ABSTRACT

“Commodity Trading” is characterized by high market volatility and risk. Globalization

and advances in technology have significantly changed the way trading is done the
factors differencing prices and the frequency with which prices change has increased
exponentially timely access to information and analysis is the only way to succeed in
commodity. Commodities actually offer immense potential to become a separate asset
class for market survey investors, arbitrageurs and speculators.

Retail investors, who claim to 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 efficient portfolio diversification option.

The primary objective of the project is to understand and know the concepts and
mechanism of commodity trading with special reference to Gold & Silver. The objective
was also to know and analyze the growth of commodity trading in India and find out the
factors that affect the trading of gold and silver commodities.

This project has been undertaken to give an outlook on the potential growth of
commodities trading in India. The project also aims to study the commodity trading and
it’s clearing & settlement; analyze the factors that influence the prices of gold and silver;
study the commodity trading with reference to gold and silver and analyze the gold and
silver trend in commodity market.
 CONTENTS

Chapter No. Name of the concept Page No.

Introduction 1-4

Objectives of the study 5

Need of Study 6

I
Scope of the study 7

Methodology of the study 8-9

Limitations of the study 10

II Review of Literature

III INDUSTRY PROFILE & COMPANY PROFILE 41-60

V DATA ANALYSIS AND INTERPRETATION 67-92

FINDINGS, SUGGESTIONS, CONCLUSIONS AND

VI 93-97
BIBILIOGRAPHY
 CHAPTER I
INTRODUCTION
 INTRODUCTION

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, commodities bonds and real estate are the best options. The
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 pumping 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 stock.
Commodities actually offer immense potential to become a separate asset class for
market survey investors, arbitrageurs and speculators. Retail investors, who claim to
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 efficient
portfolio diversification option.

Commodities future 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 Japan merchants used to store
Rice in warehouses for future use. To raise cash warehouse holders sold receipts against
the stored rice. These were known as “rice tickets”. Eventually, these rice tickets become
accepted as a kind of commercial currency. Latter on rules came in to being, to
standardize the trading in rice tickets. 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.

1
 These situations lead to need of establishing a common meeting place for farmers
and 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. In this way
producer was aware of what price he would fetch for his produce and dealer would know
about his cost involved, in advance. This kind of agreement proved beneficial to both of
them. As if dealer is not interested in taking delivery of the produce, he could sell his
contract to someone who needs the same. Similarly producer who not intended to deliver
his produce to dealer could pass on the same responsibility to someone else. The price
of such contract would dependent on the price movements in the wheat market. Latter on
by making some modifications these contracts transformed in to an instrument to protect
involved parties against adverse factors such as unexpected price movements and
unfavorable climatic factors. This promoted traders entry in futures market, which had no
intentions to buy or sell wheat but would purely speculate on price movements in market
to earn profit.

Trading of wheat in futures became very profitable which encouraged the entry of
other commodities in futures market. This created a platform for establishment of a body
to regulate and supervise these contracts. That’s 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. In 1933, during the Great
Depression, the Commodity Exchange, Inc. was established in New York through the
merger of four small exchanges – the National Metal Exchange, the Rubber Exchange of
New York, the National Raw Silk Exchange, and the New York Hide Exchange.

2
 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.

History Of Commodity Market In India:

The history of organized commodity derivatives in India goes back to the

nineteenth century when Cotton Trade Association started futures trading in 1875, about a
decade after they started in Chicago. Over the time datives market developed in several
commodities in India. Following Cotton, derivatives trading started in oilseed in Bombay
(1900), raw jute and jute goods in Calcutta (1912), Wheat in Hapur (1913) and Bullion in
Bombay (1920).

However many feared that derivatives fuelled unnecessary speculation and were
detrimental to the healthy functioning of the market for the underlying commodities,
resulting in to banning of commodity options trading and cash settlement of commodities
futures after independence in 1952. The parliament passed the Forward Contracts
(Regulation) Act, 1952, which regulated contracts in Commodities all over the India. The
act prohibited options trading in Goods along with cash settlement of forward trades,
rendering a crushing blow to the commodity derivatives market. Under the act only those
associations/exchanges, which are granted reorganization from the Government, are
allowed to organize forward trading in regulated commodities. The act envisages three
tire regulations: (i) Exchange which organizes forward trading in commodities can
regulate trading on day-to-day basis; (ii) Forward Markets Commission provides
regulatory oversight under the powers delegated to it by the central Government. (iii) The
Central Government- Department of Consumer Affairs, Ministry of Consumer Affairs,
Food and Public Distribution- is the ultimate regulatory authority.

Commodity exchange in India plays an important role where the prices of any
commodity are not fixed, in an organized way. Earlier only the buyer of produce and its
seller in the market judged upon the prices. Others never had a say.

3
The commodities future market remained dismantled and remained dormant for about
four decades until the new millennium when the Government, in a complete change in a
policy, started actively encouraging commodity market. After Liberalization and
Globalization in 1990, the Government set up a committee (1993) to examine the role of
futures trading. The Committee (headed by Prof. K.N. Kabra) recommended allowing
futures trading in 17 commodity groups. It also recommended strengthening Forward
Markets Commission, and certain amendments to Forward Contracts (Regulation) Act
1952, particularly allowing option trading in goods and registration of brokers with
Forward Markets Commission. The Government accepted most of these
recommendations and futures’ trading was permitted in all recommended commodities. It
is timely decision since internationally the commodity cycle is on upswing and the next
decade being touched as the decade of Commodities.

Today, commodity exchanges are purely speculative in nature. Before discovering

the price, they reach to the producers, end-users, and even the retail investors, at a
grassroots level. It brings a price transparency and risk management in the vital market. A
big difference between a typical auction, where a single auctioneer announces the bids
and the Exchange is that people are not only competing to buy but also to sell. By
Exchange rules and by law, no one can bid under a higher bid, and no one can offer to sell
higher than someone else’s lower offer. That keeps the market as efficient as possible, and
keeps the traders on their toes to make sure no one gets the purchase or sale before they
do.

In India there are 25 recognized future exchanges, of which there are three
national level multi-commodity exchanges. After a gap of almost three decades,
Government of India has allowed forward transactions in commodities through Online
Commodity Exchanges, a modification of traditional business known as Adhat and Vayda
Vyapar to facilitate better risk coverage and delivery of commodities.

OBJECTIVES OF THE STUDY

The primary objective of the project is to understand and know the concepts and
mechanism of commodity trading with special reference to Gold & Silver. The objective

4
was also to know and analyze the growth of commodity trading in India and find out the
factors that affect the trading of gold and silver commodities.

This project has been undertaken to give an outlook on the potential growth of
commodities trading in India.

The secondary objectives include:

• To understand the concept of commodity trading in India  To study the

commodity trading and its clearing & settlement.

• To analyse the factors that influence the prices of gold and silver.

• To study the commodity trading with reference to gold and silver.

• To analyze the gold and silver trend in commodity market.

• To suggest potential investors on commodity trading in gold and silver.

5
 NEED OF THE STUDY
The era of liberalization has revolutionized the commodity market. In such a scenario
it is necessary to make an assessment of commodity market .as more and more
investors are seeking commodity market as of the important investment avenues, it is
necessary to make a detailed analysis. Such an analysis will help any person who is to
invest in commodity market.

The need of the study arises due to lack of knowledge about the commodity
market because now-a-days, commodity trading has become an important investment
avenue and most of the investors are still unaware about its advantages and
shortcomings. Huge amount of investment is required for trading in commodity
market. To know the impact of other markets on commodity market, it became
necessary to understand the trading of commodity market.

So commodity trading covers the meaning of commodity market, its trading,

clearing and settlement, the various commodities being traded on NCDEX and MCX.
It further includes the various market participators in commodity market and
instruments available for trading like future contracts, forward contracts and options.

6
 SCOPE OF THE STUDY
 The analysis is based on commodity trading specifically in gold futures
market.

 The analysis is based on prices on daily basis to show the trend of the bullion
market.

 The study is conducted based on gold and silver only.

RESEARCH METHODOLOGY

Achieving accuracy in any research requires in depth study regarding the

subject. As the prime objective of the project is compare various Investment products
available in the market with the existing players in the market and the impact of entry
of private players in the market, the research methodology adopted was basically
based on Secondary data. The analyse is based on resulting data. The information
collected from the various locales, broachers, daily papers, company proposal records,
various books, and throughout recommendations from project guide and from the
faculty individuals of our college. Necessary information has been collected from
books. Information have also been collected from a mixture of websites such as
money control, grow brokerage, and e. t. c. s. and the analysis of gold prices, silver
prices over the years .The study covers the time period from 2019-2023

Secondary Data

Secondary data is the published data. It is already available for using and its
saves time. The mail source of secondary data are published market surveys,
government publications advertising research report and internal source such as sales,
sales records orders, customers complaints and other business record etc. the study

7
has also depended on secondary data to little extent, which is collected through
internal source.

Sources of Secondary Data:

These sources were use to obtain information on, Banks and other institutions
history, current issues, policies, procedures etc, wherever required.

 Internet

 Magazines

 Newspapers

 Journals
For this survey personal interview method was used for collecting primary data. This
survey was conducted by face to face interview customers and found to be best suited
to collect the primary data for this project.

LIMITATIONS
Every study has its own limitations in terms of methodology and available resources
for its conduct. This study was not an exception and was carried out under the
following limitations:

 Hard Enough To Fetch Information: It was not an easy task to get information
from investors who invest in commodity. The investors were not always open
and forthcoming with their views, even agitated and not disclosing.

 Limited Scope: Scope of study is limited as most of the data collected

from secondary sources (Even though the accuracy of data checked through
reliable source).

 Results May Be Inaccurate: This study is based on the assumption that

perceptions are true and factual although at times that may not be the case.

 Existence Of Biases: Though every care has been taken to eliminate such
biases, but considering the human factor the possibility of small bias having
come up cannot be ruled out altogether.

8
 Investor Behavior: investor behavior is dynamic in nature and thus over the
time, finding of today may become invalid tomorrow.

CHAPTER II –
REVIEW OF LITERATURE

9
 COMMODITY MARKET:

COMMODITY: Item is the merchandise which are exchanged the affirmed

Commodity Market. In any case, the Products ought to be moveable starting with one

spot then onto the next spot i.e., that must most likely exchange that is Buying and

moving. It is comprehensively classified into two principle types which is Hard

(NonAgricultural) and Soft (Agricultural) wares. Hard items are Non-Agricultural

Products like Gold, Silver, Copper and Natural Gas and Soft Products are Coffee,

Corn, Wheat and Sugar.

COMMODITY MARKET: Product Market is a Physical or Virtual spot where

purchasing or moving happens. By and by there are in excess of 50 Commodity

market helping more than l00 ware items everywhere throughout the world. Here the

merchants use contract framework for buy or moving the items. By and by this

division is blasting very quickly with high yielding rate of profits.

Commodities Futures’ trading in India has a long history. The first commodity
futures market appeared in 1875. But the new standardized form of trading in the
Indian capital market is an attractive package for all the people who earn money
through speculation by trading into FUTURES. It is a well-known fact and should
be remembered that the trading in commodities through futures’ exchanges is
merely, “old wine in a new bottle”.

10
The trading in commodities was started with the first transaction that took place
between two individuals. We can relate this to the ancient method of trading i.e.,
BARTER SYSTEM. This method faced the initial hiccups due to the problems
like: store of value, medium of exchange, deferred payment, measure of wealth
etc. This led to the invention of MONEY. As the market started to expand, the
problem of scarcity piled up.

The farmers / traders then felt the need to protect themselves against the fluctuations
in the price for their produce. In the ancient times, the commodities traded were – the
Agricultural Produce, which was exposed to higher risk i.e., the natural calamities and
had to face the price uncertainty. It was certain that during the scarcity, the farmer
realized higher prices and during the oversupply he had to loose his profitability. On
the other hand, the trader had to pay higher price during the scarcity and vice versa. It
was at this time that both joined hands and entered into a contract for the trade i.e.,
delivery of the produce after the harvest, for a price decided earlier. By this both had
reduced the future uncertainty.

One stone still remained unturned- ‘surety of honoring the contract on part from either
of the parties’. This problem was settled in the year 1848, when a group of traders in
CHICAGO came forward to standardize the trading. They initiated the concept of “to-
arrive” contract and permitted the farmers to lock in the price upfront and deliver the
grain at a contracted date later.
This trading was carried on a platform called CHICAGO BOARD OF TRADE, one
of the most popular commodities trading exchanges’ today. It was this time that the
trading in commodity futures’ picked up and never looked back.

