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A STUDY OF INVESTORS PERCEPTION TOWARDS COMMODITY MARKET AT

FORTUNE INTIME EQUITIES Pvt.Ltd,MYSURU

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CHAPTER-1

INTRODUCTION

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INTRODUCTION ABOUT TOPIC:
Commodity markets in India play a significant role for countries economic distribution
and its linkages with financial sector. Commodity market helps the investor to provide efficient
portfolio management which is arising from diversification benefits, which helps the investor to
get proper returns on domestic as well as international market.

Commodity is nothing but a product that has a commercial value. It can be produced,
bought and consumed. Commodities are basically products mainly concern towards primary
sector of an economy, primary sector of an economy mainly concern with agriculture and
extraction of raw materials such metals such as (natural gas, crude oil). This metals considers as
basic inputs to secondary sector of an economy. Derivatives contract were offered an various
agricultural products like, raw jute and jute goods, sugar, potatoes and onions, coffee and tea,
rubber and spices etc. Derivatives trading first started to protect the formers to control the price
fluctuation and cost price of the product.

A market were commodities are traded is known as commodity market. These

commodities includes various types of commodities like, bullion (gold and silver), non-ferrous
(base) metals like, (Zinc, nickel, lead, tin, copper, aluminum), energy like (natural gas and crude
oil) and agricultural commodities like, (rice, wheat, coffee, cotton, soya oil, palm oil etc. These
are the agricultural commodities which helps the commodity market for the growth of economic
condition of country

The commodity market referred to today pertains, to the derivatives markets in the country by
dealing with various commodities which are dealt with on exchange. A commodity exchange is a
place were different kinds of derivatives and commodities are bought and sold, At present there
are 4 national level commodity exchanges and 22 regional commodity exchanges in India. The
national level exchanges agencies like NCDEX, MCX, NMCE, and ICEX. In India there around
26 commodities exchanges which carry future exchange operations and it deals with around 146
different kinds of commodities items.

Indian commodity market is regulated by Indians independence the forward contracts

regulation act of 1952.As the developing country like India among two third of one billion
population mainly depends on agriculture. Due to which there are more number of investor are

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investing in commodity market and it become a global hub to invest in commodity derivatives
which also overtake the market for stock derivatives.

Commodity market is segmented into two types like, hard commodities and soft commodities,
hard commodities is nothing but which related to natural resources and the soft commodities
deals with agricultural products. The investor or spectators can prefer these two types of
commodities in tend to invest which give them maximum returns by reducing the risk.

TOPIC CHOOSEN FOR THE STUDY:

A STUDY ON INVESTORS PERCEPTION TOWARDS COMMODITY MARKET AT
FORTUNE INTIME EQUITY Pvt. Ltd, MYSURU

LITRATUREREVIEW:

Henric and Stephan (2009) "Study on people's speculator conduct on thing market" expresses
that the cross-sectional heterogeneity is the key measure of venture conduct into hereditary and
ecological impacts. They found that up to 45% of the divergence in money markets commitment,
resource circulation, and portfolio hazard decision, past execution of their own portfolio and
stockbroker proposal to give some examples.

Agnihotri and Sharma (2011) In "Investigation of meeting of stain and future cost in product
market (with reference to Zeera, Channa, Zink and Natural Gas for 2005-2010)" explored the
ware spot costs have merged with future business sector with a perspective to gauge the meeting.

Meenakshi Malhotra (2012) in his examination paper "product subordinate business sector in
India: The street travel challenges ahead" inspect that the ware cost exceptionally basic for the
presence and development of any industry and for the economy in general. The administration of
India has purchased about clearing changes in the product advertise so industry can effectively
deal with the value hazard which they are face with. They found that ware cost will keep on
behaving capriciously. Hazard administration through ware subsidiaries will offered solidness to
the financial movement of the nation.

Logasakthi and Asokkumar (2012) in his study title "A study on speculator's attention to
merchandise market with reference to KIFS securities private restricted at Salem" examined the

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made to discover the financial specialists learning towards product market. The study castigates
that merchandise business sector is the business sector stage in Salem. they found that venture
roads of individual financial specialists depends mostly on yearly wage and hazard taking limit.

