable prices through
derivative markets. These markets serve a risk -shifting function, and can be used to
lock -in prices instead of relying on uncertain price developments.
Both forwards and futures contracts have specific utility to commodity producers,
Merchandisers and consumers. Apart from being a vehicle for risk transfer among
hedgers and from hedgers to speculators, futures markets also play a major role in
price discovery.
Commodities have attracted considerable interest as a financial investment in recent
years. This project discusses the factors behind their growing appeal and assesses the
extent to which market characteristics, such as price volatility, have changed as a
result. The feature concludes that commodity markets have become more like
financial markets in terms of the motivations and strategies of participants, but that the
physical characteristics of commodity markets are still important.
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INDUSTRY PROFILE
BROKERSHIP CONCEPT
A broker is an individual or party (brokerage firm) that arranges transactions between
abuyerand aseller, and gets acommissionwhen the deal is executed. A broker who
also acts as a seller or as a buyer becomes aprincipalparty to the deal.
Distinguishagent: one who acts on behalf of a principal.Brokers also can furnish
considerable market information regarding prices, products and market conditions.
Brokers may represent either the seller (90 percent of the time) or the buyer (10percent) but not both at the same time. An example would be a stockbroker, who
makes the sale or purchase of securities on behalf of his client. Brokers play a huge
role in the sale of stocks, bonds and other financial services.
A brokerage firm, or simply brokerage, is afinancial institutionthat facilitates the
buying and selling offinancial securitiesbetween a buyer and a seller. Brokerage
firms serve a clientele of investorswho trade public stocks and other securities,
usually through the firm's agentstockbrokers. A traditional, or "full service",
brokerage firm usually undertakes more than simply carrying out a stock or bond
trade. The staff of this type of brokerage firm is entrusted with the responsibility of
http://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Brokerage_firmhttp://en.wikipedia.org/wiki/Buyerhttp://en.wikipedia.org/wiki/Buyerhttp://en.wikipedia.org/wiki/Buyerhttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wiktionary.org/wiki/principalhttp://en.wiktionary.org/wiki/principalhttp://en.wiktionary.org/wiki/principalhttp://en.wikipedia.org/wiki/Agent_(law)http://en.wikipedia.org/wiki/Agent_(law)http://en.wikipedia.org/wiki/Agent_(law)http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_securitieshttp://en.wikipedia.org/wiki/Financial_securitieshttp://en.wikipedia.org/wiki/Financial_securitieshttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Stockbrokerhttp://bullshouse.com/blog/wp-content/uploads/2012/06/brokers.pnghttp://en.wikipedia.org/wiki/Stockbrokerhttp://en.wikipedia.org/wiki/Investorhttp://en.wikipedia.org/wiki/Financial_securitieshttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Agent_(law)http://en.wiktionary.org/wiki/principalhttp://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Buyerhttp://en.wikipedia.org/wiki/Brokerage_firm -
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researching the markets to provide appropriate recommendations and in so doing them
direct the actions of pension fund managers andportfolio managersalike. These firms
also offer margin loans for certain approved clients to purchase investments on credit,
subject to agreed terms and conditions. Traditional brokerage firms have also become
a source of up-to-date stock prices and quotes.A commodity broker is a firm or individual who executes orders to buy or
sellcommodity contractson behalf of clients and charges them acommission. A firm
or individual who trades for his own account is called atrader. Commodity contracts
includefutures,options, and similarfinancial derivatives. Clients who trade
commodity contracts are eitherhedgerusing the derivatives markets to manage risk,
orspeculatorswho are willing to assume that risk from hedgers in hopes of a profit.
While historically commodity brokers traded grain and livestock futures contracts,
today commodity brokers trade a wide variety of financial derivatives based on not
only grain and livestock, but also derivatives based onfoods/softs,metals,energy,stock indexes,equities,bonds,currencies, and an ever
growing list of other underlying assets. Ever since the 1980s, the majority of
commodity contracts traded are financial derivatives with financial underlying assets
such as stock indexes and currencies.
COMMODITY BROKERS;
Floor Broker/Trader:An individual who trades commodity contracts on the floor of acommoditiesexchange. When executing trades on behalf of a client in exchange for a commissionhe is acting in the role of a broker. When trading on behalf of his own account, or forthe account of his employer, he is acting in the role of a trader.Floor tradingisconducted in the pits of a commodity exchange viaopen outcry.
Futures Commission Merchant (FCM):
A firm or individual that solicits or accepts orders for commodity contracts traded onan exchange and holds client funds tomargin, similar to a securitiesbroker-dealer.
Most individual traders do not work directly with a FCM, but rather through an IB orCTA.
Introducing Broker (IB):
A firm or individual that solicits or accepts orders for commodity contracts traded onan exchange. IBs do not actually hold customer funds to margin. Client funds tomargin are held by a FCM associated with the IB.
Commodity Trading Advisor (CTA):
A firm or individual that, for compensation or profit, advises others, on the trading of
commodity contracts. They advisecommodity poolsand offermanagedfuturesaccounts. Like an IB, a CTA does not hold customer funds to margin; they are
http://en.wikipedia.org/wiki/Portfolio_managershttp://en.wikipedia.org/wiki/Portfolio_managershttp://en.wikipedia.org/wiki/Portfolio_managershttp://en.wikipedia.org/wiki/Commodity_markethttp://en.wikipedia.org/wiki/Commodity_markethttp://en.wikipedia.org/wiki/Commodity_markethttp://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Speculatorshttp://en.wikipedia.org/wiki/Speculatorshttp://en.wikipedia.org/wiki/Speculatorshttp://en.wikipedia.org/wiki/Metalshttp://en.wikipedia.org/wiki/Metalshttp://en.wikipedia.org/wiki/Metalshttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Stock_indexeshttp://en.wikipedia.org/wiki/Stock_indexeshttp://en.wikipedia.org/wiki/Stock_indexeshttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Currencieshttp://en.wikipedia.org/wiki/Currencieshttp://en.wikipedia.org/wiki/Currencieshttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Floor_tradinghttp://en.wikipedia.org/wiki/Floor_tradinghttp://en.wikipedia.org/wiki/Floor_tradinghttp://en.wikipedia.org/wiki/Open_outcryhttp://en.wikipedia.org/wiki/Open_outcryhttp://en.wikipedia.org/wiki/Open_outcryhttp://en.wikipedia.org/wiki/Margin_(finance)http://en.wikipedia.org/wiki/Margin_(finance)http://en.wikipedia.org/wiki/Margin_(finance)http://en.wikipedia.org/wiki/Broker-dealerhttp://en.wikipedia.org/wiki/Broker-dealerhttp://en.wikipedia.org/wiki/Broker-dealerhttp://en.wikipedia.org/wiki/Commodity_poolshttp://en.wikipedia.org/wiki/Commodity_poolshttp://en.wikipedia.org/wiki/Commodity_poolshttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Hedge_fundhttp://en.wikipedia.org/wiki/Commodity_poolshttp://en.wikipedia.org/wiki/Broker-dealerhttp://en.wikipedia.org/wiki/Margin_(finance)http://en.wikipedia.org/wiki/Open_outcryhttp://en.wikipedia.org/wiki/Floor_tradinghttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Commodities_exchangehttp://en.wikipedia.org/wiki/Currencieshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Equitieshttp://en.wikipedia.org/wiki/Stock_indexeshttp://en.wikipedia.org/wiki/Energyhttp://en.wikipedia.org/wiki/Metalshttp://en.wikipedia.org/wiki/Speculatorshttp://en.wikipedia.org/wiki/Hedge_(finance)http://en.wikipedia.org/wiki/Financial_derivativeshttp://en.wikipedia.org/wiki/Option_(finance)http://en.wikipedia.org/wiki/Futures_contracthttp://en.wikipedia.org/wiki/Trader_(finance)http://en.wikipedia.org/wiki/Commission_(remuneration)http://en.wikipedia.org/wiki/Commodity_markethttp://en.wikipedia.org/wiki/Portfolio_managers -
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held at a FCM. CTAs exercise discretion over their clients' accounts, meaning thatthey have power of attorney to trade the clients account on his behalf according to theclient's trading objectives. A CTA is generally the commodity equivalent to afinancialadvisorormutual fundmanager.