Although in the 19th century only agricultural produce was traded as a futures
contract, but now, the commodities of global or at least domestic importance are
being traded over the commodity futures’ exchanges. This form of trading has proved

11
useful as a device for HEDGING and SPECULATION. The commodities that are
traded today are:

• Agro-Based Commodities…… Wheat, Corn, Cotton, Oils, Oilseeds etc..

• Soft Commodities…………….. Coffee, Cocoa, Sugar etc
• Livestock………………………. Live Cattle, Pork Bellies etc
• Energy………………………….. Crude Oil, Natural Gas, Gasoline etc
• Precious Metals……………….. Gold, Silver, Platinum etc
• Other Metals…………………… Nickel, Aluminum, Copper

STRUCTURE OF THE COMMODITY MARKET

12
 DEFINITION OF COMMODITIES

Any product that can be used for commerce or an article of commerce which
is traded on an authorized commodity exchange is known as commodity. The article
should be movable of value, something which is bought or sold and which is
produced or used as the subject or barter or sale. In short commodity includes all
kinds of goods. Forward Contracts (Regulation) Act (FCRA), 1952 defines “goods”
as “every kind of movable property other than actionable claims, money and
securities”.

In current situation, all goods and products of agricultural (including plantation),

mineral and fossil origin are allowed for commodity trading recognized under the
FCRA. The national commodity exchanges, recognized by the Central Government,
permits commodities which include precious (gold and silver) and non-ferrous
metals: cereals and pulses; ginned and un-ginned cotton; oilseeds, oils and oilcakes;
raw jute and jute goods; sugar and gur; potatoes and onions.

NEED OF COMMODITY MARKET IN INDIA

Achieving hedging efficiency is the main reason to opt for futures contracts. For
instance, in February, 2007, India had to pay $ 52 per barrel more for importing oil
than what they had to pay a week ago. The utility of a futures contact for hedging or
risk management purpose parallel or near-parallel relationship between the spot and
futures prices over time. In other words, the efficiency of a futures contract for
hedging essentially envisages that the prices in the physical and futures markets move
in close union not only in the same direction, but also by almost the same magnitude,
so that losses in one market are offset by gains in the other.

13
Theoretically ( and ideally), in a perfectly competitive market with surplus supplies
and abundant stocks round the year, the futures price will exceed the spot price by the
cost of storage till the maturity of the futures contract. But such storage cost declines
as the contract approaches maturity, thereby reducing the premium or contango
commanded by the futures contract over the spot delivery over its life and eventually
becomes zero during the delivery month when the spot and futures prices virtually
converge. The efficiency of a futures contract for hedging depends on the prevalence
of such an ideal price relationship between the spot and futures markets.

COMMODITIES EXCHANGES

A brief description of commodity exchanges are those which trade in

particular commodities, neglecting the trade of securities, stock index futures and
options etc.,

In the middle of 19th century in the United States, businessmen began organizing
market forums to make the buying and selling of commodities easier. These central
market places provided a place for buyers and sellers to meet, set quality and quantity
standards, and establish rules of business.

The major commodity markets are in the United Kingdom and in the USA. In India
there are 25 recognized future exchanges, of which there are three national level
multi-commodity exchanges. After a gap of almost three decades, Government of
India has allowed forward transactions in commodities through Online Commodity
Exchanges, a modification of traditional business known as Adhat and Vayda Vyapar
to facilitate better risk coverage and delivery of commodities.

14
 THE THREE EXCHANGES ARE

• National Commodity & Derivatives Exchange Limited ( NCDEX)

• Multi Commodity Exchange of India Limited ( MCX)
• National Multi-Commodity Exchange of India Limited ( NMCEIL) All
the exchanges have been set up under overall control of Forward Market
Commission (FMC) of Government of India.

NATIONAL COMMODITY & DERIVATIVES

EXCHANGES LIMITED (NCDEX)

National Commodity & Derivatives Exchanges Limited (NCDEX) located in

Mumbai is a public limited company incorporated on April 23, 2003 under the
Companies Act, 1956 and had commenced its operations on December 15, 2003.
This is the only commodity exchange in the country promoted by national level
institutions. It is promoted by ICICI Bank Limited, Life Insurance Corporation and
National Bank for Agriculture and Rural Development (NABARD) and National
Stock Exchange of India Limited (NSE). It is a professionally managed online multi
commodity exchange. NCDEX is regulated by Forward Market Commission and is
subjected to various laws of the land like the Companies Act, Stamp Act, Contracts
Act., Forward Commission ( Regulation) Act and * various other legislations.
Multi Commodity Exchange of India Limited (MCX)
Headquartered in Mumbai Multi Commodity Exchange of India Limited (MCX), is
an independent and de-mutualised exchange with a permanent recognition from
Government of India. Key shareholders of MCX are Financial Technologies (India)
Ltd., State Bank of India, Union Bank of India, Corporation Bank, Bank of India and
Canara Bank. MCX facilitates online trading, clearing and settlement.

15
All the exchanges have been set up under overall control of Forward Market
Commission (FMC) of Government of India.

Commodity exchange in India plays an important role where the prices of any
commodity are not fixed, in an organized way. Earlier only the buyer of produce and
its seller in the market judged upon the prices. Others never had a say. Today,
commodity exchanges are purely speculative in nature. Before discovering the price,
they reach to the producers, end-users, and even the retail investors, at a grassroots
level. It brings a price transparency and risk management in the vital market.

A big difference between a typical auction, where a single auctioneer announces the
bids, and the Exchange is that people are not only competing to buy but also to sell.
By Exchange rules and by law, no one can bid under a higher bid, and no one can
offer to sell higher than some one else’s lower offer. That keeps the market as
efficient as possible, and keeps the traders on their toes to make sure no one gets the
purchase or sale before they do.

INTERNATIONAL COMMODITIES EXCHANGES

Chicago board of trade (CBOT) – 1848

Chicago mercantile exchanges (CME) – 1898

New York mercantile exchanges (NYMEX) –1872

London metal exchange (LME) – 1877

London international financial futures exchange (LIFFE) – 1979
Tokyo commodity exchange (TOCOM) – 1984
Shanghai metal exchange (SHME)
Dahlia commodity exchange (DCE) – 1993

16
 EVOLUTION OF COMMODITY FUTURES EXCHANGES
Commodity markets have existed for centuries around the world because producers
and buyers of foodstuffs and other items have always needed a common place to
trade. Cash transactions were most common, but sometimes “forward” agreements
were also made deals to deliver and pay for something in the future at a price agreed
upon in the present. There are records, for example, of “forward” agreements related
to the rice markets in Seventeenth century Japan: most scholars agree that forward
arrangements actually date back much farther in time.

The first organized grain futures trading in the U.S began in places such as New York
City and Buffalo, but the development of “modern” futures, which are a unique type
of forward agreement, began in Chicago in the 1840s. With the construction of the
railroads, Chicago began to emerge as a center for transportation between Midwestern
producers and west coast population centers. The city was a natural hub for trade, but
the trading that took place there was inefficient and unorganized until a group of
Chicago-based business men formed the Board of Trade of the City of Chicago in
1848. The Board was a member-owned organization that offered a centralized
location for cash trading of a variety of goods as well as trading of forward contracts.
Members served as brokers who facilitated trading in return for commissions.

As trading of forward contracts increased, the Board decided that standardizing those
contracts would streamline the trading and delivery processes. Instead of
individualized contracts, which took a great deal of time to negotiate and fulfill,
people interested in the forward trading of corn at the Board, for example, were asked
to trade contracts that were identical in terms of quantity, quality, delivery month and
terms, all as established by the exchange. The only thing left for traders to negotiate
was price and the number of contracts.

These standardized forwards were essentially the first modern futures contracts.

17
 They were unlike other forwards in that they could only be traded at the exchange that
created them, and only at certain designated times. They were also different from
other forwards in that the bids, offers and negotiated prices of the trades were made
public by the exchange. This practice established futures exchanges as venues for
“price discovery” in U.S markets.

In contrast to customized contracts, standardized futures contracts were easy to trade,

since all traders were simply re-negotiations of price, and they usually changed hands
many times before expiration. People who wanted to make a profit based on a
fortuitous price change, or alternatively, who wished to cut mounting losses as
quickly as possible, could “offset” a futures contract before expiration by engaging in
an opposite trade: buying a contract which they had previously sold (or “gone short”),
or selling a contract which they had previously bought (or “gone long”).

CASH COMMODITY

A cash commodity must meet three basic conditions to be successfully traded in the
futures market:
1. It has to be standardized and, for agricultural and industrial commodities, must be in
a basic, raw, unprocessed state. There are futures contracts on wheat, but not on
flour. Wheat is wheat (although different types of wheat have different futures
contracts). The miller who needs wheat futures to help him avoid losing money on
his flour transactions with customers wouldn’t need flour futures. A given amount
of wheat yields a given amount of flour and the cost of converting wheat to flour is
fairly fixed hence predictable.
2. Perishable commodities must have an adequate shelf life, because delivery on a
futures contract is deferred.
3. The cash commodity’s price must fluctuate enough to create uncertainty, which
means both rise and potential profit.

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Unlike a stock, which represents equity in a company and can be held for along time,
if not indefinitely, futures contracts have finite lives. They are primarily used for
hedging commodity price-fluctuation risks or for taking advantage of price
movements, rather than for the buying or selling of the actual cash commodity. The
word “contract” is used because a futures contract requires delivery of the commodity
in a stated month in the future unless the contract is liquidated before it expires.

The buyer of the futures contract (the party with a long position) agrees on a fixed
purchase price to buy the underlying commodity (wheat, gold or T-bills, for example)
form the seller at the expiration of the contract. The seller of the futures contract (the
party with a short position) agrees to sell the underlying commodity to the buyer at
expiration at the fixed sales price. As time passes, the contract’s price changes
relative to the fixed price at which the trade was initiated. This creates profits or
losses for the trader.

In most cases, delivery never takes place. Instead, both the buyer and the seller,
acting independently of each other, usually liquidate their long and short positions
before the contract expire: the buyer sells futures and the seller buys futures.

THE ERA OF FINANCIAL FUTURES

In the 19th and early 20th centuries gold played a key role in international monetary
transactions. The gold standard was used to back currencies; the international value of
currency was determined by its fixed relationship to gold; gold was used to settle
international accounts. The gold standard maintained fixed exchange rates that were
seen as desirable because they reduced the risk of trading with other countries.

Imbalances in international trade were theoretically rectified automatically by the

gold standard. A country with a deficit would have depleted gold reserves and would
thus have to reduce its money supply. The resulting fall in demand would reduce

19
imports and the lowering of prices would boost exports; thus the deficit would be
rectified. Any country experiencing inflation would lose gold and therefore would
have a decrease in the amount of money available to spend. This decrease in the
amount of money would act to reduce the inflationary pressure. Supplementing the
use of gold in this period was the British pound. Based on the dominant British
economy, the pound became a reserve, transaction, and intervention currency. But the
pound was not up to the challenge of serving as the primary world currency, given the
weakness of the British economy after the Second World War.

Preparing to rebuild the international economic system as World War II was still
raging 730 delegates from all 44 Allied nations gathered at the Mount Washington
Hotel in Breton Woods, New Hampshire for the United Nations Monetary and
Financial Conference. The delegates deliberated upon and signed the Bretton Woods
Agreements during the first three weeks of July 1944.

Setting up a system of rules, institutions, and procedures to regulate the international

monetary system, the planners at Bretton Woods established the International Bank
for Reconstruction and Development (IBRD) (now one of five institutions in the
World Bank Group) and the International Monetary Fund (IMF). These organizations
became operational in 1946 after a sufficient number of countries had ratified the
agreement.