Ravi (2013) In his exploration paper "value revelation and unpredictability overflow in Indian
thing prospects market utilizing chose wares "examined the consequences of the examination
study show the future business sector of the items is more productive when contrasted with spot
market. The future market additionally spots market during the time spent value disclosure. They
found that subsidiaries instruments are accessible for subordinate products altogether impact the
instability.

Bansl, Varsha and Ahmed (2014) in his study title "Indian thing showcase An execution audit"
explored that Indian thing markets have as of late tossed open another boulevard for retail
financial specialist and merchants to take an interest product subordinates. The study examine
the advancement and execution of the business sector its present status and the future plan and
they discovered diverse wares like farming, metals , Bullion , Energy and others demonstrate a
positive pattern in their volume and estimation of exchange. The rate offer of agribusiness thing
in all out ware market has been decrease in the year 2011 and 2012 yet bullion demonstrates an
expanding pattern alongside metals and vitality. Everything demonstrates that market has solid
development potential.

STATEMENT OF THE PROBLEM:

The commodity market in India has play a dominant role in order to improve the
economy as well as development of countries performance by the help of this market country is
gain the revenue this automatically leads to development of countries financial strength. The
important factor is dicessions of the investors, different investors have difference of opinions and
perceptions while investing in commodity market. On the basis of that it makes greater impact on
market fluctuations, so it include many factors like micro and macro economical factors by these
types of factors leads to change the investors decisions and perception in investing in various
investing plans. There are many studies and research is done on to know the behavior of
investors towards equity market, like derivative market the researcher try to knows the investors

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perception towards commodity maket.The present research try to bridges or fill the gap in this
direction.

NEED FOR THE STUDY:

The main motive behind this study to know the investors perceptions towards commodity
market. The study is mainly focuses on different investors characteristics or opinions while
investing towards commodity market, and it also concentrate on whether they are satisfying with
returns as well service which is provided by there broker and in derivatives there are different
guids are there to help the investors to select the segment which give them maximum returns on
there investment.

The study help to identify the various factors which contributing to the investors
perception towards commodity market by the help of this study we can analyes the present and
future investors to change there behavior towards this market. The research help to market
broker as well as financial planner to know the pulse of the investors in these area. This study not
only help the investors, but it also for brokers and financial planners.

SCOPE OF THE STUDY:

The present study aims at analyzing the investment behavior of individual investors with
special reference to Mysore city. Hence scope of the study confined to perception, preferences
and behavior of small and household investors of Mysore city.

OBJECTIVE OF THE STUDY:

The following are the major objectives of the study:

To study the origin, growth and trends in derivatives market in India.

To measure the awareness, perception of investors towards commodity derivatives.
To ascertain the factors influencing the investors for investing in commodity market.
To examine the problems that would rise while investing in commodity market.
To offer suggestions in the light of the study.

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METHODOLOGY OF THE STUDY:
The present study is based on both primary and secondary data. However, the secondary
data is also made used at some places for the study. The primary data is collected through a
structured schedule. The relevant secondary data is gathered from the reports, books, journal,
periodicals, magazines and websites.

SAMPLING DESIGN:
As the universe of the study is on the investors of commodity trading companies who are
operating in Mysore city companies like www.nseindia.com , www.sebi.co.in,
www.derivativesindia.com have been listed in websites of SEBI. Based on convenience random
sampling respondents were selected.

TOOLS FOR ANALYSIS:

1. Graphical representation
2. Pie chart

SOURCES OF DATA COLLECTION:

Primary data has been use to carry out the research. The secondary data has been
collected from NDEX and MCX. For the purpose of gathering primary data a structure and
questionnaire was designed to collect the data from the derivatives investor.

LIMITATIONS OF THE STUDY:

The study of project is limited to only Mysore city.

The findings purely based on the information provided by the respondent and there is a
possibility of biased.
The duration of the study is only2 months.