Commodity Pool Operator (CPO):A firm or individual that operates commodity pools advised by a CTA. A commodity
pool is essentially the commodity equivalent to a mutual fund.
Registered Commodity Representative (RCR)/Associated Person (AP):
An employee, partner or officer of a FCM, IB, CTA, or CPO, duly registered andlicensed to conduct the activities of a FCM, IB, CTA, or CPO. This is the commodityequivalent to aregistered representative.
REGULATION
A single firm or individual may be registered and act in more than one capacity. In the
United States, an individual working in any of the above roles must pass the Series 3
National Commodity Futures Examination administered by theFinancial IndustryRegulatory Authority (FINRA). With few exceptions, most individuals who act as a
FCM, IB, CTA, and CPO, as well as their RCR/APs, are required to register with
theCommodity Futures Trading Commission (CFTC), and be members of
theNational Futures Association(NFA). Floor brokers/traders who are members or
employees of a commodity exchange generally do not need to be members of the
NFA, as they are regulated by the exchange.
BROKERAGE FEE
A fee charged by an agent, or agents company to facilitate transactions between
buyers and sellers. The brokerage fee is charged for services such as negotiations,
sales, purchases, delivery or advice on the transaction. There are many types of
brokerage fees added in areas such as insurance, realty, delivery services or
stocks. Brokerage fees will usually be based on either a percentage of the transaction
or a flat fee. They can also be a combination of the two.
SUMMARY ABOUT COMMODITY BROKERAGESHIP
STRENGTHS;
http://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Registered_representativehttp://en.wikipedia.org/wiki/Registered_representativehttp://en.wikipedia.org/wiki/Registered_representativehttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commissionhttp://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commissionhttp://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commissionhttp://en.wikipedia.org/wiki/National_Futures_Associationhttp://en.wikipedia.org/wiki/National_Futures_Associationhttp://en.wikipedia.org/wiki/National_Futures_Associationhttp://en.wikipedia.org/wiki/National_Futures_Associationhttp://en.wikipedia.org/wiki/Commodity_Futures_Trading_Commissionhttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Financial_Industry_Regulatory_Authorityhttp://en.wikipedia.org/wiki/Registered_representativehttp://en.wikipedia.org/wiki/Mutual_fundhttp://en.wikipedia.org/wiki/Financial_advisorhttp://en.wikipedia.org/wiki/Financial_advisor -
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Huge market potential given the under-penetration of commodities as aninvestment avenue amongst Indian investor community and an increasinginvestor interest in new market segments like equity, currency futures, interestrate derivatives.Adequate capitalization levels, at least for larger players provides cushion toabsorb potential losses resulting from the short term challenges in theoperating environment.A relatively diversified revenue profile at least for the larger players.A more flexible cost structure arising from the increasing reliance onfranchisee model.
CHALLENGES;
Protecting brokerage yields and market share in the highly competitive andfragmented commodity brokerage industry; further accentuated by the risingshare of the low yielding options segment.
Volatility in earnings and profitability due to linkages with vagaries of capitalmarket and increasing cost of regulatory compliances.
Achieving a critical scale of operations and managing costs to sustainprofitability even in a prolonged dull phase.
Managing the inherent refinancing risk as players scale up capital marketfunding book.
Continue investing in upgrading the risk management systems and monitoringpolicies to mitigate associated risks, especially during periods of extrememarket volatility.
Scaling up the non broking business lines to diversify revenue streams whilecontaining risks.
Greater dominance of the foreign brokerage houses in the institutional brokingsegment
TOP BROKERAGE FIRMS IN INDIAN CONTEXT
Brokerage firms are the business entities that deal with stock trading. India, with an
increasing capital market and a growing number of investors, has a number of brokerage
firms. In Indian retail brokerage industry, the brokerage firms primarily work as agents for
buying and selling of securities like shares, stocks and other financial instruments and earn
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commission for each of the transactions. There are plenty of brokerage firms in India. Let's
have a look at the top 10 brokerage firms in India.
Before talking anything about top brokerage firms in India, let's have a glance at the Indian
retail brokerage market, which is going through a wonderful phase with high growth rate. The
total trading volume of the Indian brokerage companies stood at US$ 1239.1 billion in theyear 2004, which increased to US$ 1492.1 billion in 2005. It is further expected to reach US$
6535.7 billion by the year 2015.
TOP TEN COMMODITY BROKERAGE FIRMS IN INDIA
Name Kotak Securities Limited
Terminals 4320
Sub Brokers 910
No. of
Employees4008
No. of Branches 350
Name Karvy Stock Broking Limited
Terminals 1700
Sub Brokers 19000
No. of
Employees3910
No. of Branches 581
Name India bulls
Terminals 2876
Sub Brokers NA
No. of
Employees5873
No. of Branches 522
Name IL&FS Investmart Limited
Terminals 1644
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Sub Brokers NA
No. of
Employees1900
No. of Branches 294Name MotilalOswal Securities
Terminals 7923
Sub Brokers 890
No. of
Employees2193
No. of Branches 63
Name Reliance MoneyTerminals 2428
Sub Brokers 1494
No. of
Employees2037
No. of Branches 142
Name India Infoline
Terminals 173
Sub Brokers 173
No. of
EmployeesNA
No. of Branches 605
Name Angel Broking Limited
Terminals 5715
Sub Brokers NA
No. of
Employees284
No. of Branches NA
Name AnandRathi Securities Limited
Terminals 1527
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Sub Brokers 320
No. of
Employees4566
No. of Branches 220
Name Geojit
Terminals 627
Sub Brokers 247
No. of
Employees343
No. of Branches 314
Business Today 2012 may issue
There are basically two types of trading on market
Delivery Intraday
Delivery trading is one in which shares are bought and can only be sold after they aredelivered by the broker that means that they cannot be sold the same day, and delivery
takes two to three days after they are bought and then they are ready to be sold.
Intraday trading which takes place for that very particular day and there is no delivery
they can be bought and sold the same day and are automatically sold at the end of the
trading session if you have not sold it by yourself during the trading session.
