A Project Report

On
A STUDY ON COMMODITY MARKET
(by using commodity Futures)
At
India Bulls
Submitted in partial fulfilment of the
Requirements for the award of the Degree
of
MASTER OF BUSINESS ADMINISTRATION

Submitted By
Sanjith Singh
131215672023
Under the Guidance
of
Mr. K . Arjun Goud
Assistant Professor
MallaReddy Institute of Management
(Affiliated to Osmania University, Hyderabad)
2015 2017
 CHAPTER I
Introduction of the study
Need & Scope of the Study
Objective of the study
Research Methodology
Limitations of the study

Introduction
Commodities have always been a part of our day to day existence as one of the
finest investment avenues available. But we have been unaware of them. The wheat in our bread,
the Cotton in our clothes, our gold jewels, the oil that runs our cars, etc,are all traded across the
world in major exchanges.
 India has a long history of trade in commodity derivatives; this sector remained
underdeveloped due to the control over and intervention in commodities prices by the
government for many years. The production, supply and distribution of many agricultural
commodities are still governed by the state and forwards and futures trading are selectively
introduced with stringent controls. Free trade in many commodity items is restricted under the
Essential Commodities Act, 1955 and the Agriculture Productive Marketing Committees Acts of
the various state governments.
The Bombay Cotton Trade Association set up the first commodity exchange in
India and formally organized futures trading in cotton in 1875. Subsequently, many exchanges
came up in different parts of the country for futures trading in various commodities. The Gujarati
Vyapari Mandali came into existence in 1900, which undertook futures trading in oilseeds for the
first time in the country. The Calcutta Hessian exchange ltd and the East India Jute Association
Ltd were set up in 1919 and 1927 respectively for futures trade in raw jute. A future trading in
cotton was organized in Mumbai under the auspices of East India cotton Association in 1921.
Simultaneously, several exchanges were set up in major agricultural centers in North India before
the World War broke out and they were mostly engaged in wheat futures until it was prohibited
in 1921.
The existing exchanges Hapur, Muzaffarnagar, Meerut, Bhatinda etc were
established during this period. The Government of India banned trading in commodity futures in
the year 1966 in essential commodities. As a result of this, all the commodity futures in the year
1966, in order to have an effective control over the Khusro Committeee in 1980, the
Government, reintroduced futures trading in some selected commodities. As a result of this, all
the commodity exchanges went out of business and many trades started resorting to unofficial
and informal trading in futures On the recommendation of the Khusro committee in 1980, the
Government reintroduced futures trading in some selected commodities including cotton, jute
potatoes etc. As a part of economic reforms, the government of India appointed an expert
committee on forward markets under the chairmanship of K N Kabra in the year
1993. The committee submitted its report in 1944 and recommended for the reintroduction of
futures, with a wider coverage of and scope for more agricultural commodities. In order to give a
thrust to the agricultural sector, the National Agricultural Policy 2000 envisaged external and
domestic market reforms and the dismantling of all controls and regulations on the agricultural
commodity market. It also proposed enlargement of the coverage of futures market to reduce
wide fluctuations in commodity prices and for hedging the risk arising from price fluctuations.
In the budget speech delivered on 28 February 2002, the then Finance Minister
announced an expansion of futures and forward trading to cover all agricultural commodities.
This was followed by the removal of the ban on futures trading on 27 (out of 81 items) in
oilseeds, oils and their cakes in August 2002. Subsequently, in February 2003, the Government
removed the prohibition on the remaining 54 commodities also under the Forward trading in
general and the agricultural sector in particular, The Securities Contracts (Regulation) Act, 1956,
was also amended in August 2003 to provide for commodity derivatives Exchange (NCDEX )
and Multi Commodity Exchange (MCX), Mumbai,
National status was given to these exchanges so that they would be
automatically permitted to conduct futures trading in all commodities subject to the clearance of
by laws and contract specifications by the FMC, While the NMCE, Ahmedabad commenced
futures trading in November 2002, MCX and NCDEX, Mumbai commenced operations in
October and December 2003 respectively.
Futures trading play a key role in the marketing of many important
agricultural commodities and their products. And yet this institution is still perhaps the least
understood and often the most condemned part of the entire marketing system. In our own
country as well as in those like the U.S.A. and the U.K., where active Futures markets exist, a
theoretical debate has been going on for quite some time as to their role and functions. Much of
the discussion has naturally centered on the Effects of futures trading on prices. Some affirm that
it helps to stabilize prices while others argue that because of the existence of speculation which is
inherent in it; its price effects are often destructive. Little empirical evidence, however, has yet
been produced in support of either view. The present study is a modest attempt in that direction.

Need of the Study

There have been a large number of studies made in the field of investment and creation of
portfolios. All the studies made are in reference with income levels in general. Income levels
even though same but the field of work and the life style of a particular segment differ from
others, which in turn affects the saving and investment priorities.

Scope of the study

The main focus on potential investors and those who invest regularly commodity
futures there return, risk and expectation towards commodity futures of this study is to asses

To examine the various risk factors in using commodity futures by inflation and price
fluctuation, and to evaluate the future trading on price and price variation

Objectives of the study

1. To examine the various risk factors in using commodity future.

2. To study the influence of futures trading, on price and price variation

Research Methodology
Methodology
It is a way to systematic solution of the research problem. The researcher needs to
understand the assumption underlying various techniques and procedures that will be applicable
to certain problem. This means that it is necessary for the researcher to design its methodology.
There are various factors such as the personal factors as well as the market factors that motivate
a person to save and invest. Thus, the questionnaire will be directed towards the respondents to
give the feed back about their savings interest and the various investment opportunities they are
aware about and it also give respondents to rethink about their investment criteria and upgrade it
to maximize their returns.

Sampling
All items under study in any field of survey are known as a universe or population. A
complete enumeration of all items in the population is census enquiry, which is not practically
possible. Thus sample design is done which basically refers to the definition plan defined by any
data collection for obtaining a sample from a given population.

Sampling Technique This study is purposive in nature as the research is concentrating on the
various issues that are related to general investment avenue .Research is not trying to reach a
conclusion by making any assumption and findings are based on the responses of the respondents
that enrich our database with a focus on the creation of certain portfolios in general investment
avenue

Convenient Sampling approach is adopted here. This is due to the fact that the
respondents were available only at the colleges and only at the duty time, to get the clear idea of
their approach the nearest colleges were selected and the study was made.

Sampling unit
The sample size consists of different units like businessman, professionals, government
employees, and private employees .others and head of departments of various streams. Thus the
population selected was of faculties consisting of both males and females of different age groups,
holding different qualifications.

In this study the Primary data is collected by means of personnel interview with
the help of some questions
The secondary data are those data which already exist. This data is also an important
input for the study, and in this case the secondary data is collected from various records,
magazines, text books, internet, discussion with various in house faculties etc.
 Limitations of the study

Some of the potential investors were reluctant to disclose their financial data and the
personal details.
 The findings and conclusions drawn out of the study will reflect only existing trends in
the sector.

Only a percentage of total investors in each financial institute could be interviewed but
the analysis is generalized

The accuracy and authenticity of the observations made and conclusions drawn largely
depend upon the corresponding accuracy and authenticity of the information supplied
by the respondents at large.