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 The study is not based on the international perspective of commodity markets. It is
restricted to national level only.
The study is limited to 100 samples only

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CHAPTER-2

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INDUSTRY PROFILE AND COMPANY PROFILE

INDUSTRY PROFILE

EVOLUTION

Indian Stock Markets are one of the most seasoned securities exchange in Asia. Its history goes
back to two hundred years prior. The most punctual records of security dealings in India are dark
and small. By 1830's business on corporate stock Cotton Presses and partakes in Bank occurred
in Bombay. Despite the fact that the exchanging rundown was more extensive in 1839, there
were just (six) about six dealers perceived by banks and traders amid 1840 and 1850. 1850 saw a
quick improvement of business venture and financier business pulled in numerous men into the
field and by 1860 the quantity of dealers expanded to 60. In 1860-61 the American Civil War
broke out cotton supply from United States of Europe was halted; subsequently the 'Offer Mania'
started in India .accordingly the quantity of dealers expanded to around 25% i.e.(200 to 250). Be
that as it may, toward the end of the American Civil War, in 1865, a terrible droop started, the
dealers who flourished out of Civil War in 1874, found a spot in a road (now suitably called as
Dallal Street) where they would helpfully gather and execute business. In 1887, merchants
formally settled in Bombay, the "Local Share and Stock Broker's Association" (which is on the
other hand known as 'The Stock Exchange'). In 1895, (Native share and stock Broker's
Association) the Stock Exchange obtained a reason in the same road and it was initiated in 1899.
Accordingly, the Stock Exchange was combined at Bombay. Step by step with the progression of
time quantities of trades were expanded and at as of now it came to the figure of 23 stock trades.

STOCK MARKET IN INDIA

The Indian Equity Market is all the more prominently known as the Indian Stock Market.
The Indian value market turned into the third greatest after China and Hong Kong in the Asian
area. As per the most recent report by Asian Development Bank (ADB), it has a business sector
capitalisation of almost $600 billion. As of March 2009, the business sector capitalisation was
around $598.3 billon which is one-tenth of the joined valuation of the Asian locale. The business
sector was moderate following mid 2007 and proceeded till the main quarter of 2009.

STOCK EXCHANGE

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Stock trade is a managed and composed money related business sector where (securities, notes,
shares) are purchased and sold at a value represented by the strengths f request and supply.

THE ROLE OF STOCK EXCHANGES

Stock trade plays a noteworthy and numerous parts in the nation's economy. The pretended by
trade incorporates the accompanying:

RAISING CAPITAL FOR COMPANIES/BUSINESS: The Stock Exchange furnishes

organizations with the office to raise capital for extension through offering shares to the
contributing open.

FACILITATING COMPANY GROWTH: A takeover offer or a merger assention through the

share trading system is one of the least complex and most regular routes for an organization to
develop by securing or combination.

CREATING INVESTMENT OPPORTUNITIES FOR SMALL INVESTORS: rather than

different organizations that require colossal capital, putting resources into shares is interested in
both the vast and little stock financial specialists in light of the fact that a man can purchase the
quantity of shares they like. Thusly different open doors are given by stock trade to retail/little
speculators to possess shares of the same organizations as substantial financial specialists.

BAROMETER OF THE ECONOMY: At the Stock Exchange, offer costs fall and rise depending
to a great extent on business sector powers. Offer costs have a tendency to stay stable or rise
when organizations and the economy all in all hint at development and solidness. A monetary
discouragement, subsidence, or money related emergency could in the end lead to a securities
exchange crash. Subsequently when all is said in done the development of offer costs of the
stock files can be marker of the general pattern in the economy.

SPECULATION: The stock trades are additionally stylish spots for hypothesis. In a money
related connection the expression "hypothesis" and "speculation" are quite particular. For
example, in spite of the fact that "venture" is utilized, in a general sense, putting cash in a
monetary vehicle with the purpose of delivering returns over a timeframe, the vast majority of
the cash incorporating stores put on the planet's securities exchanges is really not venture but
rather theory.

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Improvement

An early occasion in the improvement of the stock exchange in India was the development of the
Native Share and Stock Broker's Association at Bombay in 1875. This was trailed by the
development of affiliations/trades in Ahmadabad (1894), Calcutta (1908), and Madras (1937).

The focal government presented an enactment called the Securities Contracts Act, 1956. As of
January 2002 there were 23 stock trades perceived by the focal government they are:

Bangalore stock exchange. National stock trade.

Mumbai (Bombay) stock exchange. Calcutta (Kolkata) stock trade.
Ahmadabad stock exchange. Bhubaneswar stock trade
Guwahati stock exchange. Hyderabad stock trade.
Delhi stock exchange. Madras stock trade.
Jaipur stock exchange. Ludhiana stock trade.
Cochin stock exchange. Coimbatore stock trade.
Madhya Pradesh stock exchange. Magadha stock trade.
Mangalore stock exchange. Meerut stock trade.
Saurashtra Kutch stock trade. Pune stock trade.
OTC stock trade of India.