Brokerage is usually negotiable: Several of you trying to choose an online broker and
open an online trading account must have been frustrated trying to search for the exactbrokerage charges charged by various online brokers. But the fact is the brokerage
charged by the same broker varies and in several cases is negotiable. For example if
you go and tell a brokerage house that you are going to deposit 2 lakh rupees and try
to convince them you are going to trade heavily, they might consider reducing your
brokerage. That is why in the above table you will find only a range for the brokerage
charges in some cases. But that should be enough to get an idea.
Effective brokerage with taxes is more: In addition to the above brokerage charges
you will have to pay STT (Securities Transaction Tax) at the rate or 0.02% of thetotal transaction amount. You will also be charged 12.5% Service Tax on the
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brokerage amount (and not on the transaction amount). For example, if your brokerage
is 0.50% for delivery and you do a delivery transaction of Rs.100/- then the total
brokerage you pay is 0.50 (brokerage) + 0.02 (stt) + 0.063 (service tax) = 0.58.
Thus our effective brokerage (including all taxes) will be 0.58%. Similarly forbrokerage on intraday transactions.
One may also like to compare brokerages charged by the online brokers mentioned
above for trading in futures and options. I have traded options on SBICAP securities
and have been charged Rs.100/- flat brokerage fee for every options trade. I will
probably find out and also add a comparison table for brokerage charges for trading
derivatives (futures and options) later, if i see enough people Google searching for the
same. For futures, some online brokers charge different brokerage for different legs of
the trade, i.e. different for buy and sell trade.
COMMODITY AND COMMODITY MARKET
The vast geographical extent of India and her huge population is aptly complemented
by the size of her market. The broadest classification of the Indian Market can be
made in terms of the commodity market and the bond market. The commodity market
in India comprises of all palpable markets that we come across in our daily lives. Such
markets are social institutions that facilitate exchange of goods for money. The cost of
goods is estimated in terms of domestic currency. Electronic trading and settlement of
transactions has created a revolution in global financial and commodity markets.
A commodity is a product that has commercial value, which can be produced, bought,
sold, and consumed. Commodities are basically the products of the primary sector of
an economy. The primary sector of an economy is concerned with agriculture and
extraction of raw materials such as metals, energy (crude oil, natural gas), etc., which
serve as basic inputs for the secondary sector of the economy.Ineconomics,
a commodity is the generic term for any marketable item produced to
satisfywantsorneeds. Economic commodities comprisegoodsandservices.
A commodity has full or partialfungibility; that is, the market treats it as equivalent
or nearly so no matter who produces it. "From the taste of wheat it is not possible to
tell who produced it, a Russian serf, a French peasant or an English
capitalist."Petroleumandcopperare examples of such commodities. The price of
copper is universal, and fluctuates daily based on global supply and demand. Items
such as stereo systems, on the other hand, have many aspects of product
differentiation, such as thebrand, the user interface, the perceived quality etc. And,
the more valuable a stereo is perceived to be, the more it will cost.
COMMODITY MARKET
http://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Economicshttp://en.wikipedia.org/wiki/Wantshttp://en.wikipedia.org/wiki/Wantshttp://en.wikipedia.org/wiki/Wantshttp://en.wikipedia.org/wiki/Needshttp://en.wikipedia.org/wiki/Needshttp://en.wikipedia.org/wiki/Needshttp://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Fungibilityhttp://en.wikipedia.org/wiki/Fungibilityhttp://en.wikipedia.org/wiki/Fungibilityhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Copperhttp://en.wikipedia.org/wiki/Copperhttp://en.wikipedia.org/wiki/Copperhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Brandhttp://en.wikipedia.org/wiki/Copperhttp://en.wikipedia.org/wiki/Petroleumhttp://en.wikipedia.org/wiki/Fungibilityhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Good_(economics)http://en.wikipedia.org/wiki/Needshttp://en.wikipedia.org/wiki/Wantshttp://en.wikipedia.org/wiki/Economics -
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Commodity market is an important constituent of the financial markets of any
country. It is the market where a wide range of products, viz., precious metals, base
metals, crude oil, energy and soft commodities like palm oil, coffee etc. are traded. It
is important to develop a vibrant, active and liquid commodity market. This would
help investors hedge their commodity risk, take speculative positions in commoditiesand exploit arbitrage opportunities in the market.
The commodities market is actually a collection of 48 worldwide markets that trade
96 commodities. Everything from silver to orange juice concentrate can be sold. The
largest market here in the United States is located in Chicago. Smaller in size and
fame, the Chicago Mercantile Exchange or CME trades in a large amount of
commodities.
STRUCTURE OF COMMODITY MARKET
HISTORY OF EVOLUTION OF COMMODITY MARKET
Commodities trading was evolved from need of assured continuous supply
of seasonal agricultural crops. The concept of organized trading in commodities
evolved in Chicago, in 1848. But one can trace its roots in Japan. In 19th century
Chicago in United States had emerged as a major commercial hub. So that wheat
producers from Mid-west attracted here to sell their produce to dealers & distributors.
Due to lack of organized storage facilities, absence of uniform weighing & grading
mechanisms producers often confined to the mercy of dealers discretion. These
situations lead to need of establishing a common meeting place for farmers and
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dealers to transact in spot grain to deliver wheat and receive cash in return. Gradually
sellers & buyers started making commitments to exchange the produce for cash in
future and thus contract for futures trading evolved; Whereby the producer would
agree to sell his produce to the buyer at a future delivery date at an agreed upon price.
Trading of wheat in futures became very profitable which encouraged the entry ofother commodities in futures market. This created a platform for establishment of a
body to regulate and supervise these contracts. Thats why Chicago Board of Trade
(CBOT) was established in 1848. In 1870 and 1880s the New York Coffee, Cotton and
Produce Exchanges were born. Agricultural commodities were mostly traded but as
long as there are buyers and sellers, any commodity can be traded. In 1872, a group of
Manhattan dairy merchants got together to bring chaotic condition in New -York
market to a system in terms of storage, pricing, and transfer of agricultural products.
The largest commodity exchange in USA is Chicago Board of Trade, The Chicago
Mercantile Exchange, the New York Mercantile Exchange, the New York Commodity
Exchange and New York Coffee, sugar and cocoa Exchange. Worldwide there are
major futures trading exchanges in over twenty countries including Canada, England,
India, France, Singapore, Japan, Australia and New Zealand.
COMMODITY MARKET AND INDIA
Organized futures market evolved in India by the setting up of "Bombay Cotton Trade
Association Ltd." in 1875. In 1893, following widespread discontent amongst
leadingcottonmill owners and merchants over the functioning of the Bombay Cotton
TradeAssociation, aseparate association by the name "Bombay Cotton Exchange Ltd." was
constituted. A future trading in oil seeds was organized in India for the first time with
the setting up of GujaratiVyapariMandali in 1900, which carried on futures trading in
groundnut, castor seed andcotton. Before the Second World War broke out in 1939
several futures markets in oilseedswere functioning in Gujarat and Punjab.
A three-pronged approach has been adopted to revive and revitalize the market.
Firstly, on policy front many legal and administrative hurdles in the functioning of the
markethave been removed. Forward trading was permitted in cotton and jute goods in1998, followed by some oilseeds and their derivatives, such as groundnut, mustard
seed, sesame,cottonseed etc. in 1999. A statement in the first ever National Agriculture
Policy, issued inJuly, 2000 by the government that futures trading will be encouraged
in increasing number ofagricultural commodities was indicative of welcome change in
the government policytowards forward trading.