20
 EMERGING TRENDS IN COMMODITY MARKET WITH SPECIAL
REFERENCE TO GOLD &SILVER

GOLD:

Gold is a characteristic asset accessible everywhere throughout the world however not
in plentiful. In science it has nuclear number 79 and symbolized as AU. It is
profoundly Precious metal and is put resources into coins, gems, bars, authentications,
accounts and so forth. It is pulled in by all the people as wellspring of lofty thing or
the wellspring of speculation to make greatest returns. In India gold has turned out to
be extremely renowned metal from the old days itself, it represents its one of a kind
property and it is treated as a benefit and center riches by the general population. As
per the financial specialists owning gold is particularly protected in light of the fact
that everywhere throughout the globe gold is same there is no distinction underway
and individuals figure it will help in troublesome circumstance as there is high
liquidity control. Putting resources into gold is sheltered in light of the fact that it
does exclude the yield pivot change in the market. Everywhere throughout the world
gold is acknowledged and exchanged as a ware.

USES OF GOLD:

• It very well may be wellspring of venture.

• It is treated as sheltered paradise.

• It has high liquidity control.

• It goes about as protection

• WORLD’S LARGEST GOLD PRODUCING COUNTRIES:

21
 COUNTRY GOLD PRODUCTION IN TONNES

RUSSIA 270.7

UNITED STATES 230.0

CANADA 175.8

PERU 162.3

INDONESIA 154.3

SOUTH AFRICA 139.9

MEXICO 130.5

GHANA 101.7

SILVER:

Silver is a characteristic asset accessible everywhere throughout the world

yet not in bottomless. In science it has nuclear number 47 and symbolized
as Ag. Silver has the highest electrical conductivity and greatest warm
conductivity of metal. It was a mechanism of trade in the old days and
they are additionally utilized for gems, religious articles and sustenance
vessels. It has history from past 700 B.C. also, later in 1792 it was begun
as the cash between the countries until 1965 after that unit was ceased as
the estimation of silver was expanded. In present situation silver has
exceptionally gigantic interest and potential market; the financial
specialists are pulled in towards the silver as source venture. Silver is
utilized 95% for mechanical application, ornamental articles, photography,

22
adornments and flatware. Silver incorporates novel properties like its
electrical conductivity, warm conductivity and has the ability to endure
extraordinary temperature go.

WORLD’S LARGEST SILVER PRODUCING COUNTRIES:

COUNTRY SILVER PRODUCTION IN TONNES

MEXICO 38223

PERU 5600

CHINA 4500

RUSSIA 2500

POLAND 1400

BOLIVIA 1228

CHILE 1200

AUSTRALIA 1200

UNITED STATES 1020

23
 CHAPTER III

INDUSTRY PROFILE
&
COMPANY PROFILE

24
INDUSTRY PROFILE

COMMODITY MARKET TRADING MECHANISM

Every market transaction consists of three components – trading, clearing and

settlement.

TRADING
The trading system on the Commodities exchange provides a fully automated
screenbased trading for futures on commodities on a nationwide basis as well as an
online monitoring and surveillance mechanism. It supports an order driven market
and provides complete transparency of trading operations. After hours trading has
also been proposed for implementation at a later stage.

The NCDEX system supports an order driven market, where orders match
automatically. Order matching is essentially on the basis of commodity, its price,
time and quantity. All quantity fields are in units and price in rupees. The exchange
specifies the unit of trading and the delivery unit for futures contracts on various
commodities. The exchange notifies the regular lot size and tick size for each of the
contracts traded from time to time. When any order enters the trading system, it is an

25
active order. It tries to find a match on the other side of the book. If it finds a match,
a trade is generated. If it does not find a match, the order becomes passive and gets
queued in the respective outstanding order book in the system; Time stamping is done
for each trade and provides the possibility for a complete audit trail if required.

COMMODITY FUTURES TRADING CYCLE

NCDEX trades commodity futures contracts having one-month, two-month and
threemonth expiry cycles. All contracts expire on the 20 th of the expiry month. Thus
a January expiration contract would expire on the 20 th of January and a February
expiry contract would cease trading on the 20 th February. If the 20th of the expiry
month is a trading holiday, the contracts shall expire on the previous trading day.
New contracts will be introduced on the trading day following the expiry of the near
month contract.

Following Figure shows the contract cycle for futures contracts on NCDEX.

Jan Feb Mar Apr

Time
Jan 20 contract

Feb 20 contract
March 20 contract

April 20 contract
May 20 contract
June 20 contract

ORDER TYPES AND TRADING PARAMETERS

26
An electronic trading system allows the trading members to enter orders with various
conditions attached to them as per their requirement. These conditions are broadly
divided into the following categories:
• Time conditions
• Price conditions
• Other conditions
Several combinations of the above are possible thereby providing enormous
flexibility to users. The order types and conditions are summarized below. Of these,
the order types available on the NCDEX system are regular lot order, stop loss order,
immediate or cancel order, good till day order, good till cancelled order, good till
order and spread order.

TIME CONDITIONS
1. Good till day order
A day order, as the name suggests is an order which is valid for the day on which it is
entered. If the order is not executed during the day, the system cancels the order
automatically at the end of the day Example: A trader wants to go long on March 1,
2004 in refined palm oil on the commodity exchange. A day order is placed at
Rs.340/- 10 kg. If the market does not reach this price the order does not get filled
even if the market touches Rs.341 and closes. In other words day order is for a
specific price and if the order does not get filled that day, one has to place the order
gain the next day.

27
2. Good till cancelled (GTC)
A GTC order remains in the system until the user cancels it. Consequently, it spans
trading days, if not traded on the day the order is entered. The maximum number of
days an order can remain in the system is notified by the exchange from time to time
after which the order is automatically cancelled by the system. Each day counted is a
calendar day inclusive of holidays. The days counted are inclusive of the day on
which the order is placed and the order is cancelled from the system at the end of the
day of the expiry period. Example: A trader wants to go long on refined palm oil
when the market touches Rs.400/- 10 kg. Theoretically, the order exists until it is
filled up, even if it takes months for it to happen. The GTC order on the NCDEX is
cancelled at the end of a period of seven calendar days from the date of entering an
order or when the contract expires, whichever is earlier.

3. Good till date (GTD)

A GTD order allows the user to specify the date till which the order should remain in
the system if not executed. The maximum days allowed by the system are the same
as in GTC order. At the end this day / date, the order is cancelled from the system.
Each day / date counted is inclusive of the day / date on which the order is placed and
the order is cancelled from the system at the end of the day / date of the expiry period.

4. Immediate or Cancel (IOC)

An IOC order allows the user to buy or sell a contract as soon as the order is released
into the system, failing which the order is cancelled from the system. Partial match is
possible for the order, and the unmatched portions of the order are cancelled
immediately. 5. All or none order
All or none order ( AON) is a limit order, which is to be executed in its entirety, or not
at all. Unlike a fill-or-kill order, an all-or-none order is not cancelled if it is not
executed as soon as it is represented in the exchange. An all-or-none order position
can be closed out with another AON order.

28
6. Fill or Kill order
This order is a limit order that is placed to be executed immediately and if the order is
unable to be filed immediately, it gets cancelled.

PRICE CONDITION

1. Limit Order
An order to buy or sell a stated amount of a commodity at a specified price, or at a
better price, if obtainable at the time of execution. The disadvantage is that the order
may not get filled at all if the price of that day does not reach specified price.

2. Stop-loss
A stop-loss order is an order, placed with the broker, to buy or sell a particular futures
contract at the market price if and when the price reaches a specified level. Futures
traders often use stop orders in an effort to limit the amount they might lose if the
futures price moves against their position Stop orders are not executed until the price
reaches the specified point. When the price reaches that point the stop order becomes
a market order. Most of the time, stop orders are used to exit a trade. But, stop orders
can be executed for buying / selling positions too. A buy stop order is initiated when
one wants to buy a contract or go long and a sell stop order when one wants to sell or
go short . The order gets filled at the suggested stop order price or at a better price.
Example: A trader has purchased crude oil futures at Rs.750 per barrel. He wishes to

29
limit his loss to Rs.50 a barrel. A stop order would then be placed to sell an offsetting
contract if the price falls to Rs.700 per barrel. When the market touches this price,
stop order gets executed and the trader would exit the market. For the stoploss sell
order, the trigger price has to be greater than the limit price.

OTHER CONDITIONS
Margins for trading in futures
Margin is the deposit money that needs to be paid to buy or sell each contract. The
margin required for a futures contract. The margin required for a futures contract is
better described as performance bond or good faith money. The margin levels are set
by the exchanges based on volatility (market conditions) and can be changed at any
time. The margin requirements for most futures contracts range from 2% to 15% of
the value of the contract.
In the futures market, there are different types of margins that a trader has to maintain.
We will discuss them in more details when we talk about risk management in the next
chapter. At this stage we look at the types of margins as they apply on most futures
exchanges.
• Initial margin: The amount that must be deposited by a customer at the time of
entering into a contract is called initial margin. This margin is meant to cover
the largest potential loss in one day. The margin is a mandatory requirement
of parties who are entering into the contract.
• Maintenance margin: A trader is entitled to withdraw any balance in the
margin account in excess of the initial margin. To ensure that the balance in
the margin account never becomes negative, a maintenance margin, which is
somewhat lower than the initial margin, is set. If the balance in the margin
account falls below the maintenance margin, the trader receives a margin call
and is requested to deposit extra funds to bring it to the initial margin level
within a very short period of time. The extra funds deposited are known as a
variation margin. If the trader does not provide the variation margin, the
broker closes out the position by offsetting the contract.

30
 • Additional margin: In case of sudden higher than expected volatility, the
exchange calls for an additional margin, this is a preemptive move to prevent
breakdown. This is imposed when the exchange fears that the markets have
become too volatile and may result in some payments crisis, etc.,
• Mark-to-Market margin (MTM): At the end of each trading day, the margin
account is adjusted to reflect the trader’s gain or loss. This is known as
marking to market the account of each trader. All futures contracts are settled
daily reducing the credit exposure to one day’s movement. Based on the
settlement price, the value of all positions is marked-to-market each day after
the official close, i.e., the accounts are either debited or credited based on how
well the positions fared in that day’s trading session. If the account falls
below the maintenance margin level the trader needs to replenish the account
by giving additional funds. On the other hand, if the position generates a gain,
the funds can be withdrawn (those funds above the required initial margin) or
can be used to fund additional trades.
Just as a trader is required to maintain a margin account with a breaker, a clearing
house member is required to maintain a margin account with the clearing house. This
is known as clearing margin. In the case of clearing house member, there is only an
original margin and no maintenance margin. Clearing house and clearing house
margins have been discussed further in detail under the chapter on clearing and
settlement.

CHARGES
Members are liable to pay transaction charges for the trade done through the exchange
during the previous month. The important provisions are listed below; the billing for
the all trades done during the previous month will be raised in the succeeding month.
1. Rate of charges: The transaction charges are payable at the rate of Rs.6 per Rs.
One Lakh trade done. This rate is subject to change from time to time.
2. Due date: The transaction charges are payable on the 7 th day from the date of
the bill every month in respect of the trade done in the previous month.

31
 3. Collection process: NCDEX has engaged the services of Bill Junction
Payments Limited (BJPL) to collect the transaction charges through Electronic
Clearing System.
4. Registration with BJPL and their services: Members have to fill up the
mandate form and submit the same to NCDEX. NCDEX then forwards the
mandate form the BJPL. BJPL sends the login ID and password to the
mailing address a s mentioned in the registration form. The members can then
log on through the website of BJPL, and view the billing amount and the due
date. Advance email intimation is also sent to the members. Besides, the
billing details can be viewed on the website up to a maximum period of 12
months.
5. Adjustment against advances transaction charges: In terms of the regulations,
members are required to remit Rs.50, 000/- as advance transaction charges on
registration. The transaction charges due first will be adjusted against the
advance transaction charges already paid as advance and members need to pay
transaction charges only after exhausting the balance lying in advance
transaction.
6. Penalty for delayed payments: If the transaction charges are not paid on or
before the due date, a penal interest is levied as specified by the exchange.
Finally, the futures market is a zero sum game i.e. the total number of long in
any contract always equals the total number of short in any in time is called
the “Open interest”. This Open interest figure is a good indicator of the
liquidity in every contract. Based on studies carried out in international
exchanges, it is found that open interest is maximum in near month expiry
contracts.

CLEARING & SETTLEMENT

Most futures contracts do not lead to the actual physical delivery of the underlying
asset. The settlement is done by closing out open positions, physical delivery or cash
settlement. All these settlement functions are taken care of by an entity called

32
clearing house or clearing corporation. National Securities Clearing Corporation
Limited (NSCCL) undertakes clearing of trades executed on the NCDEX. The
settlement guarantee fund is maintained and managed by NCDEX.