Till later past, floor exchanging occurred in all the stock trades. In floor exchanging framework,
the exchange happens through clamor framework amid the official exchanging hours.
Exchanging are appointed for various securities where offer and purchase exercises were
exchanged. This framework requires an up close and personal contact among the (merchant)
dealers and confines the exchanging volume.

The rate of the new data considered the costs was somewhat moderate moving. The framework
supported the agents as opposed to the speculators and the arrangements were additionally not
straightforward.

Bombay stock trade (BSE) presented the screen based exchanging framework in 1995, which is
known as BOLT (Bombay On-line Trading System).

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BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange is famously known as "BSE" was set up in 1875 as The
Native Share and Stock Brokers Association and is the most seasoned trade in Asia which is
more established than the Tokyo Stock Exchange, which was built up and upheld in 1878. It is
one of the intentional non-benefit making Association and is presently occupied with the
procedure of changing over itself into corporate substance. It has advanced over numerous years
into its present status as the head Stock Exchange in India. Under the Securities Contract Act of
1956, It is the main stock trade in the nation to have acquired perpetual acknowledgment in 1956
from the administration of India.

The Exchange, while giving straightforwardness and effectiveness in the business sector for
exchanging subordinates, securities, and obligation maintains the premiums of the financial
specialists and guarantees redressal of their grievances whether against its own part merchants or
organizations. It likewise endeavors to edify and teach the financial specialists by making
accessible to them essential useful inputs and directing speculator instruction program

In the zenith Governing Board there are 20 executives, which chooses the guidelines and
arrangements and directs the issues of the Exchange. The peak Governing Board additionally
comprises of 9 chose chiefs, who are from the broking group (33% of them resign each year by
turn), three SEBI chosen people are, six Public Representatives and an executive and CEO and a
Chief Operating Officer.

NATIONAL STOCK EXCHANGE (NSE)

NSE was fused in 1992 and was perceived as a stock trade in April 1993 and began its
operations in the year 1994 with exchanging on the Wholesale Debt Market Segment. Along
these lines in June 1994 it dispatched the Capital Market Segment as an exchanging stage for
values and in the year 2000 it additionally began the Futures and Options Segment for different
subsidiary instruments. The innovation has been saddled with the expect to convey the
administrations to the speculators the nation over at the least expensive conceivable expense. It
gives a screen-based, across the country, computerized exchanging framework, with a high level
of equivalent access and straightforwardness to financial specialists independent of land area.

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These securities include:

i. Shares, stocks, scrip, securities, debenture stocks or other attractive securities of like
nature of any joined organization or other body corporate;

ii. Government securities;

iii. Rights or enthusiasm for securities.

Organization PROFILE

ABOUT THE COMPANY

Fortune financial administrations (India) confined was joined inside of the year 1991, by Mr. J. T
Poonja, executive and man. Nimish c Shah, voice director and administrator, Fortune bunch that
contains of organization Fortune money related administrations (India) confined and its inside
and out close by backups is occupied with giving an assortment of financial administrations
right from values and subordinates mercantilism, value investigation products mercantilism,
portfolio administration dispersion of shared assets, IPOs and protection stock and moreover
speculation managing an account administrations.

The principal activities of the corporate are led through Fortune money related administrations
that is also the organization and it's inside and out close by backups. A short snap of the
considerable number of organizations exercises characterize as underneath.

M/S Fortune money related administrations (India) confined, is recorded on the city securities
market limited, and is SEBI enrolled class .1 average financier, it's as of late got approval from
SEBI to dispatch its portfolio administration administrations (PMS), FESIL has four business
verticals like, Fortune value broker (India) confined, Fortune wares and subsidiaries (India)
limited, Fortune credit capital limited and Fortune fiscal Asian nation protection specialists
confined.

M/S Intime values constrained.

M/S, Intime values constrained is 100 percent auxiliary of M/S Fortune fiscal administration
(India) ltd it offers broking administration inside of the cash and future and decision portions of

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the national securities business sector of Asian nation confined creature illness limited it's
likewise store member of focal store administration confined

M/S intime multi exchange products organization ltd. is backup of M/S. Fortune financial
administrations ltd., connected with inside of the matter of products broking. It's having
participations with the MCX and NCDEX 2 driving Indian items trade.