Secondly, strengthening of infrastructure and institutional capabilities of the regulator
and the existing exchanges received priority. Thirdly, as the existing exchanges are
slow toadopt reforms due to legacy or lack of resources, new promoters with resourcesand
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Professional approach were being attracted with a clear mandate to set up
dematerialized,
technology driven exchanges with nationwide reach and adopting best international
practices.
The year 2003 marked the real turning point in the policy framework for commodity
market when the government issued notifications for withdrawing all prohibitions and
Opening up forward trading in all the commodities. This period also witnessed other
reforms,such as, amendments to the Essential Commodities Act, Securities (Contract)
Rules, whichhave reduced bottlenecks in the development and growth of commodity
markets. Of thecountry's total GDP, commodities related (and dependent) industries
constitute about roughly50-60 %, which itself cannot be ignored.
TYPES OF COMMODITIES
World-over one will find that a market exits for almost all the commodities known to
us. These commodities can be broadly classified into the following:
Precious Metals: Gold, Silver, and Platinum etc
Other Metals: Nickel, Aluminum, Copper etc
Agro-Based Commodities: Wheat, Corn, Cotton, Oils, Oilseeds.
Soft Commodities: Coffee, Cocoa, Sugar etc
Live-Stock: Live Cattle, Pork Bellies etcEnergy: Crude Oil, Natural Gas, Gasoline etc
COMMODITY EXCHANGESMost of the existing Indian commodity exchanges are single commodity platformsare
regional in nature, run mainly by entities which trade on them resulting in
substantialconflict of interests, opaque in their functioning and have not used
technology to scale uptheir operations and reach to bring down their costs. But with
the strong emergence ofNational Multi-commodity Exchange Ltd., Ahmadabad
(NMCE), Multi CommodityExchange Ltd., Mumbai (MCX), National Commoditiesand Derivatives Exchange, Mumbai(NCDEX), and National Board of Trade, Indore
(NBOT), all these shortcomings will beaddressed rapidly. These exchanges are
expected to be role model to other exchanges and arelikely to compete for trade not
only among themselves but also with the existing exchanges.
The current mindset of the people in India is that the Commodity exchanges
arespeculative (due to non delivery) and is not meant for actual users. One major
reason beingthat the awareness is lacking amongst actual users. In India, Interest rate
risks, exchange raterisks are actively managed, but the same does not hold true for the
commodity risks. Someadditional impediments are centered on the safety,transparency and taxation issues.
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LARGEST COMMODITY EXCHANGES IN THE WORLD
Chapter 2
COMPANY PROFILE
Exchange Country Volume per month $M
CME Group USA 19[6]
Tokyo Commodity
ExchangeJapan -
NYSE Euronext USA -
Dalian Commodity
ExchangeChina -
Multi Commodity Exchange India -
Intercontinental Exchange USA, Canada, China, UK -
Africa Mercantile
ExchangeAfrica -
http://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/CME_Grouphttp://en.wikipedia.org/wiki/Commodity_market#cite_note-5http://en.wikipedia.org/wiki/Commodity_market#cite_note-5http://en.wikipedia.org/wiki/Tokyo_Commodity_Exchangehttp://en.wikipedia.org/wiki/Tokyo_Commodity_Exchangehttp://en.wikipedia.org/wiki/Tokyo_Commodity_Exchangehttp://en.wikipedia.org/wiki/NYSE_Euronexthttp://en.wikipedia.org/wiki/NYSE_Euronexthttp://en.wikipedia.org/wiki/Dalian_Commodity_Exchangehttp://en.wikipedia.org/wiki/Dalian_Commodity_Exchangehttp://en.wikipedia.org/wiki/Dalian_Commodity_Exchangehttp://en.wikipedia.org/wiki/Multi_Commodity_Exchangehttp://en.wikipedia.org/wiki/Intercontinental_Exchangehttp://en.wikipedia.org/wiki/Intercontinental_Exchangehttp://en.wikipedia.org/wiki/Africa_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Africa_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Africa_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Africa_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Africa_Mercantile_Exchangehttp://en.wikipedia.org/wiki/Intercontinental_Exchangehttp://en.wikipedia.org/wiki/Multi_Commodity_Exchangehttp://en.wikipedia.org/wiki/Dalian_Commodity_Exchangehttp://en.wikipedia.org/wiki/Dalian_Commodity_Exchangehttp://en.wikipedia.org/wiki/NYSE_Euronexthttp://en.wikipedia.org/wiki/Tokyo_Commodity_Exchangehttp://en.wikipedia.org/wiki/Tokyo_Commodity_Exchangehttp://en.wikipedia.org/wiki/Commodity_market#cite_note-5http://en.wikipedia.org/wiki/CME_Group -
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NAME OF THE COMPANY
NIRMAL BANG SECURITIES PVT.LTD
LOGO OF THE COMPANY
Green signifies wealth.
Blue signifies loyalty & perseverance.
The logo symbolizes holding hands together to create a relationship
beyond broking.
MISSION
To work Together With Integrity and Makes Our Customer Feel Valued
VISION
To Create Valuable relationship and Provide the Best Most
Professionally
CORE VALUE
Respect our colleagues and The Business itself
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NIRMAL BANG - AN OVERVIEW
Founded in 1986 by Shri Nirmal Bang, the Nirmal Bang Group is recognized as
one of the largest retail broking houses in India, providing an array of financial
products and service.
Throughout the company history, they have fostered one overriding purpose: To
provide each client with personal service and quality work. By adhering to this
principle, company has grown to become a successful and well-respected firm
of highly qualified professionals. The group is headed by Shri Dilip Bang and
Shri Kishore Bang who bring forward industry expertise and strong business
acumen.
A premier financial services organization in broking, providing individual and
co-operates with customized financial solutions. Nirmal Bang realizes the
dreams, needs, aspirations, concerns and resources that are unique and is
reflected in every move we make with and for you. Nirmal Bang has deep
appreciation for the value of building an everlasting relationship with their
clients.
It inherits the legacy of Nirmal Bang Group which has been one of the
dominant entities in financial Markets. The strive to achieve excellence and
dynamic growth has been possible through optimum mix of technology,customer orientation, best business practices, forging alliances, high quality
standards and proactive business culture.
The company mainly dealing with Equities, Derivatives, Commodities,
Currency, Mutual funds, IPOs, Insurance, DP. Here, in Bangalore branch they
are dealing with Equities, Derivatives, Commodity, and Currency factor.
PRODUCT OFFERD
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SERVICES OFFERD
NIRMAL BANG ADVANTAGES AS A BROKERAGE FIRM
PEOPLE;
Treated as greatest asset. Drawn from a diversity of professional backgrounds,their blend of experience, skill and dedication is shared with all clients.
NirmalBang
Commodities
Currency
Mutual
Funds
Depository
PCG
Deriva
tives
IPOs
Insurance
Equities
NirmalBang
OnlinePlatfor
ms MarginFundin
g
AdvanceBrokera
ge
Backoffice
Software
(LD/HAWKEY)
SMSFacility
InternetPresence
AdvisoryServices
E-Contract
Note
CustomerService
Desk
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APPROACH;
Innovative and enthusiastic. We emphasize adequate, thorough research local
and world-wide developments, balancing these with the astute discovery of
intrinsic values, synergies and growth.