CLEARING
Clearing of trades that take place on an exchange happened through the
exchangeclearing house. A clearinghouse is a system by which exchanges guarantee
the faithful compliance of all trade commitments undertaken on the trading floor or
electronically over the electronic trading systems. The main task of the clearing
house is to keep track of all the transactions that take place during a day so that the
net position of each of its members can be calculated. It guarantees the performance
of the parties to each transaction. Typically it is responsible for the following:
1. Effecting timely settlement.
2. Trade registration and follow up.
3. Control of the evolution of open interest.
4. Financial clearing of the payment flow.
5. Physical settlement (by delivery) or financial settlement ( by price
difference) of contracts.
6. Administration of financial guarantees demanded by the participants.

The clearing house has a number of members, who re mostly financial institutions
responsible for the clearing and settlement of commodities traded on the exchange.
The margin accounts for the clearing house members are adjusted for gains and losses
at the end of each day (in the same way as the individual traders keep margin
accounts with the broker). On the NCDEX, in the case of clearing house members
only the original margin is required (and not maintenance margin). Everyday the
account balance for each contract must be maintained at an amount equal to the
original margin times the number of contracts outstanding. Thus depending on a
day’s transactions and price movement, the members either need to add funds or can
withdraw funds from their margin accounts at the end of the day. The brokers who

33
are not the clearing members need to maintain a margin account with the clearing
house member through whom they trade in the clearing house.

CLEARING MECHANISM
Only clearing members including professional clearing members (PCMs) are entitled
to clear and settle contracts through the clearinghouse.
The clearing mechanism essentially involves working out open positions and
obligations of clearing members. This position is considered for exposures and daily
margin purposes. The open positions of PCMs are arrived at by aggregating the open
positions of all the TCMs clearing through him, in contracts in which they have
traded. A TCM’s open position is arrived at by the summation of his clients’ open
positions, in the contracts in which they have traded. Client positions are netted at the
level of individual client and grossed across all clients, at the member level without
any set-offs between clients. Proprietary positions are netted at member level without
any set-offs between client and proprietary positions.

At NCDEX, after the trading hours on the expiry date, based on the available
information, the matching for deliveries takes place firstly, on the basis of locations
and then randomly, keeping in view the factors such as available capacity of the
vault / warehouse, commodities already deposited and dematerialized and offered for
delivery etc., Matching done by this process is binding on the clearing members.
After completion of the matching process, clearing members are informed of the
deliverable / receivable positions and the unmatched positions. Unmatched positions
have to be settled in cash. The cash settlement is only for the incremental gain / loss
as determined on the basis of final settlement price.

CLEARING BANKS
NCDEX has designed clearing bank through who funds to be paid and/or to be
received must be settled. Every clearing member is required to maintain and operate
a clearing account with any one of the designated clearing bank branches. The

34
clearing account is to be used exclusively for clearing operations i.e., for settling
funds and other obligations to NCDE including payments of margins and penal
charges. A clearing member can deposit funds into this account, but can withdraw
funds from this account only in his self-name. A clearing member having funds
obligation to pay is required to have clear balance in his clearing account on or before
the stipulated pay-in day and the stipulated time. Clearing members must authorize
their clearing bank to access their clearing account for debiting and crediting their
accounts as per the instructions of NCDEX from time to time. The clearing bank will
debit/credit the clearing account of clearing members as per instructions received
from NCDEX. The following banks have been designated as clearing banks ICICI
Bank Limited, Canara Bank, UTI Bank Limited and HDFC Bank Limited, National
Securities Clearing Corporation (NSCCL) undertakes clearing of trades executed on
the NCDEX.

SETTLEMENT
Futures contracts have two types of settlements, the MTM settlement which happens
on a continuous basis at the end of each day, and the final settlement which happens
on the last trading day of the futures contract. On the NCDEX, daily MTM
settlement and final MTM settlement in respect of admitted deal in futures contracts
are cash settled by debiting/crediting the clearing accounts of CMs with the respective
clearing bank. All positions of a CM, brought forward, created during the day or
closed out during the day, are marked to market at the daily settlement price or the
final settlement price at the close of trading hours on a day.
• Daily settlement price: Daily settlement price is the consensus closing price as
arrived after closing session of the relevant futures contract for the trading day.
However, in the absence of trading for a contract during closing sessions, daily

35
 settlement price is computed as per the methods prescribed by the exchange from
time to time.
• Final settlement price: Final settlement price is the closest price of the underlying
commodity on the last trading day of the futures contract. All open positions in a
futures contract cease to exist after its expiration day.

SETTLEMENT MECHANISM

Settlement of commodity futures contracts is a little different from settlement of

financial futures, which are mostly cash settled. The possibility of physical settlement
makes the process a little more complicated.

TYPES
OF SETTLEMENTS

DAILY SETTLEMENT FINAL SETTLEMENT

1)Daily settlement price 1) Final settlement price

2)Handles daily price fluctuation 2) Handles final settlement
for all trades of all open oppositions
3)Daily process at end of the day 3) On contract expiry date

36
DAILY MARK TO MARKET SETTLEMENT:

Daily mark to market settlement is done till the date of the contract expiry. This is
done to take care of daily price fluctuations for all trades. All the open positions of
the members are marked to market at the end of the day and profit/loss is determined
as below:
• On the day of entering into the contract, it is the difference between the entry
value and daily settlement price for that day.
• On any intervening days, when the member holds an open position, it is the
different between the daily settlement price for that day and the previous day’s
settlement price.

FINAL SETTLEMENT

On the date of expiry, the final settlement price is the spot price on the expiry day.
The spot prices are collected from members across the country through polling. The
polled bid/ask prices are bootstrapped and the mid of the two bootstrapped prices is
taken as the final settlement price. The responsibility of settlement is on a trading
cum clearing member for all trades done on his own account and his client’s trades.
A professional clearing member is responsible for settling all the participants’ trades,
which he has confirmed to the exchange.

On the expiry date of a futures contract, members are required to submit delivery
information through delivery request window on the trader workstations provided by
NCDEX for all open positions for a commodity for all constituents individually.

37
NCDEX on receipt of such information matches the information and arrives at a
delivery position for a member for a commodity. A detailed report containing all
matched and unmatched requests is provided to members through the extranet.
Pursuant to regulations relating to submission of delivery information, failure to
submit delivery information for open positions attracts penal charges as stipulated by
NCDEX from time to time. NCDEX also adds all such open positions for a member,
for which no delivery information is submitted with final settlement obligations of the
member concerned and settled in cash.

Non-fulfillment of either the whole or part of the settlement obligations is treated as a

violation of the rules, bye-laws and regulations of NCDEX, and attracts penal charges
as stipulated by NCDE from time to time. In addition NCDEX can withdraw any or
all of the membership rights of clearing member including the withdrawal of trading
facilities of all trading members clearing through such clearing members, without any
notice. Further, the outstanding positions of such clearing member and/or trading
members and/or constituents, clearing and settling through such clearing member,
may be closed out forthwith or any thereafter by the exchange to the extent possible,
by placing at the exchange, counter orders in respect of the outstanding position of
clearing member without any notice to the clearing member and / or trading member
and / or constituent. NCDEX can also initiate such other risk containment measures,
as it deems appropriate with respect to the open positions of the clearing members. It
can also take additional measures like imposing penalties, collecting appropriate
deposits, invoking bank guarantees or fixed deposit receipts, realizing money by
disposing off the securities and exercising such other risk containment measures as it
deems fit or take further disciplinary action.

38
SETTLEMENT METHODS

Settlement of futures contracts on the NCDEX can be done in three ways –by
physical delivery of the underlying asset, by closing out open positions and by cash
settlement. We shall look at each of these in some detail. On the NCDEX all
contracts settling in cash are settled on the following day after the contract expiry
date. All contracts materializing into deliveries are settled in a period 2-7 days after
expiry. The exact settlement day for each commodity is specified by the exchange.

Physical delivery of the underlying asset

For open positions on the expiry day of the contract, the buyer and the seller can
announce intentions for delivery. Deliveries take place in the electronic form. All
other positions are settled in cash.

When a contract comes to settlement/the exchange provides alternatives like delivery

place, month and quality specifications. Trading period, delivery date etc. are all
defined as per the settlement calendar. A member is bound to provide delivery
information. If he fails to give information, it is closed out with penalty as decided by
the exchange. A member can choose an alternative mode of settlement by providing
counter party clearing member and constituent. The exchange is however not
responsible for, nor guarantees settlement of such deals. The settlement price is
calculated and notified by the exchange. The delivery place is very important for
commodities with significant transportation costs. The exchange also specifies the
precise period (date and time) during which the delivery can be made. For many
commodities, the delivery period may be an entire month. The party in the short
position (seller) gets the opportunity to make choices from these alternatives. The
exchange collects delivery information. The price paid is normally the most recent
settlement price (with a possible adjustment for the quality of the asset and – the
delivery location). Then the exchange selects a party with an outstanding long
position to accept delivery.

39
As mentioned above, after the trading hours on the expiry date, based on the available
information, the matching for deliveries is done, firstly, on the basis of locations and
then randomly keeping in view factors such as available capacity of the
vault/warehouse, commodities already deposited and dematerialized and offered for
delivery and any other factor as may be specified by the exchange from time to time.

After completion of the matching process, clearing members are informed of the
deliverable/receivable positions and the unmatched positions. Unmatched positions
have to be settled in cash. The cash settlement is done only for the incremental
gain/loss as determined on the basis of the final settlement price.

Any buyer intending to take physicals has to put a request to his depository
participant. The DP uploads such requests to the specified depository who in turn
forwards the same to the registrar and transfer agent (R&T agent) concerned. After
due verification of the authenticity, the R&T agent forwards delivery details to the
warehouse which in turn arranges to release the commodities after due verification of
the identity of recipient. On a specified day, the buyer would go to the warehouse and
pick up the physicals.

The seller intending to make delivery has to take the commodities to the designated
warehouse. These commodities have to be assayed by the exchange specified assayer.
The commodities have to meet the contract specifications with allowed variances. If
the commodities meet the specifications, the warehouse accepts them. Warehouses
then ensure that the receipts get updated in the depository system giving a credit in
the depositor’s electronic account. The seller then gives the invoice to his clearing
member, who would courier the same to the buyer’s clearing member.

40
NCDEX contracts provide a standardized description for each commodity. The
description is provided in terms of quality parameters specific to the commodities. At
the same time, it is realized that with commodities, there could be some amount of
variances in quality/weight etc., due to natural causes, which are beyond the control
of any person. Hence/ NCDEX contracts also provide tolerance limits for variances.
A delivery is treated as good delivery and accepted if the delivery lies within the
tolerance limits. However, to allow for the difference, the concept of premium and
discount has been introduced. Goods that come to the authorized warehouse for
delivery are tested and graded as per the prescribed parameters. The premium and
discount rates apply depending on the level of variation.
The price payable by the party taking delivery is then adjusted as per the
premium/discount rates fixed by the exchange. This ensures that some amount of
leeway is provided for delivery, but at the same time, the buyer taking delivery does
not face windfall loss/gain due to the quantity/quality variation at the time of taking
delivery. This, to some extent, mitigates the difficulty in delivering and receiving
exact quality/quantity of commodity.

CLOSING OUT BY OFFSETTING POSITIONS

Most of the contracts are settled by closing out open positions. In closing out, the
opposite transaction is effected to close out the original futures position. A buy
contract is closed out by a sale and a sale contract is closed out by a buy. For
example, an investor who took a long position in two gold futures contracts on the
January 30, 2004 at 6090, can close his position by selling two gold futures contracts
on February 27, 2004 at Rs.5928. In this case, over the period of holding the position
he has suffered a loss of Rs.162 per unit. This loss would have been debited from his
margin account over the holding period by way of MTM at the end of each day, and
finally at the price that he closes his position, that is Rs. 5928 in this case.

41
CASH SETTLEMENT
Contracts held till the last day of trading can be cash settled. When a contract is
settled in cash, it is marked to the market at the end of the last trading day and all
positions are declared closed. The settlement prince on the last trading day is set
equal to the closing spot price of the underlying asset ensuring the convergence of
future prices and the spot prices. For example an investor took a short position in five
long staple cotton futures contracts on December 15 at Rs. 6950. On 20 th February,
the last trading day of the contract, the spot price of long staple cotton is Rs. 6725.
This is the settlement price for his contract. As a holder of a short position on cotton,
he does not have to actual deliver the underlying cotton but simply takes away the
profit of Rs. 225 per trading unit of cotton in the form of cash entities involved in
physical settlement.