M/S Fortune credit capital ltd. Fortune credit capital confined is 100 percent backup of M/S.
Fortune financial administrations ltd., it's molded for the point of subsidizing aura to the
customer, the corporate has gotten permit from run batted in for NBFC operations.

ITI Investment informatory ltd., is 100 percent backup of Fortune administration (India) confined
and formed for the plan of giving protection informatory and diverse associated administrations.

PROFILE OF THE COMPANY

Name of the company: Fortune Intime Equity ltd.

Year of Establishment: 1991

Headquarter: Elphinstone Road, Bombay - four hundred 013

Nature of Business: Fortune Intime Equity restricted primarily into retail broking, and
shopper monetary Services

Website: E-portal named computer network. ffsil.com

Slogan: With tomorrows leaders.

Logo:

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VISION OF THE FIRM:

Vision of the firm is to supply best worth of cash to investors and purchasers through innovative
merchandise, investment strategies/ mercantilism, web site of the art information and client
created service.

MISSION OF THE FIRM

To be the best contestant among the exchange terms of service innovation, shopper support,
market understanding by creating happy investors.

Product and Services:

Stock broking

Currency commerce.

Online commerce.

Wealth consulted services.

Mutual Funds distributions.

Commodities Broking.

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 DP Services.

Insurance consulted.

SWOT ANALYSIS

Strength

Innovative scope of monetary merchandise

Known for clear and simple functioning

Innovative I. T solutions for purchasers and customers

Emphasis on building stronger bond with purchasers and customers

Services offered incorporating Commodities, Equity mercantilism, Portfolio Management

Services, IPO, deposit Services, Mutual Funds, life assurance, and Investment informatory.

Weakness

Less penetration in rural vary

Indians ar typically conservative and incline investment in Gold and land

Opportunity

High shopping for power and individual trying to a lot of investment opportunities

Growing rustic/ rural market

Earning Urban Youth

Threats

Entry of foreign companies in Indian marketplace for investment

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Competitors:

Share khans.

Karvy stock broking.

Angel broking.

Indian information line.

Share wealth.

Share wealth traders.

Mothilaloswal.

Reliance shares and stocks.

FUTURE PROSPECTS

Increasing client

Increasing general turnover

Improving brand

Maximum client loyalty

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Introduction to Derivatives

The derivatives is became famous for the reasons it high volatility in the capital market
and same as foreign exchange market. Derivatives are mainly used to minimize the risk of
investors in stock market and for many purposes like speculation. Derivatives are showcasing
every aspects of finance like how much investment to be made, what extent the capital to raise
end the same time how well manages the risk associated with investors. In which it have new
products and new techniques are developed in both domestic as well as foreign financial markets
hence it is necessary to study and it have an significant impact.

Derivatives Defined
Derivatives is nothing but an product which the value derived from one or more critical
variables, called bases (Index or underlying assets) in a differential mode. The underlying assets
can be Commodities, equities, Forex or any former assets. For an example : The wheat farmers
may have desire to trade in future date in order to reduce the level of risk and at the same time
future uncertainty due to change in the value by the date. The derivatives determined by the spot
price of the wheat which is underlying under commodities.

Products, Participants and Functions

Derivative contracts have several variants. The most common variants are forwards, futures,
options and swaps. The following three broad categories of participants - hedgers, speculators,
and arbitrageurs trade in the derivatives market. Hedgers face risk associated with the price of
an asset. They use futures or options markets to reduce or eliminate this risk. Speculators wish
to bet on future movements in the price of an asset. Futures and options contracts can give them
an extra leverage; that is, they can increase both the potential gains and potential losses in a
speculative venture. Arbitrageurs are in business to take advantage of a discrepancy between
prices in two different markets. If, for example, they see the futures price of an asset getting
out of line with the cash price, they will take offsetting positions in the two markets to lock in a
profit.