AIM;
Simply to help the clients and maximize their returns. The interests no matter
how big or small - come first.
PRODUCTS & SERVICES;
Comprehensive and available to meet every investment financial need.
COMMITMENT;
To provide service, par excellence and become the spirit of change
TEAM WORK OF NIRMAL BANG
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UNIQUE PROPOSITIONS
A very strong and dedicated Research and Advisory desk
One of the highest success ratio in both technical and fundamental calls
An excellent IT infrastructure in place Marketing support to channel partners
Training Programs to upgrade the knowledge base & competency levels
of our employees
Nirmal Bang has subscribed a SPEED-e Facility of NSDL & Easiest
facility of CDSL
RMSMarketing & Sales
Publishing Legal
IT
Resear
ch
Compliance &Surveillance
KY
C
Dp
Dispatch &
Contract Notes
Finance &
Accounts
Demat
CustomerCare
Settlement
HR
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Like NSDLs Ideas and CDSLs Easi, Nirmal Bang has its own website
which shows holding with valuation as clients request and transaction
statement from the date of A/C opening till date.
Free account opening scheme.
KYC operations run in both the shift to ensure a TAT of 36 to 48 hours to
activate client codes.
Analysts have been featuring daily on various business news channels
like:
ET Now
Zee Business
Bloomberg UTV
NDTV
CNBC Awaaz
CNBC TV-18 and
Second by second S.M.S alert is the one of the prospectus of Nirmal
Bang.
INFRASTRUCTURE
Nirmal Bang have Indias best single screen Multi Exchange Trading
Software platform.
Nirmal Bang has trading terminals (both direct and indirect), online
monitoring, control terminals (administration terminals) and back office
support terminals (settlement terminals) across all locations and centres.
Nirmal Bang provide telephonic and chat support for technical and
functional issues of branches, franchises and all our clients
The company uses the LidhaDidha system of Apex Soft cell Pvt. Ltd
which is one of the topmost back office software which has the capacity
to process over one lakh trades in a five minutes time frame.
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The Company website www.nirmalbang.com is comprehensive and
provides online feeds, net trading and portfolio tracking tool.
GEOGRAPHICAL SPREAD
Registered office: Lower-Parel
Present in 26 states
89 Branches
More than 2000 Employees
More than 360 Cities
More than 2000 Franchisees
REAGIONAL HUBS
Mumbai [H.O]
Kerala
Kolkata
JodhpurBhopal
Delhi
Karnataka
Jaipur
Udaipur
Indore
Gujarat
Tamilnadu
Punjab J&K
ACHIEVEMENTS
Over the last two decades we have achieved many a milestones.
We have been awarded Analyst of the year to Mr. Kunal Shah (Head
Commodity Research (Commodity- Fundamentals) by Zee Business andNCDEX as the Indias Best Market Analyst Awards 2011.
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BEYOND MARKET CONCEPT
Beyond Market is a fortnightly magazine which provides readers with
the latest news, interesting stories and articles, key announcements and
insightful excerpts
Targeting different cities since Oct 2009
It also captures current market trends, useful tips on investing and other
latest developments in economy
BEYOND MANDI
A series of commodity camps organized every month in cities like
Mumbai, Delhi, Kolkata, Nagpur, Indore, Bikaner, Ludhiana, Rajkot,
Kanpur, Lucknow and Jaipur
among others
An average of 400-500 people at each camp.
MEDIA COVERAGE
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Mr. Sunil Jain, Mr.MehraboonIrani, Mr. Rahul Arora, Mr. Vishal Jajoo and
Mr.Kunal Shah are regularly featuring on Business channels like Zee Business,
ET Now, Bloomberg UTV etc .They also quoted in magazines, websites,
newswires and newspapers like Outlook Profit, Forbes, The Analysts, Money
control, Economic Times, Financial Chronicle, Business Bhaskar, Bloombergand PTI.Companies Research team have been quoted in the newspapers like
Economic Times and DNA as well.
GROUP OVERVIEW
NIRMAL
BANGGROU
P
NIRMALBANG
SECURITIES
NIRMAL
BANGCOMMODIT
IES
SAKSHAMHOLDING
S
NIRMALBANG
EQUITIESPVT LTD
SHRESTHSECURITI
ES
SHRESTHPROJECT
S
NIRMA
L BANGFINANCIAL
SERVICES PVT
LTD
Dp
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SWOT ANALYSIS ABOUT NIRMAL BANG
STRENGTHS:
23 years of research and broking experience
Understandings of the markets
All financial needs under one roof
Scalable and robust infrastructure
Full fledge research unit comprising of both fundamental & technical research
Dedicated, Qualified and Loyal staff
Flexible Brokerage charges
WEAKNESS:
Low Brand Image in the market.
Low Professionalism
Low AdvertisementsOPPORTUNITY:
Large potential market for delivery and intra-day transactions.
Open interest of the people to enter in to stock market for investing
Attract the customers who are dissatisfied with other brokers & DPs.
Up growing markets in commodity and forex trading
THREATS:
Decreasing rates of brokerage in the market. An Increasing competition against
other brokers & DPs.
Day to day growing completion, Non availability of Employees, Growing
technologies for analysis of markets etc.
An Indirect threat from instable stock market, i.e., low/no profit of NIRMAL
BANG's clients would lead them to go for other broker/DP.
Witness the power of change at Nirmal Bang!
Be the revolutionbe the change
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Chapter 3
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RESEARCH
METHODOLOGY
Research in common parlance refers to search of knowledge. Research comprises
defining and redefining problems, formulating hypothesis or suggested solutions;
collecting, organizing and evaluating data; making deductions and reaching
conclusions; and at last carefully testing the conclusions to determine whether they fit
the formulating hypothesis. D. Slesinger and M. Stephenson in the Encyclopedia of
Social Sciences define research as the manipulation of things, concepts or symbols
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for the purpose of generalizing to extend, correct or verify knowledge, whether that
knowledge aids in construction of theory or in the practice of an art.
In short, the search for knowledge through the objective and systematic method of
finding solution to the problem is research.
OBJECTIVES OF MY RESEARCH:
The purpose of research is to discover answers to questions through the application of
scientific procedures. My objective in doing this research report:
1. To study in detail the trading system in India.
2. To help potential investors to understand the commodity market
trend
3.
To study in which way the broking companies are assisting
investors.
4. To understand the interest of investors in different investment
options.
The research I have done is explanatory in nature. And I am trying to explain the best market
to invest in by comparing a commodity from others.. The price fluctuations, and the increase
or decrease in profits and also comparing the views of people about markets and investment
options available.
DATA COLLECTION:
Data collection is a term used to describe a process of preparing and collecting data, for
example, as part of a process improvement or similar project. The purpose of data collection
is to obtain information to keep on record, to make decisions about important issues, or to
pass information on to others. Data are primarily collected to provide information regarding a
specific topic.
Data collection usually takes place early on in an improvement project, and is often
formalized through a data collection planwhich often contains the following activity.