ENTITLES INVOLVED IN PHYSICAL SETTLEMENT

Physical settlement of commodities involves the following three entities – an
accredited warehouse, registrar & transfer agent and an assayer. We will briefly look
at the functions of each accredited warehouse.

ACCREDITED WAREHOUSE
NCDEX specified accredited warehouses through which delivery of a specific
commodity can be affected and which will facilitate for storage of commodities. For
the services provided by them, warehouses charge a fee that constitutes storage and
other charges such as insurance, assaying and handling charges or any other incidental
charges following are the functions of an accredited warehouse.

FOLLOWING ARE THE FUNCTIONS OF AN ACCREDITED

WAREHOUSE
1. Earmark separate storage area as specified for the purpose of storing
commodities to be delivered against deals made on the exchange.

42
 The warehouses are required to meet the specifications prescribed by the
exchange for storage of commodities.
2. Ensure and coordinate the grading of the commodities received at the
warehouse before they are stored.
3. Store commodities in line with their grade specifications and validity
period and facilitate maintenance of identity. On expiry of such validity
period of the grade for such commodities, the warehouse has to
segregate such commodities and store them in a separate area so that the
same are not mixed with commodities which are within the validity
period as per the grade certificate issued by the approved assayers.
4. Approved registrar and transfer agents (R&T agents)

The exchange specifies approved R&T agents through whom commodities can be
dematerialized and who facilitate for dematerialization/re-materialization of
commodities in the manner prescribed by the exchange from time to time. The R&T
agent performs the following functions.

1. Establishes connectivity with approved warehouses and supports them

with physical infrastructure.
2. Verifies the information regarding the commodities accepted by the
accredited warehouse and assigns the identification number (ISIN)
allotted by the depository in line with the grade/validity period.
3. Further processes the information, and ensures the credit of
commodity holding to the Demat account of the constituent.
4. Ensures that the credit of commodities - £oes only to the demat
account of c5 the constituents held with the exchange empanelled DPs.

43
5. On receiving a request for re-materialization (physical delivery)
through the depository, arranges for issuance of authorization to the
relevant warehouse for the delivery of commodities.

R&T agents also maintain proper records of beneficiary position of

constituents holding dematerialized commodities in warehouses and in the
depository for a period and also as on a particular date. They are required to
furnish the same to the exchange as and when demanded by the exchange,
R&T agents also do the job of co-ordinating with DPs and warehouses for
billing of charges for services rendered on periodic intervals. They also
reconcile dematerialized commodities in the depository and physical
commodities at the warehouses on periodic basis and co-ordinate with all
parties concerned for the same settlement – entity interaction approved
assayer.

Client Broker Exchange

BANK Clearing Corporation

Depository NSDL
Participant

Ware R&T
House Agent

44
 APPROVED ASSAYER
The exchange specifies approved assayers through whom grading of commodities
(received at approved warehouses for delivery against deals made on the exchange),
can, be availed by the constituents of clearing members. Assayers perform the
following functions.
Inspect the warehouses identified by the exchange on periodic basis to verify the
compliance of technical/safety parameters detailed in the warehousing accreditation
norms of the exchange.
Make available grading facilities to the constituents in respect of the specific
commodities traded on the exchange at specified warehouse. The assayer ensures that
the grading to be done (in a certificate format prescribed by the exchange) in respect
of specific commodity is as per the norms specified by the exchange in the respective
contract specifications.
Grading certificate so issued by the assayer specifies the grade as well as the validity
period up to which the commodities would retain the original grade, and the time up
to which the commodities are fit for trading subject to environment changes at the
warehouses.

PRICING COMMODITY FUTURES

The process of arriving at a figure at which a person buys and another sells a futures
contract for a specific expiration date is called price discovery. In an active futures
market, the process of price discovery continues from the market’s opening until its
close. The prices are freely and competitively derived. Future prices are therefore
considered to be superior to be administered prices or the prices that are determined
privately. Further, the low transaction costs and frequent trading encourages wide
participation in futures markets lessening the opportunity for control by a few buyers
and sellers.

45
We try to understand the pricing of commodity futures contracts and look at how the
futures price is related to the spot price of the underlying asset. We study the cost-of-
carry model to understand the dynamics of pricing that constitute the estimation of
fair value of futures the cost of carry model.

REGULATORY FRAMEWORK FOR COMMODITY TRADING

IN INDIA

At present there are three tiers of regulations of forward/futures trading system in

India, namely, government of India, Forward Markets Commission (FMC) and
commodity exchanges. The need for regulation arises on account of the fact that the
benefits of futures markets accrue in competitive conditions.

Proper regulation is needed to create competitive conditions. In the absence of

regulation, unscrupulous participants could use these leveraged contracts for
manipulating prices. This could have undesirable influence on the spot prices,
thereby affecting interests of society at large. Regulation is also needed to ensure that
the market has appropriate risk management system. In the absence of such a system,
a major default could create a chain reaction.
The resultant financial crisis in a futures market could create systematic risk.
Regulation is also needed to ensure fairness and transparency in trading, clearing,
settlement and management of the exchange so as to protect and promote the interest
of various stakeholders, particularly non-member users of the market.

RULES GOVERNING COMMODITY DERIVATIVES

EXCHANGES

The trading of commodity derivatives on the NCDEX is regulated by Forward

Markets Commission (FMC). Under the Forward Contracts (Regulation) Act, 1952,
forward trading in commodities notified under section 15 of the Act can be conducted

46
only on the exchanges, which are granted recognition by the central government
(Department of Consumer Affairs, Ministry of Consumer Affairs, Food and Public
Distribution). All the exchanges, which deal with forward contracts, are required to
obtain certificate of registration from the FMC Besides, they are subjected to various
laws of the land like the Companies Act, Stamp Act, Contracts Act, Forward
Commission (Regulation) Act and various other legislations, which impinge on their
working.

Forward Markets Commission provides regulatory oversight in order to ensure

financial integrity (i.e. to prevent systematic risk of default by one major operator or
group of operators), market integrity (i.e. to ensure that futures prices are truly
aligned with the prospective demand and supply conditions) and to protect and
promote interest of customers/ nonmembers. It prescribes the following regulatory
measures:

1. Limit on net open position as on close of the trading houses. Some

times limit is also imposed on intra-day net open position. The limit is
imposed operator-wise/ and in some cases, also member wise.
2. Circuit filters or limit on price fluctuations to allow cooling of market
in the event of abrupt upswing or downswing in prices.
3. Special margin deposit to be collected on outstanding purchases or
sales when price moves up or down sharply above or below the
previous day closing price. By making further purchases/sales
relatively costly, the price rise or fall is sobered down. This measure is
imposed only on the request of the exchange.
4. Circuit breakers or minimum/maximum prices. These are prescribed
to prevent futures prices from failing below as rising above not
warranted by prospective supply and demand factors. This measure is
also imposed on the request of the exchange.

47
 5. Skipping trading in certain derivatives of the contract closing the
market for a specified period and even closing out the contract. These
extreme are taken only in emergency situations.

Besides these regulatory measures, the F.C) R) Act provides that a client’s position
cannot be appropriated by the member of the exchange, except when a written
consent is taken within three days time. The FMC is persuading increasing number of
exchanges to switch over to electronic trading, clearing and settlement which is more
customer/friendly. The FMC has also prescribed simultaneous reporting system for
the exchanges following open out cry system.

These steps facilitate audit trail and make it difficult for the members to indulge in
malpractice like trading ahead of clients, etc. The FMC has also mandated all the
exchanges following open outcry system to display at a prominent place in exchange
premises, the name, address, telephone number of the officer of the commission who
can be contacted for any grievance. The website of the commission also has a
provision for the customers to make complaint and send comments and suggestions to
the FMC. Officers of the FMC have been instructed to meet the members and clients
on a random basis, whenever they visit exchanges, to ascertain the situation on the
ground, instead of merely attending meetings of the board of directors and holding
discussions with the office bearers.

RULES GOVERNING INTERMEDIARIES

In addition to the provisions of the Forward Contracts (Regulation) Act 1952 and
rules framed there under, exchanges are governed by its own rules and bye laws
(approved by the FMC). In this section we have brief look at the important
regulations that govern NCDEX. For the sake of convenience/these have been divided

48
into two main divisions pertaining to trading and clearing. The NCDEX provides an
automated trading facility in all the commodities admitted for dealings on the spot
market and derivative market. Trading on the exchange is allowed only through
approved workstation(s) located at locations for the office(s) of a trading member as
approved by the exchange. If LAN or any other way to other workstations at any
place connects an approved workstation of a trading Member it shall require an
approval of the exchange.

Each trading member is required to have a unique identification number which is

provided by the exchange and which will be used to log on (sign on) to the trading
system. A trading member has a non-exclusive permission to use the trading system
as provided by the exchange in the ordinary course of business as trading member.
He does not have any title rights or interest whatsoever with respect to trading
system/its facilities/ software and the information provided by the trading system.

For the purpose of accessing the trading system/the member will install and use
equipment and software as specified by the exchange at his own cost. The exchange
has the right to inspect equipment and software used for the purposes of accessing the
trading system at any time. The cost of the equipment and software supplied by the
exchange/installation and maintenance of the equipment is borne by the trading
member and users Trading members are entitled to appoint, (subject to such terms and
conditions/as may be specified by the relevant authority) from time to time
Authorized persons and Approved users.

Trading members have to pass a petrifaction program/which has been prescribed by

the exchange. In case of trading members/other than individuals or sole
proprietorships/such certification program has to be passed by at least one of their
directors/employees/partners/members of governing body.

49
Each trading member is permitted to appoint a certain number of approved users as
notified from time to time by the exchange. The appointment of approved users is
subject to the terms and conditions prescribed by the exchange. Each approved user
is given a unique identification number through which he will have access to the
trading system. An approved user can access the trading system through a password
and can change the password from time to time. The trading member or its approved
users are required to maintain complete secrecy of its password. Any trade or
transaction done by use of password of any approved user of the trading member, will
be binding on such trading member. Approved user shall be required to change his
password at the end of the password expiry period.

TRADING DAYS
The exchange operates on all days except Saturday and Sunday and on holidays that it
declares from time to time. Other than the regular trading hours, trading members are
provided a facility to place orders offline i.e. outside trading hours. These are stored
by the system but get traded only once the market opens for trading on the following
working day.
The types of order books, trade books, price a limit, matching rules and other
parameters pertaining to each or all of these sessions are specified by the exchange to
the members via its circulars or notices issued from time to time. Members can place
orders on the trading system during these sessions, within the regulations prescribed
by the exchange as per these bye laws, rules and regulations, from time to time.

TRADING HOURS AND TRADING CYCLE

The exchange announces the normal trading hours/open period in advance from time
to time. In case necessary, the exchange can extend or reduce the trading hours by
notifying the members. Trading cycle for each commodity/derivative contract has a
standard period, during which it will be available for trading.

50
CONTRACT EXPIRATION
Derivatives contracts expire on a pre-determined date and time up to which the
contract is available for trading. This is notified by the exchange in advance. The
contract expiration period will not exceed twelve months or as the exchange may
specify from time to time.
TRADING PARAMETERS
The exchange from time to time specifies various trading parameters relating to the
trading system. Every trading member is required to specify the buy or sell orders as
either an open order or a close order for derivatives contracts. The exchange also
prescribes different order books that shall be maintained on the trading system and
also specifies various conditions on the order that will make it eligible to place it in
those books. The exchange specifies the minimum disclosed quantity for orders that
will be allowed for each commodity/derivatives contract. It also prescribed the
number of days after which Good Till Cancelled orders will be cancelled by the
system. It specifies parameters like lot size in which orders can be placed, price steps
in which shall be entered on the trading system, position limits in respect of each
commodity etc.

FAILURE OF TRADING MEMBER TERMINAL

In the event of failure of trading member’s workstation and/ or the loss of access to
the trading system, the exchange can at its discretion undertake to carry out on behalf
of the trading member the necessary functions which the trading member is eligible
for. Only requests made in writing in a clear and precise manner by the trading
member would be considered. The trading member is accountable for the functions
executed by the exchange on its behalf and has to indemnity the exchange against any
losses or costs incurred by the exchange.

TRADE OPERATIONS
Trading members have to ensure that appropriate confirmed order instructions are
obtained from the constituents before placement of an order on the system. They

51
have to keep relevant records or documents concerning the order and trading system
order number and copies of the order confirmation slip/modification slip must be
made available to the constituents.

The trading member has to disclose to the exchange at the time of order entry whether
the order is on his own account or on behalf of constituents and also specify orders
for buy or sell as open or close orders. Trading members are solely responsible for the
accuracy of details of orders entered into the trading system including orders entered
on behalf of their constituents. Traders generated on the system are irrevocable and
blocked in 1. The exchange specifies from time to time the market types and the
manner if any, in which trade cancellation can be effected.

Where a trade cancellation is permitted and trading member wishes to cancel a trade,
it can be done only with the approval of the exchange.

MARGIN REQUIREMENTS
Subject to the provisions as contained in the exchange bye-laws and such other
regulations as may be in force, every clearing member/in respect of the trades in
which he is party to, has to deposit a margin with exchange authorities. The exchange
prescribes from time to time the commodities/derivatives contracts, the settlement
periods and trade types for which margin would be attracted.

The exchange levies initial margin on derivatives contracts using the concept of Value
at Risk (VaR) or any other concept as the exchange may decide from time to time.
The margin is charged so as to cover one-day loss that can be countered on the
position on 99% of the days. Additional margins may be levied for deliverable
positions, on the basis of VaR from the expiry of the contract till the actual settlement
date plus a mark-up for default.

52
The margin has to be deposited with the exchange within the time notified by the
exchange. The exchange also prescribes categories of securities that would be eligible
for a margin deposit, as well as the method of valuation and amount of securities that
would be required to be deposited against the margin amount.

The procedure for refund/adjustment of margins is also specified by the exchange

from time to time. The exchange can impose upon any particular trading member or
category of trading member any special or other margin requirement. On failure to
deposit margin/s as required under this clause, the exchange/clearing house can
withdraw the trading facility of the trading member. After the pay-out, the clearing
house releases all margins.

CLEARING
As mentioned earlier, National Securities Clearing Corporation Limited (NSCCL)
undertakes clearing of trades executed on the NCDEX, All deals executed on the
Exchange are cleared and settled by the trading members on the settlement date by
the trading members themselves as clearing members or through other professional
clearing members in accordance with these regulations/bye laws and rules of the
exchange.

LAST DAY OF TRADING

Last trading day for a derivative contract in any commodity is the date as specified in
the respective commodity contract.
If the last trading day as specified in the respective commodity contract is a holiday,
the last trading day is taken to be the previous working day of exchange. On the
expiry date of contracts, the trading members/ clearing members have to give delivery
information as prescribed by the exchange from time to time. If a trading
member/clearing member fails to submit such information during the trading hours on
the expiry date for the contract/the deals have to be settled as per the settlement
calendar applicable for such deals, in cash-together with penalty as stipulated by the

53
exchange deals entered into through the exchange. The clearing member cannot
operate the clearing account for any other purpose.

54
55
Multi Commodity Exchange of India Ltd (MCX)
is a commodity exchange based in India. It was established in 2003 by
the Government of India and is currently based in Mumbai. It is India's largest
commodity derivatives exchange. The Multi Commodity Exchange of India
Limited (MCX), India’s first listed exchange, is a state-of-the-art, commodity
derivatives exchange that facilitates online trading of commodity derivatives
transactions, thereby providing a platform for price discovery and risk
management. The Exchange, which started operations in November 2003,
operates under the regulatory framework of Securities and Exchange
Board of India (SEBI).The average daily turnover of commodity futures
contracts increased by 26% to ₹32,424 crore during FY2019-20, as against
₹25,648 crore in FY2018-19. The total turnover of commodity futures traded on
the Exchange stood at ₹83.98 lakh crore in FY2019-20. MCX offers options
trading in gold and futures trading in non-ferrous metals, bullion, energy, and a
number of agricultural commodities (mentha oil, cardamom, crude palm oil,
cotton, and others).

Multi Commodity Exchange of India Ltd

Companytype Public

Traded as BSE: 534091

NSE: MCX

ISIN INE745G01035

56
 Industry Commodity Exchange

Founded November 10, 2003; 20 years ago (commenced

operation)

Headquarters Mumbai, Maharashtra, India

Key people P S Reddy

(MD & CEO)

Products Commodity derivatives

Website www.mcxindia.com

Board of Directors
Our leadership team provides strategic direction to company.
The team comprises of :

Dr. Harsh Kumar Bhanwala

Chairman & Public Interest Director

57
Mr. Chandra Shekhar Verma
Public Interest Director

Mr. Ashutosh Vaidya

Public Interest Director

Ms. Sonu Bhasin

Public Interest Director

Dr. Navrang Saini

Public Interest Director

Mr. Arvind Kathpalia

Non-Independent Director

58
 Mr. Mohan Narayan Shenoi
Non-Independent Director

Ms. Suparna Tandon

Non-Independent Director

Mr. P.S. Reddy

Managing Director & Chief Executive Officer

59
MCX was among the top global commodity exchanges in terms of the number
of futures contracts trade, the latest yearly data from Futures Industry
Association (FIA) showed. MCX launched the MCX India Commodity Indices
(MCX iCOMDEX) series on December 20, 2019, which conform to the global
best practices set by the International Organisation of Securities Commissions
(IOSCO). iCOMDEX series consists of iCOMDEX Composite, iCOMDEX
Base Metals, iCOMDEX Bullion, iCOMDEX Gold, iCOMDEX Copper and
iCOMDEX Crude Oil. Subsequently, MCX received regulatory approval for
launch of futures contracts on MCX iCOMDEX Bullion and Base Metal indices.
The exchange also set up a web-based application "ComRIS" (Commodity
Receipts Information System) in order to maintain an electronic record of
commodities deposited at the Exchange accredited warehouses and ensure flow
of real time information from the warehouses.
SEBI issued operational guidelines for participation of Mutual Funds and
Portfolio Managers in commodity derivatives in May 2019 and subsequently,
approved few custodial service providers as custodians in the commodity space.
In February 2012, MCX had come out with a public issue of 6,427,378 Equity
Shares of Rs. 10 face value in the price band of Rs. 860 to Rs. 1032 per equity
share to raise around $134 million. [clarify] It was the first-ever IPO by an Indian
exchange and made MCX India's only publicly listed exchange.
From 28 September 2015, MCX is being regulated by the Securities and
Exchange Board of India (SEBI). Earlier MCX was regulated by the Forward
Markets Commission (FMC), which got merged with the SEBI on 28 September
2015.
Mr Padala Subbi Reddy (Mr P S Reddy) was appointed as MD & CEO of the
company for a period of five w.e.f. May 10, 2019. Prior to this Mr Reddy
worked as managing director and CEO of Central Depository Services (CDSL).
[1]

Commodities traded include -

 Metal - Aluminium, Copper, Lead, Nickel, Zinc

 Bullion - Gold, Gold Mini, Gold Guinea, Gold Petal, Gold Petal ( New
Delhi), Gold Global, Silver, Silver Mini, Silver Micro, Silver 1000.

60
  Agro Commodities - Cardamom, Cotton, Crude Palm Oil, Kapas,
Mentha Oil, Castor seed, RBD Palmolien, Black Pepper.
 Energy - Crude Oil, Natural Gas.
The efforts that started in the fourth quarter of FY 2018–19 to migrate to
'Compulsory Delivery-based' contracts in all base metals were successfully
completed in FY 2019–20. The launch of indigenously benchmarked deliverable
futures contracts of Copper, Aluminium, Zinc, Lead and Nickel on MCX, has
paved the way for the Indian market prices for metals to be discovered on an
exchange platform in a transparent manner. This fulfills an important step
towards development of domestic benchmarks which reflect domestic market
fundamentals, while the delivery standards are in tune with international
standards.
Paving the way for introduction of Options with 'commodities' as underlying,
the Government of India issued a notification on October 18, 2019, which
widens the scope of commodity derivatives traded in recognised exchanges.
Following this, SEBI permitted stock exchanges to launch 'Option in goods' in
their commodity derivatives segment, in addition to existing 'options on
commodity futures'. MCX has launched Gold Mini Options with Gold Mini
(100 grams) bar as the underlying, and plans to launch Silver Mini 5 kg 'option
in goods' contract soon.
In April 2022, the MCX collaborated with the Chittagong Stock Exchange,
(CSE), to establish Bangladesh's first commodity exchange.[2][3]
MCX also provides live feeds for all traded commodities and these are published
on various websites like MoneyControl,[4] GoldSilverReports[5] and Economic
Times.[6]

61
CHAPTER IV

DATA ANALYSIS

62
Analysis of Gold & Silver Prices

Gold prices have been consistently increasing in the last five years. Gold Prices have
increased from Rs.2980 per gram in 2017 to nearly Rs.4950 in 2021 which is a good
66% increase.

Chart: 1

Table: 1

Year Gold Price (in Rs. Per Gram)

2023 4950.00
2022 4865.00
2021 3900.00
2020 3110.00

63
 2019 2980.00

Analysis of Gold Prices VS Sensex

Gold Price (in Rs. Per Gram) SENSEX

2023 4950.00 59000

2022 4865.00 48000

2021 3900.00 41000

2020 3110.00 35800

2019 2980.00 34056

64
Drivers of the gold price
The gold price is – as the price of any commodity – driven by the basic laws of supply
and demand. The demand for gold falls into four sectors: The official sector, i.e.
central banks, jewellery, technology, i.e. industrial and dental sectors, and private
investment.

The central banks have developed from net sellers to net buyers of gold, driven by a
decrease of sales from developed countries and an increase in buying activity from
developing countries.

Given the low percentage of central banks asset allocation into gold in emerging
countries like China (2% versus about 70% in countries like the United States,
Germany and France), there is a solid chance that the official sector will continue to
be a net buyer of gold.

Over the last decade jewellery demand for gold decreased in relation to demand from
other sectors, mainly the investment sector. High gold prices and economic
uncertainties will likely keep gold demand from jewellery moderate in future.

Besides jewellery, the demand from the investment sector accounts for more than
40% of total demand. Amidst the money and debt creation by major economies and
following the financial crisis, the demand for gold as an investment reached record
highs in 2018. While during the previous gold price peak, the demand came nearly in
equal parts from gold securities like Gold ETF and physical gold in the form of bars
and coins, this changed during the latest peak, when nearly 80% of investment
demand flowed into physical gold, e.g., in the form of professionally vaulted gold.
This indicates that safety is a major concern for gold investors, who usually view
physical gold or vaulted gold as more safe than so called ‘paper gold’ (see our
comparison of different forms of gold investment).

65
The second important driver of the gold price in addition to the demand factors is the
supply side. The supply of gold is composed of mine supply, i.e. gold production, and
gold recycling.

Present Scenario

A number of factors have caused the prices to hit a sweet spot. The global economic
slowdown, with fears the US economy is moving towards a recession, has turned gold
into a safe haven. The trade wars and the geo-political tensions are also pushing up
prices. Add to that is the easy monetary policy adopted by central banks. An inverse
relationship with money supply means higher prices as liquidity rises. Besides, falling
stock prices have made gold more lucrative among investors.

India, which is one of the largest consumers of gold globally, imports much of the
metal. A couple of local factors have added a greater impetus to the price. The rupee
has depreciated against the dollar, while finance minister Nirmala Sitharaman has
raised the import duty by 2.5 percentage points in her maiden budget to 12.5 per cent.
With fundamentals supporting the metal, experts said gold is set to test even higher
levels. “It could hit Rs 39,000-40,000 levels (per 10 gram) by Diwali,” Anuj Gupta
(DVP – Commodities & Currencies Research) at Angel Broking told The Telegraph.

Shaankar Sen, MD, Senco Gold and Diamonds, said: “In the past few months we have
seen a substantial jump in the gold prices and we expect the trend to continue. Global
geopolitical situation coupled with central banks buying gold is driving this increase
in prices. There is increasing trend of speculation on gold. Volatility in currency is
also affecting prices.” He said prices were likely to reach Rs 43000-45000 during the
festive season, which will impact the demand for jewellery. “People who don’t have
higher budgets could be affected.”