1. Pre collection activityagree on goals, target data, definitions, methods
2. Collectiondata collection
3. Present Findingsusually involves some form of sortinganalysis and/or
presentation.
http://en.wikipedia.org/wiki/Datahttp://en.wikipedia.org/wiki/Process_improvementhttp://en.wikipedia.org/wiki/Data_collection_planhttp://en.wikipedia.org/wiki/Data_collection_planhttp://en.wikipedia.org/wiki/Process_improvementhttp://en.wikipedia.org/wiki/Data -
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Prior to any data collection, pre-collection activity is one of the most crucial steps in the
process. It is often discovered too late that the value of their interview information is
discounted as a consequence of poor sampling of both questions and informants and poor
elicitation techniques. After pre-collection activity is fully completed, data collection in the
field, whether by interviewing or other methods, can be carried out in a structured, systematic
and scientific way.
A formal data collection process is necessary as it ensures that data gathered are both defined
and accurate and that subsequent decisions based on arguments embodied in the findings are
valid. The process provides both a baseline from which to measure from and in certain cases
a target on what to improve. Secondary data collection and analysis was performed.
Secondary datawas collected from various sources such as websites, financial magazines
and newspapers and financial management textbooks.
OBJECTIVE OF THE STUDY
The main and foremost object of my study is to identify the overall structure of awell reputed Financial based organization.
To study the concepts of commodities trading in India.
To study of the various trends in commodity trading
To make understand the process of future commodity trading in India.
To know the investment pattern of commodity traders and people.
To assess the social commitment of a fast growing business.
To study in detail the role of futures and forwards.
To analyse the present situation of the commodities in Indian market and
suggest for any improvements thereafter. To gain first-hand experience from a Financial based industry etc.
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METHOD OF STUDY
Various methods were used to conduct the study. The data used were collected
through;
Various softwares and Company websites. [www.moneycontrol.com,
Forexfactory.com , Squareindia.com] Different Magazines & Articles. [Business Today, Business world, Indian
financial system etc.]
Different levels of Employees and from Sub brokers in Nirmal Bang Etc.
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LIMITATION OF THE STUDY The data collected is completely restricted to Nirmal Bang Securities Pvt.Ltd.
Bangalore ofJulySeptember 2012, hence this analysis cannot be taken universal.
The study was limited to only the main significant investment options in
commodity market.
Most of the information collected is secondary data.
The data is compared and analyzed on the basis of performance of the
investment options over the past five years.
While considering the returns from mutual funds only top performing schemes
were analyzed.
It was very difficult to obtain the date regarding the details of returns of each
investment history.
I havecollected most of the information about the company from my
external guide and from the written works etc.
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VARIOUS INVESTMENT OPTIONS
IN
INDIAN COMMODITY MARKET
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GOLD AS A COMMODITY
http://www.google.co.in/imgres?q=gold+in+commodity+market&start=12&num=10&hl=en&biw=965&bih=659&tbm=isch&tbnid=2nZmh0CI3kYjPM:&imgrefurl=http://mcxncdex-commodity-tips.blogspot.com/&docid=372-CgRWKRlN-M&imgurl=http://4.bp.blogspot.com/-8hfc2tD75I8/T1SRkecgADI/AAAAAAAAACs/3tNoSPeMZYs/s1600/services.jpg&w=300&h=300&ei=mS8ZULq4C4btrAeSu4CgAw&zoom=1http://www.google.co.in/imgres?q=crude+oil+in+commodity+market&num=10&hl=en&sa=X&biw=965&bih=659&tbm=isch&tbnid=PL-vSp6Iy8fHuM:&imgrefurl=http://www.stockwatch.in/trading-strategy-gold-and-silver-futures-commodity-market-outlook-23376&docid=MTPn-d-8F1EfJM&imgurl=http://www.topnews.in/files/gold-bars.jpg&w=400&h=300&ei=GTAZULb7HsfhrAf8ooGIDQ&zoom=1http://www.google.co.in/imgres?q=gold+in+commodity+market&start=12&num=10&hl=en&biw=965&bih=659&tbm=isch&tbnid=2nZmh0CI3kYjPM:&imgrefurl=http://mcxncdex-commodity-tips.blogspot.com/&docid=372-CgRWKRlN-M&imgurl=http://4.bp.blogspot.com/-8hfc2tD75I8/T1SRkecgADI/AAAAAAAAACs/3tNoSPeMZYs/s1600/services.jpg&w=300&h=300&ei=mS8ZULq4C4btrAeSu4CgAw&zoom=1http://www.google.co.in/imgres?q=crude+oil+in+commodity+market&num=10&hl=en&sa=X&biw=965&bih=659&tbm=isch&tbnid=PL-vSp6Iy8fHuM:&imgrefurl=http://www.stockwatch.in/trading-strategy-gold-and-silver-futures-commodity-market-outlook-23376&docid=MTPn-d-8F1EfJM&imgurl=http://www.topnews.in/files/gold-bars.jpg&w=400&h=300&ei=GTAZULb7HsfhrAf8ooGIDQ&zoom=1 -
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Since 2000, investors have been buying historically unprecedented volumes ofgold as long-term investments. Those involved in this modern day gold rush have
ranged from individuals around the world to sophisticated institutional investors, fund
managers, and the family offices of high net worth individuals; and from developing
countries to major industrialized nations. Investors have many good reasons to invest
in gold. Some are buying gold to protect their wealth from the impacts of inflation,
recession, currency market upheaval, and financial market crises. Others are buying
gold to capitalize on the shifts in economic and financial markets. Given the ravages
of financial markets worldwide in 2008 and 2009, buying gold has become the hedge
of choice against calamity.
Even before the economic and financial problems associated with the Great Recession
of 2008 and 2009 surfaced, investors were in the midst of this gold buying spree. The
period of intense investor accumulation of gold began in 2001, following the stock
market bubbles popping and a slide into recession in that year. Between 2001 and
2009, investors bought 356.8 million ounces of gold in bullion bars and coins, more
than ever before in any surge of demand, even during the Great Depression and World
War II. The buying of gold has never stopped. In fact, investors have added more gold
to their collective gold bullion holdings between 2000 and 2010 than is estimated to
have been accumulated by investors throughout all of history up to 1967.
It would be a mistake only to focus on the current period of historically strong
investment demand for gold. The fact is that gold always makes sense as an
investment. The wisest and wealthiest people in the world, including famous
institutional investors and billionaires, keep a portion of their assets in gold, silver and
other precious metals as a hedge against various potential problems and as a portfolio
diversifier.
Recently, many investors have been buying gold investments because they wereseeking to diversify their portfolios of stocks and bonds. Others have increased their
gold holdings as a hedge against currency market volatility, not only in terms of the
U.S. dollars exchange rate but out of concern about a wide range of currencies.
Others have bought gold because they are concerned about the stability of financial
institutions at whichthey house their assets, or inflation, or overall economic,
financial, and political calamities. Still others have been buying gold as a
commodity, because they expect the gold price to rise based on the metals
fundamentals of supply and demand.
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Whatever the reason, gold bullion investors did better in 2008 than any other majorclass of investors, and in general have done very well over most of the past decadedue to their investments in gold and gold equities.