Hareesh V, head commodity research at Geojit Financial Services, said gold had the
potential of hitting Rs 41,800 per ten gram by the end of this calendar year. He said he
expected some correction on the Modi government announcing some stimulus to push
up growth, though prices are unlikely to go below Rs 31,000 per 10 gram, which was
seen in the April-June period. The markets are awaiting key events, which include the

66
minutes of the US Federal Reserve’s July meeting and the Jackson Hole meeting of
the central bankers. Naveen Mathur, director-commodities and currencies at Anand
Rathi Shares and Stock Brokers, struck a cautious note. He said though the sentiment
remained bullish, prices may consolidate at the current levels and investors should not
jump into buying the metal .

Table: 2

Source: www.jagoinvestor.com

67
Silver Price Trends

The price of Silver has increased in the last two years. The silver price remained at
almost the same level of Rs.45,000 per Kg from 2017 to 2019. The price increased to
Rs.72000 per kg in 2020 before decreasing to Rs.66000 per kg in 2021.

Chart: 3

Table: 3

Year Silver (Price in Rs Per KG)

2023 66000
2022 72000
2021 45000
2020 41450

68
 2019 42800

Analysis of Silver Prices VS Sensex

Silver Price (in Rs. Per Kg) SENSEX

2023 66000 59000

2022 72000 48000

2021 45000 41000

2020 41450 35800

2019 42800 34056

Since the past few years, silver has followed the trend of gold prices, rising and
falling at a faster pace than gold. The trend indicates that the monetary influences on
the precious metal are more than the fundamental demand and supply factors. Over
the years, silver has shown a rising trend, led by weaker US dollar, global economic
turmoil and liquidity infusions. Apart from this diversification to hard assets from

69
paper equity assets, simplification of investment from silver ETFs and bullion funds

and strong industrial demand are fueling prices.

Facts that matter

• 10-fold Growth in silver prices over the preceding decade

• 52:1 Silver-gold price ratio
• 5,30,000 Total silver reserves globally
• Geologists estimate that there are 17 ounces of silver for every ounce of gold
on the planet

Gold

India is the largest consumer of gold in the world. Liberalization in 1991 saw efforts
to slowly revive the gold market in the country with the other sectors of economy.
Thus, since 1991, demand for gold has been increasingly met by official imports. The
results are obvious in the form of reduced smuggling, unofficial premiums and
enhanced government revenue, by way of customs and sales tariffs. The increasing
gold trade deserves an efficient bullion exchange in India, for which there is a need to
develop an efficient spot and forwards market, sufficient liquidity, regular, safe and
cheap supply system with good delivery standards are some of the prerequisites for
smooth functioning of a bullion exchange. The recent decision of the International
Monetary Fund & other central bankers against selling gold for the next five years
signifies the faith placed in this metal by the leading economies of the world. Gold
will continue to play a decisive role in world economy in the next millennium.

70
Why to invest in Gold:-

Gold responds when you need it most:-

Recent independent studies have revealed that traditional diversifiers often fall during
times of market stress or instability. On these occasions, most asset classes (including
traditional diversifiers such as bonds and alternative assets) all move together in the
same direction. There is no “cushioning” effect of a diversified portfolio — leaving
investors disappointed. However, a small allocation of gold has been proven to
significantly improve the consistency of portfolio performance, during both stable and
unstable financial periods. Greater consistency of performance leads to a desirable
outcome — an investor whose expectations are met.

Gold is highly liquid:-

Gold can be readily bought or sold 24 hours a day, in large denominations and at
narrow spreads. This cannot be said of most other investments, including stocks of the
world’s largest corporations. Gold proved to be the most effective means of raising

71
cash during the 1987 stock market crash, and again during the 1997/98 Asian debt
crisis. So holding a portion of portfolio in gold can be invaluable in moments when
cash is essential, whether for margin calls or other needs

Sanctuary :

In unstable times, investors look to safeguard their capital by shifting it into assets
deemed to be a reliable depository of value. Gold provides a security against the
capricious nature of paper currency.

Assorted Portfolio :

A portfolio that holds widely varied investments is protected against market decline.
Portfolios comprising gold are reliable and secure.

Avoiding Inflation:

Although the purchasing capability of various currencies has largely fallen due to
price hikes that of gold has stayed amazingly steady. So, gold is purchased to offset
the consequences of price increases and currency instability.

Combat Dollar Instability:

Gold is frequently used as a convenient flight against dollar fluctuations. A rise in

dollar value leads to a drop in the gold price and a decrease in the dollar value results
in an increase in the gold price. Therefore, gold is considered useful in guarding
against dollar instability.

Handling Risk:

72
A portfolio containing assets with minimal instability reduces risk and has a positive
bearing on anticipated returns. Gold is less susceptible to change and is hence a good
investment.

Demand and supply:

The demand for gold has constantly exceeded supply mainly due to extended lead
times that occur in gold mining and growing income levels in major gold markets.
The future gold scenario looks bright and positive.

Indian Gold Market:-

India was the worlds’ largest gold market with Mumbai as the main trading center
prior to 1962. The government enacted the Gold Control Act in 1962 prohibiting the
citizens of India from holding pure gold bars and coins due to loss of gold reserves
during the Indo-China war in 1962. Only licensed dealers were allowed to deal in
pure gold bars and coins. It was this legislation, which killed the official gold market
and a large unofficial market for gold sprung up dealing in cash only. The gold was
smuggled in and sold through the unofficial channel wherein many jewelers and
bullion traders traded in smuggled gold leading to the development of huge black
market for gold. Gold was smuggled into India in the size of 10-tola bars (called a TT
bar in trade parlance). The traditional Indian measure for gold is “tola”; a name
derived from the Sanskrit word “tula” for scale or balance. One tola is equal to 11.664
grams. Hence a 10-tola bar weighs 116.64 grams.

The important feature of this 10-tola bar is that they don’t have serial number, unlike
almost all other cast bars available on the international market. This made ten-tola bar
the gold currency of choice, especially from 1947-1992 when India strictly regulated
gold imports, giving rise to a massive black market. During 50’s and 80’s, the
government had a controlled economy wherein all the factors of production and

73
resources were controlled and licensed. This led to the corruption and shortages
resulting in profiteering by the businesses. It was in 1990 when India had a major
foreign exchange problem; the Indian government pledged 40 tons of gold from their
gold reserves with the Bank of England to save the day. Subsequently India embarked
upon the path of economic liberalization.

SUPPLY AND DEMAND DYNAMICS:-

I. Production
II. Consumption
III. Investment
IV. Demand Supply factors

Demand for Gold:-

India is the largest consumer of gold in the world. Most of the demand for gold
appears to be for jewellery fabrication, and the rest, estimated at 10 to 15 percent, is
possibly meant to meet demand on account of investment and Industrial and dental
processes. This is sure to surprise many when India is considered a very poor country
with one of the lowest per capita incomes in the world.

74
Chart: 4
Demand for Gold:

Chart: 5

75
Demand for Jewellery:
Rural India

India has highest demand for gold in the world and more than 90% of this gold is
acquired in the form of jewelers. The demand for jewelry mainly comes from rural
sector; about 65-70% of the gold purchases are from rural India, which live upon
agriculture for their livelihood. Since agriculture is highly dependent on the rains, the
rural disposable income depends upon weather; hence a good year for agriculture
assures higher demand for gold. The bulk of the Indian jewelers buying is still rooted
in tradition and jewelry is sold in traditional designs. The main reason for such high
rural demand for gold is non-taxation of agricultural income. If the agricultural
income were taxed, the disposal income would substantially reduce resulting in lower
gold demand. In the rural areas, the womenfolk especially have a low level of
education. Hence the middle-aged rural Male invests more of their savings in gold so
that womenfolk can encase their wealth without any legal hassles.

In south India, consumers prefer new designs with the change in fashion trends, hence
they sell off their jewelry when they become out of fashion exchange for new jewelry.

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In north India, new purchases are done only when the ornaments are broken and in
some extreme cases. About 95% of purchases are done by women .The demand for
gold in north India increases during festivals (mainly Diwali) and marriage season.
The months from October to January, April and May constitute the main marriage
season and also have a large number of festivals. Hence demand for gold is very
strong during these months. In south India demand is more or less uniform throughout
the year as salaried people form the major chunk of purchasers who invest their
savings regularly in gold purchases. The figures of the past few years show that
Indian demand for gold has consistently been hovering around 25% of total world
demand. Jewelers designs vary in different regions of India, making the style unique
to each region. In south India the designs are inspired by nature - paisley motif of the
mango, rice grains, melon and cucumber seeds, etc. while In northern and western
designs are inspired by the meenakari (enameling) and kundan (setting of precious
and semi-precious stones in gold) styles to just give a few examples.

Urban India
Exposure to western influences and the media have spawned a consumerist culture.
The entry of modern gadgetry like laptops, cell phones and white goods has grabbed
away a part of the urban Indian’s disposable income. The lure of spending on these
modern gadgets has taken precedence over the older virtue of saving. Adding to it, the
urban Indian has been exposed to alternate forms of savings like equities and bonds
via mutual funds, which have diminished their desire for gold. In effect, dampening
the urban demand for gold. The passion for gold between the urban and the rural
Indian has widened.

Demand for Investment:-

Private Holding of Gold bars in India was forbidden until 1990 due to Gold Control
Act. There was physical investment in smuggled ten tola bars, but it was limited and

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often amounted to keeping a few bars ready to be made into jewelers. Gold
investment essentially was in 22-carat jewellery.

Since 1990 (after Gold control Act was abolished), investment in small bars, both
imported ten tolas and locally made small bars, which have proliferated from local
refineries, has increased substantially. GFMS estimate that investment has exceeded
100 tons (3.2 million-oz) in some years, although it is hard to segregate true
investment from stocks held by the 16,000 or more gold dealers spread across India.

Certainly gold has been used to conceal wealth, especially during the mid-1990s,
when the local rupee price increased steadily. It was also augmented in 1998 when
over 40 tons (1.3 million-oz) of gold from bonds originally issued by the RBI were
restituted to the public.In the rural areas 22-carat jewellery remains the basic
investment, while in the cities, gold is competing with the stock market, investment in
Internet industries, and a wide range of consumer goods.

Factors Influencing Demand for Gold

Following are the factors influencing the demand for gold;
1. The movement of gold prices is one of the important variables determining
demand for gold.
2. The increase in the irrigation, technological change in agriculture (through
mechanization and high yielding varieties), have generated large marketable
surplus and a highly skewed rural income distribution is another factors
contributing to additional demand for gold.
3. Black money originating in the services sector, like real estate and public sector,
has contributed to gold as store of value. Hence income generated in these service
sector can be treated as a determining variable
4. Since bank deposits, unit trust of India, Mutual funds, small savings, etc are
alternative avenues for investing savings, the weighted return on these alternative
assets can be considered as another influencing factor.

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5. Demand for gold also depends upon prices of other commodities. When there is
an increase in general price level, it has two effects: first it reduces the purchasing
power available for acquisition of jewellery and secondly, it reduces the real
return on gold. It has depressing effect on the component of demand in both ways.
6. Inflation redistributes incomes in favour of non-wage income earners, leading to
more skewed income distribution. With incremental income of non-wage earners,
the demand for gold as a store of value can be expected to rise.

Sources of Supply:-
The supply of Gold in India arises mainly from domestic production, legal and illegal
imports. Scrap gold, which is not an additional supply, supports the market
requirements.
Domestic production:-
The main producers of Gold are Hutti Gold Mines and Bharat Gold mines Limited,
which annually produce about two tons. This has been the case from the past two
decades. There are no known gold reserves in India worth mentioning.

Channels for Import of Gold:-

Gold enters India via. a number of different routes. The trade routes are complex but
can be classified into two broad categories - Direct flow (official) and Indirect flow
(unofficial flows).
Direct flows include shipments, which mainly come from the refining centers of
Europe, South Africa and Australia. Imports through direct flows are done in three
ways
1. Special import licenses
2. Non-resident Indians
3. Authorized banks and institutions.
Import of gold through Special Import License (SIL) and NRI route has been
negligible after gold import through banks was permitted. The liberalized gold policy

79
has brought most of the unofficial sector trade to official sector. The elimination of
large unofficial market in forex has improved the policy effectiveness. It may also be
noted that the Indian consumer of gold has been spared of huge transaction costs
amounting to thousands crores of rupees on account of the existence of the unofficial
sector in the past.

Indirect flows (unofficial) occurs place through two entry ports of Singapore, Sri
Lanka and Dubai in the first instance.