In the final analysis, gold is a financial asset. It also is a commodity: The price of goldrises and falls based on its role as a financial asset, like acurrency, a stock or a bond,that investors buy and sell based on a complex web of factors. More importantly, goldhas been a financial asset, a store of value and an investment that has held itsown forfive millennia. Gold has stood the test of time repeatedly and has outlasted all otherfinancial and monetary assets.
Throughout history, gold has served three functions. It has been a financial asset, heldby individual investors as a store of wealth and a portfolio diversifier. It has been acommodity, used primarily in jewelry but also in electronics, dentistry, and manyother applications. Finally, it has been a monetary asset, used by governments as areserve asset, as a form of money, and as a backing for their own currencies. Central
banks have moved away from using gold as money or as backing their owncurrencies, but they still own nearly one billion ounces of gold as a reserve asset. Thecentral banks of Europe, along with a few others (such as those of Canada, Australia,,
THE GOLD PRICE
Many factors influence the price of gold. Central banks have historically held large
positions in gold; as a result, announcements and activities by those banks have
influenced the supply and demand of gold. Fluctuations in the value of the US dollar,
political uncertainties and economic concerns around the world, hedging activities by
gold producers, and trading activities of speculators also help drive the price of gold.
Gold is a physical asset that is accumulated, rather than consumed. This differentiates
it from investment assets such as equities and fixed income instruments (which are
claims on future cash flows), other commodities such as oil (which are consumed),
and paper money (which can be more easily destroyed). Thesetraits are among the
reasons why gold may perform differently than other investments.
There are several ways that investors may use gold as part of a larger investment
strategy. Potential safe haven during political or economic uncertainty;
1. Portfolio diversifier over both long and Short-term horizons
2. Inflation hedge and store of value
3. Hedge against a devaluing dollar.
INVESTING IN GOLD FUTURE
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Gold futures are exchange-traded standardized contracts that oblige the buyer, to buy
a definite quantity of gold at a future delivery date to a price fixed beforehand. The
future buyer assumes that the price of gold increases at due date. The contracts are
usually settled in cash, without delivery of physical gold. Gold futures are traded on
the Commodity Exchange (COMEX) of the NYMEX and the Londoner BullionMarket (LBMA).
The advantage of such gold investment is the possibility to bet on rising (long
position) as well as falling (short position) gold prices depending on the investors
market expectation, without the inconvenience of taking delivery of the underlying
physical gold. The market is deep and liquid, and it is quite easy to track the true value
of the futures contract by following the exchange price.
Trading gold futures eliminates the costs of settlement and significantly reduces the
costs of storage. Buying gold futures implies small transaction costs (initial and
maintenance margin).
An initial margin with 2% of the future value has to be paid up front, and any profit or
losswill be adjusted on the down-payment and paid back to the investor net. In case of
significant movements in the gold price which could lead to losses, the additional
margin (variation margin) is however required. Therefore, the disadvantage is the high
risk because of the high short-term volatility of the gold prices.
GOLD PRICES- A CHART ANALYSIS
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CRUDEOIL AS A COMMODITY
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Crude oil accounts for nearly 40% of the global energy demand and its consumption is
estimated to be over 85 million barrels per day.Crude oil has wide application and
global appeal. When refined, it gives an array of automobile fuels, lubricants, asphalt
and petrochemicals. Petrochemical end-products include plastic, detergent, chemical
fertilizer, synthetic fiber and rubber. Consequently, changes in crude oil price haveconsiderable impact on world economy. As price rises, cost of transportation also
increases. In turn, this raises costs of manufacturing and distribution, adversely
affecting end-product prices. This has an industry-wide impact and adds to
inflationary pressure. Thus, crude oil is the backbone of today's global economy and it
is the largest traded commodity in the world
What makes crude oil a wise investment?
Crude oil is a versatile commodity and its byproducts are used as input for
numerous industries.Modern industrial as well as agricultural economy depends upon crude oil.
This makes it a good investment in the long run.
Crude oil demand is on a rise in emerging nations like India and China and
this trend will persist as economic activity rises further.
Crude oil market is in tight balance and with increasing demand in emerging
markets and dwindling sources of new supplies, price may remain firm in the
long term.
With steadily rising crude oil prices in India, why should a trader add the
commodity to his portfolio?
India is world's 4th largest crude oil consumer with consumption at 3.1 million
barrels per day. India imports almost 70% of its total consumption.
Crude oil is the biggest component of India's import basket and its price
affects overall economy.
Rapid economic development is expected to further increase its
consumption.
Indian commodity market is growing and crude oil is one of the most traded
commodities on domestic bourses.
Crude Oil DescriptionUpdate
Crude oil which is also known as petroleum is a flammable liquid that is naturallyoccurring. In other words, it is a fossil fuel. It is a complex mixture of hydrocarbons.
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Crude oil is an important commodity, used in many countries for various purposes.
The most common use of crude oil is gasoline. The oil is refined and separated, which
is done most often by boiling. Different compounds in the crude oil reach boiling
point at different levels, making separation of the compounds an easy task. Heavy
crude oil is widely available but is not ideal for refinement, taking longer to processand having more waste product. Light crude oil is the best type to use for refining and
is most readily found in Arabic countries.
What Increases the Price of Crude Oil?
Strong oil reserves
Politics Limits Supplies Every nation has resources. Political systems contrive
shortages, by making some resources more difficult to access. Governments
(see OPEC cartel) create artificial shortages. Even rare elements like...
Resource is Limited When resources are limited, they are impossible to replace.
If demand for a resource stays the same, then a decreasing supply will increase
the price of the resource. This happens whenever OPEC, an...
What Decreases the Price of Crude Oil?
Emits Carbon Carbon emitting products and industries are blamed for global
warming. If global warming has a cost on the planet, then that cost should beattributed to the ones creating the problem. Increasing cost...
Risks and benefits
Whether we are new to the trading world or a veteran who knows the ropes, the
chances are that we have had an earful on whether or not crude oil is a smart option
for our investment dollars. Some people in the trading field will tell you that crude oil
is something that we want to stay away from, while others will say that as aninvestment crude oil is actually a way to help us gain nice profits. So, which outlook
are you to believe? As a smart investor, new or old, taking a good look at all of our
options is the only way to find out what is best for us and our investment funding.
Certainly, in order to make the best possible decision on whether or not you should
invest, it is necessary to take a look at the various aspects of crude oil. When it comes
to crude oil, natural gas, unleaded gasoline and heating oil, you should know that they
could be the perfect avenue for big profits with a number of advantages. Energy
markets end up being volatile in nature. This volatility and price movement is needed
in order to gain decent profits in the trading world. Once you learn how to properly
http://www.wikiwealth.com/swot-strength:crude-oil:strong-oil-reserveshttp://www.wikiwealth.com/swot-strength:supplies-are-limited-by-politics-onlyhttp://www.wikiwealth.com/swot-strength:resource-limit-only-accesshttp://www.wikiwealth.com/swot-weakness:emits-carbonhttp://www.wikiwealth.com/swot-weakness:emits-carbonhttp://www.wikiwealth.com/swot-strength:resource-limit-only-accesshttp://www.wikiwealth.com/swot-strength:supplies-are-limited-by-politics-onlyhttp://www.wikiwealth.com/swot-strength:crude-oil:strong-oil-reserves -
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manage risk, you could be able to take this market volatility and turn crude oil
investing into into profits.