Factors Influencing the Supply of Gold:-

The following are few of the factors that influence gold supply.
• Supply of gold follows the demand for gold hence the demand for gold is one
of the important variables determining supply for gold.
• The differentials between domestic and international prices for gold acts as
inducement for smuggling with the objective of earning large rupee income,
thus this can be treated as one of the important factor influencing supply of
gold.

GOLD CONTRACT SPECIFICATIONS:

Trading system MCX's Trading System

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Trading hours Trade timings on all trading days:
Trading Hours : 09.55 a.m. 11.55 p.m.
Single Call Market (Closing session) for determination of
Closing Price:11.15 p.m. to 11.30 p.m.

Unit of trading 100 gm

Delivery unit 1 kg

Quotation/Base Value Rs per 10 gm of Gold with 999.9 fineness (called “Pure

Gold“ in trade circles)
Quality specification Not less than 995 fineness bearing a serial number and
identifying stamp of a refiner approved by MCX. List of
approved refiners will be available with the Exchange and
also on its web site: www.mcx.com

Quantity Variation None

No. of active contracts At any date, 3 concurrent month contracts will be active.
There will be a total of twelve month contracts in a year

Delivery center Mumbai

Opening Date Trading in any contract month will open on the 21st day of
the month, 3 months prior to the contract month i.e. January
2004 contract opens on 21st October 2003

Due date 20th day of the delivery month, if 20th happens to be a

holiday then previous working day

Premium / Discount The discount will be given for the fineness below 999.9.
The settlement price for less than 999.9 fineness will be
calculated as: (Actual fineness / 999.9) *Settlement price

Explanation of the contract specialization-

81
Gold-
1) The first parameter of the contract deals with that the gold is a commodity that is
traded on MCX markets from 9.55pm to 11.30 pm 2) Now generally we can do three
types of trading- a) Daily trading
b) Delivery trading
c) Short trading
3) Now the minimum quantity we can take is of 100 Gm. In one lot we can take
maximum 1 kg. After 1 kg the lot changes and the second lot come in face. 4) Now
the margin money generally we have to give is 10% and by giving the margin we can
start trading. It is mandatory to pay the margin money. Without paying of the margin
money we can not do trading.
5) Generally the fineness provided is 999.9 fineness and the gold must bear the mark
of recognized refiner approved by MCX .
6) Generally three month future contract is done in MCX Markets.
7) Any kind of discount may be provided if the fineness is less than 999.9 8) The
delivery centre for collection of gold is generally in Mumbai.

Silver

Silver has been used for thousands of years as ornaments and utensils, for trade, and
as the basis for many monetary systems. This made silver one of the most widely
sought-after amongst all the precious metals. It was probably the only precious metal
the demand for which was influenced by both its availability and usage. During the
last century, the metals demand was also influenced from its treasury importance.
However, the large part of silver production is relatively insensitive to the price of
silver. In the early last century, development of technology led to increase in Silver
usage. Silver finds extensive usage in films, coins, consumer durables etc. Its superior
electric conductivity made it one of important ingredient in industrial and electronic
usage. Increased usage necessitated higher silver production.

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Major Characteristics
• Silver is a brilliant grey-white metal that is soft and malleable.
• Silver has unique properties such as its strength, malleability, ductility,
electrical and thermal conductivity, sensitivity, high reflectance of light, and
reactivity.
• The main source of silver is in lead ore, although it can also be found
associated with copper, zinc and gold and produced as a by-product of base
metal mining activities.
• Secondary silver sources include coin melt, scrap recovery, and dis-hoarding
from countries where export is restricted. Secondary sources are price
sensitive.
• Silver is unique amongst metals due to the fact that it can be classified as both
a precious metal and an industrial metal.
• Today, silver is sought as a valuable and practical industrial commodity and as
an investment.
• Silver is an important element of global monetary reserves.
• It is an effective portfolio diversifier.

Global Scenario

• Silver is predominantly traded on the London Bullion Market Association

(LBMA) and COMEX in New York.
• LBMA, as the global hub of over-the-counter (OTC) trading in silver, is its
main physical market. Comex is a futures and options exchange, where most
fund activity is focused.
• Silver is invariably quoted in the US dollars per troy ounce.

83
Indian Scenario

• India's silver demand averages 2500 tonnes per year, whereas the country's
production was around 206.95 tonnes in 2010.
• Nearly 60% of India's silver demand comes from farmers and rural India, who
store their savings in silver bangles and coins.

Factors Influencing the Market

• Economic events such as national industrial growth, global financial crisis,

recession, and inflation affect metal prices.
• Commodity-specific events such as the construction of new production
facilities or processes, unexpected mine or plant closures, or industry
restructuring, all affect metal prices.
• Governments set trade policy (implementation or suspension of taxes,
penalties, and quotas) that affect supply by regulating (restricting or
encouraging) material flow.
• Geopolitical events involving governments or economic paradigms and armed
conflict can cause major changes.
• A faster growth in demand against supply often leads to a drop in stocks with
the government and investors.
• Silver demand is underpinned by the demand from jewellery and silverware,
industrial applications, and overall industrial growth.
• In India, the real industrial demand occupies a small share in the total
industrial demand of silver. This is in sharp contrast to most developed
economies.
• In India, silver demand is also determined to a large extent by its price level
and volatility.

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Chart: 6

Export/Import Scenario:-

Total global demand for silver is around 29,000 tons. Indian demand for silver is
around 3,800 tons. Indian market is price sensitive and is dependent on the monsoon.
The rural demand is crucial to the total demand for silver in India.

Price Outlook:-

For centuries, the price of silver has been closely linked with the price of gold, but the
de-monetization of both metals in much of the world has weakened the link. Several
factors influence Silver prices such as number of Silver ounces required for buying an

85
 ounce of Gold, investment demand, above-ground stocks of silver etc. Above factors,
to large extent, help determining prices.

CONTRACT SPECIFICATIONS:

SILVER
Trading system MCX's Trading System

Trading hours Trade timings on all trading days: Trading Hours : 09.55
a.m. 11.55 p.m.
Single Call Market (Closing session) for determination of
Closing Price:11.15 p.m. to 11.30 p.m.

Delivery unit 30 kg

Quality specification List of approved refiners will be available with the

Exchange and also on its web site: www.mcx.com

Quantity Variation None

No. of active contracts At any date, 3 concurrent month contracts will be active.
There will be a total of twelve month contracts in a year.
i.e. March- May- July.

Delivery center Mumbai

Opening Date Trading in any contract month will open on the 21st day of
the month, 3 months prior to the contract month.

Due date 20th day of the delivery month, if 20th happens to be a

holiday then previous working day

Margin 6.5%
SILVER MINI
Trading system MCX's Trading System

86
Trading hours Trade timings on all trading days:
Trading Hours : 09.55 a.m. 11.55 p.m.
Single Call Market (Closing session) for determination of
Closing Price:11.15 p.m. to 11.30 p.m.

Delivery unit 5 kg

Quality specification List of approved refiners will be available with the

Exchange and also on its web site: www.mcx.com

Quantity Variation None

No. of active contracts At any date, 3 concurrent month contracts will be active.
There will be a total of twelve month contracts in a year.
i.e. March- May- July.

Delivery center Mumbai

Opening Date Trading in any contract month will open on the 21st day of
the month, 3 months prior to the contract month.

Due date 20th day of the delivery month, if 20th happens to be a

holiday then previous working day

Margin 6.5%

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 CHAPTER V

FINDINGS, SUGGESTIONS , CONCLUSION

& BIBILOGRAPHY

88
 FINDINGS
 Gold Prices have increased from Rs.2980 per gram in 2019 to nearly Rs.4950 in
2023 which is a good 66% increase.
 The silver price remained at almost the same level of Rs.45,000 per Kg from 2019
to 2021. The price increased to Rs.72000 per kg in 2022 before decreasing to
Rs.66000 per kg in 2023.
 Commodity market not totally based on the “Demand & Supply” forces prevailing
in the market and day traders still have the power to manipulate the daily trading
somewhat..
 The player (Speculators) creates the bull and bear situation in the commodity
market based on money power and profit booking motives. If there is no
speculation in the market then nobody is interested to participate in the trading, as
the real motive still is the speculation. Although I personally feel that the maturity
to the market will come only of the market is used by large number of players to
hedge.
 The commodity market is currently only concerned with the future contracts of 1
month and 3 month maturity and this should further be expanded.
 The business in the commodity market is a very risky in nature mainly due to
above stated reason of real motive being the speculation.
 Generally the role of hedgers is done by farmers. Farmers settle down their profits
by doing trading in MCX markets. Although it may not be happening to that
extent.
 Generally the people who do not have money to take the delivery they do the role
of arbitersury to gain the profit by trading in two markets.
 These markets are also very useful to jewelry traders. They trade on both side i.e.
on their shop and in MCX markets to settle down their profits or loss.

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 SUGGESTIONS
• Understand the provisions and rates relating to the sales tax, value added tax, APMC
Tax, Mandi Cess and Tax, Octroi, excise duty, stamp duty, etc., as applicable on the
underlying commodity of any contracts offered for trading by MCX.

• Read, understand and be updated about the guidelines and circulars of the Exchange
and of the Forward Markets Commission issued from time to time and kept on the
respective websites.

• Read the commodity contracts circulars issued & kept on MCX website and carefully
note the contract specifications of the commodity in which you wish to trade. The
contract specifications are subject to change from time to time.

• Before entering into buy and sell transactions please be aware of all the factors that
go into the mechanism of pricing, trading, clearing and settlement.

• Read the product note of the commodity in which you wish to deal to understand the
commodity and parameters that impact on the trading and settlement of the
commodity.

• Understand the Delivery & Settlement Procedures given in the Exchange Circular of
the commodity kept on the Exchange website that you wish to deal in the futures
market.

• Study historical and seasonal price movements of the commodity that you wish to
deal in the futures market.

• Keep track of Governments' Policy announcements from time to time of the

commodity that you wish to deal in the futures market.

• Apply your own prudent judgment for investments in commodity futures and take
informed decisions.

• Comply with Taxation and other Central Government/State Governments regulatory

issues.

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• Go through all Rules, Bye Laws, Regulations, Circulars and directives issued by
MCX.

• Since futures trading attract various types of margins, be aware of the risks associated
with your positions in the market and margin calls made from time to time.

• Collect/Pay Mark-to-Market margins Cheque on your futures positions on a daily

basis from/to your Member.

• Be aware of your risk taking ability and fix stop-loss limits. Liquidate your positions
at such levels to reduce further losses, if any.

• In case of any doubt/problems, contact Exchange's Help Desk or email at

[email protected]

• Do not fall prey to market rumours.

• Do not go by any explicit/ implicit promise made by analysts/ advisors/ experts/

market intermediary until convinced

• Do not take trading decisions based on reports/ predictions made in various print and
electronic mediums without proper evaluation.

• Do not deal based on Bull/Bear run of commodity markets sentiments.

• Do not trade on any product without knowing the risks associated with it.

91
 CONCLUSION
India is one of the top producers of a large number of commodities and also has a
long history of trading in commodity and related derivatives. The market has made
enormous progress in terms of technology, Transparency and trading activity.
Interestingly this have happen only after the govt protection was removed from the
number of commodity and market forces were allowed to play their role. This should
act as a major lesson for the policy makers in developing countries that pricing and
price risk management should be left to the market forces rather than try to achieve
these through administered price mechanisms. The management of price risk is going
to assume even greater importance in future with the promotion of free trade. In short
I want to say that, today the commodity market not only limited to the particular
country but it also spread across the world.

 India is the second largest market in the world after the China.

 In commodity market, there is no delivery based market activity. Only the

contracts are taking place.

 Large traders (e.g. MNC’s) maintain large stock of the quantity and play
speculation in the market.

 The “Holding Capacity” of participating traders is very strong.

 General people and framers are not that much aware about the commodity
market, so the speculators and the gamblers are taking the advantage of
commodity market.

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 BIBLIOGRAPHY
Journals &Articles
(1) Jangaih Paladi and c.Anitha raman,commodity market_ A
relook ,in icfai reader.

Books
(1) Financial Claims & Derivatives -by David N King.
(2) Futures & Options -by Franklin R Edward.

Websites
(1) Market data is available from the URL
http://www.mcxindia.com/market/date wise

(2) Company data available from the URL

http://www.ise.com/webform/view page

93