The bottom line is, there is money that can be made from crude oil. When you go into
such investing with your eyes open with a grasp on how this trend works, then you
will have a better chance of higher profits with less risk. Certainly, every single
investment has a potential level of risk as well as reward. As an investor, you always
hope for a decent return as a reward for the risks that you put in front of you. Knowing
how to weed out crude oil investment schemes will help you to put your best foot
forward as you trade.
Take the time to look into all of the research and numbers that are available to you
regarding all of the potential crude oil investments that are out there. There are a
number of publications and online outlets where you can get the latest numbers and
reports on crude oil and related investing. At the same time, be sure that you keeptrack of supply and demand, as well as the fluctuations that take place from season to
season. Additionally, various news stories and political situations going on around the
globe can have quite an impact on how you should be planning out your crude oil
investments.
When it comes to seasonal trends, you will see that the market and the trading patterns
where crude oil is concerned will change greatly around holidays or changes in the
weather. During the summer months, driving season will kick into full swing and
gasoline will be very high in demand. On the other end of the spectrum, during the
winter months heating oil tends to rise in prices as the demand gets higher. The
general rule in trading in this case is that price actually precedes consumption. This
means that the prices can fluctuate in anticipation of the upcoming need.
As you look around for ways to invest in crude oil, you will see that there are many
opportunities for trading. For starters you have crude oil companies of all kinds
including major petroleum companies along with medium sized oil companies. The
bigger petroleum companies have huge reserves and are generally traded publicly all
over the world. There are exchange traded funds to name a few.
When it comes to some of the independent oil companies that are out there, you will
see that there are thousands throughout the United States that actually give you the
option to take your money and turn it into an investment in their various products.
There are a number of risks involved in such a trading venture. You simply have to
make sure that you go back and do all of your research if you decide that this may be
where your money is best suited to your level of comfort in terms of investing. My
choice is in the NYMEX crude oil options on Futures. I can provide you with ideas on
trades such as should you write options or trade spreads or just outright futures.
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No matter what you decide to invest in, when it comes to crude oil or any other type
of investment; you should never invest any more than you can actually afford to lose.
Since there are so many risk factors involved in crude oil trading, it is important that
you take into account any potential wars, the fact that accidents and oil spills can
always happen or even the economy will come into play as you look to the future andyour potential for a good return. All in all, crude oil investing is a smart way to make a
decent return as long as you go into the venture knowing all of the possible risks.
ITS AWISE INVESTMENT BECAUSE..
1. New discoveries.Worldwide oil demand might be off. But its temporary. And even if
demand miraculously plateaus (dont count on it with gas below $2 per gallon), the
world would still need to replace one Saudi Arabia per three years, according to
Petrobras CEO. No other company is making bigger discoveries than Petrobras. In
fact, the companys recent finds could triple its reserves. And as we all know, the
country with the oil is always in control!
2. Long-term focus. With crude below $40 per barrel, most oil companies are cutting
back on exploration and development. Not Petro bras. They plan to spend $174 billion
by 2013, which ensures theyll have plenty of products to sell whenoil pricesclimb
higher.
3. Low cost. Management estimates it can be profitable on new projects, even if crude
oil stays around $45 per barrel. Few if any other major oil producers can claim
such a low hurdle rate. Basic economic principles govern herethe low cost providerof a commodity enjoys the most profits when prices rise. And share prices often go
along for the ride, too.
4. Deep-water expertise. All the easy-to-findcrude oilis gone. But Petrobras is an
expert in deep-water exploration. Thats a competitive advantage no other oil
company can touch. And it should continue to help Petro bras add reserves at much
lower costs than its peers.
5. Valuation. Emerging markets took it on the chintwice as hard as the United States
despite stronger underlying fundamentals. Its pointless to argue whether or not it was
deserved. What matters is many high-quality stocks got caught up in the downdraftand now trade at mouthwatering levels. Petro bras is no exception, trading for less
than 10 times earnings.
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Chapter 4
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ANALYSIS AND
INTERPRETATION
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INTERPRETATION:
Talking to people gave a clear point on why people do not invest in markets. Many people
tried out investing in commodities, stocks, mutual funds etc. but because they had to bear loss
once they left it and never tried again. And here also, the bad experience of one person affects
the interest of the other.
GOLD AND CRUDE OIL:
After the analysis of prices of gold and crude oil it was found out that gold and
crude oil prices are interrelated.
Gold is often seen as a wealth preserver during inflationary periods rather than a
get-rich-quick investment opportunity. A balanced portfolio can certainly
-3
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GOLD
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CRUDE OIL
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include gold as a portion. Any investment strategy, though, that relies heavily
on gold is a bet against the dollar. With this in mind, gold investors and
speculators need to approximate when they expect the dollar to rebound and
plan accordingly.
Investors interested in riding the gold bull need to research more than just the
oil-gold relationship as a basis for decisions by considering the other factors in
play. Some long-term studies show gold also to be strongly correlated with
economic indicators other than oil prices, such as the S & P 500 and 10-year T-
bills, according to aGold-Eagle editorial. Also there are other factors that
influence the price rise and fall of gold prices like value of dollar, production of
gold, demand of jewelry and central bank reserves.
THE DOLLAR AND COMMODITY:
When analyzing the four sectors of the economy, the path to take is to start with
the dollar, move into the commodity market, then the bond market, and finally
the stock market. The connection of the dollar to stocks and bonds is more
complete and makes more sense when analyzed through the commodity
markets.
We can see this if we begin with the stock market and work backwards toward
the dollar. The stock market is reactive to interest rates and thus, movements in
the bond market.
A rising dollar has no effect on inflation. A rising dollar usually produces
commodity that are lower. A fall in commodity prices leads to higher bond
prices and lower interest rates. A falling dollar has the converse effect: it is
bearish for bonds and equities and bullish for commodities.
http://www.gold-eagle.com/editorials_04/baryshevsky122204.htmlhttp://www.gold-eagle.com/editorials_04/baryshevsky122204.htmlhttp://www.gold-eagle.com/editorials_04/baryshevsky122204.htmlhttp://www.gold-eagle.com/editorials_04/baryshevsky122204.html -
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BONDS AND COMMODITY PRICES:
The relationship between bonds and commodity prices is one of the most
important relationships in the intermarket area. The inverse relationship
between treasury bond prices and commodity market shows the connection
between financial sector and commodity sector that in effect shows a tie
between the stock market and the commodity market. The inverse relationship
between commodity market and bond prices can be documented. If we know
that bond prices and bond yields move in opposing directions and that
commodity prices and interest rate yields head in the same direction, then we
establish that commodity prices and bond prices move in the opposite
directions. These relationships do exist.
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Chapter 5
FINDINGS
AND
SUGGESTION
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FINDINGS;
The study that conducted at M/s Nirmal Bang Securities Pvt.Ltd. in Bangalore found
out the final following facts;-
In my view, the main objectives of Nirmal Bang are to provide improved quality
investment opportunities to customers and build up the public image of the
company through better intermediary techniques.
Majority