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FACTORS FORCING THE GROWTH OF DERIVATIVES
Over the three decade the derivative market shows tremendous increment throughout the world.
Contract of derivatives has been launch across the world, there are various factors forcing the
growth of derivatives which can be shown bellow.
Improvement cooperation as well as integration of local financial markets with that of
international markets.
Increase the volatility in asset value in financial markets.
Act as a important tool for risk management and provide to economy a wider range or
variety of risk management.
Derivatives help in reducing the risk burden of investors as well guide them to invest in
different derivatives so which they can get maximum retuns with minimize the risk as
well as transaction cost to a individual financial assets
To enlarge savings and investments in long periods of time.

INDIAN COMMODITY MARKET

Commodities market is emerging market by the total value of commodities futures traded in
India in the financial year 2011-12 was Rs.181.3 trillion. Commodity futures trading started in
India on April 1, 2003 with an amount of trade of Rs1.3 trillion in the financial year 2003-0417.
The trade volume has increased almost 180% from the year 2003 to 2012. This growth was
triggered by the trading activity in bullion and agricultural commodities. Bullion grew up in
volume of 85% over the year 2011, while agriculture commodities and the energy commodities
recorded a year-on-year increase of 51% and 23 % respectively. Indian commodity exchanges
have not only provided a room for better price discovery and price risk management but also
have helped the farmers/producers in enhanced choice of crop/produce. It has helped framers
make decision to store or sell in the market or making better storage decisions.
Commodity Forward Market
Commodity exchanging forward business sector existed in old times as it is said in
Kautilya'sArthashastra; which was composed 2500 years prior. Bombay Cotton Trade
Association was built up in 1875 for exchanging cotton in India and is thought to be the world's
second and India's most seasoned sorted out merchandise prospects trade. Prospects exchanging
oilseeds in 1900 began at "Gujarati VyapariMandali", and crude jute and jute products fates

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started exchanging Calcutta with the foundation of the "Calcutta Hessian Exchange Ltd"., in
1919. Fates market in bullion started at Mumbai in 1920. At the appropriate time, a few different
trades were likewise made in the nation to exchange such assorted things as pepper, turmeric,
potato, sugar and gur (jaggery). Around the same time the Government of Bombay, passed the
Bombay Contract Control (War Provision) Act and set up.

the Cotton Contracts Board. Number of local trades were framed amid the time of first and
second world war at different areas like MuzaffarnagarChandausi, Meerut, Saharanpur, Hathras,
Ghaziabad, Sikenderabad and Barielly in U.P, Amritsar, Moga, Ludhiana, Jalandhar, Fazilka,
Dhuri, Barnala and Bhatinda in Punjab and Jamnagar, Delhi, Calcutta, Rajkot and Mumbai to
exchange different products like cotton, jute, crude jute, jute merchandise, groundnut, groundnut
oil, castor seed, wheat, rice, sugar and gold and silver. By the year 1930 there were more than
300 trades managing in various wares. Tremendous development was knowledgeable about
Indian thing fates market amid the first and Second World War. There were concerns like: the
greater part of the trades were regionalized or confined. Exchanging was directed both in choices
and prospects however absence of a focal controller incapacitated the framework. There were
issues in clearing and settlement arrangement of the trade.

Restricted Trade
After autonomy, the Constitution of India brought the subject of "Stock Exchanges and Futures
markets" in the Union rundown or the focal rundown and thus decreased the part of states.
Therefore, the obligation regarding regulation of item prospects markets was lapsed on the
Government of India. With a specific end goal to manage the fates market in India, the
Government of India had passed a bill on the premise of the report put together by Shroff
council, and in December 1952, the Forward Contracts (Regulation) Act, 1952, was instituted.

Fates and also forward exchanging the things got to be idle amid the seventies because of either
suspension or preclusion of enrolled affiliations. Reintroduction of future exchanging was
suggested by the Khusro Committee (June 1980)18. With the presentation of financial changes,
one more board was setup under the Chairmanship of Prof. K.N. Kabra. The Committee
prescribed that prospects exchanging be presented in nine products like basmati rice, cotton and
kapas, crude jute and jute merchandise and silver to give some examples. The board of trustees

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likewise suggested that a percentage of the current item trades might be moved up to the level of
universal prospects markets.

The National Agricultural Policy in 2000 imagined the evacuation of value control in
horticultural market and promoted the utilization of prospects contracts for supporting. Setting
up of the across the country Multi thing trade, Central warehousing company and presentation of
guaranteed Warehouse Receipts (WRs) frameworks will help in diminishing amount and value
hazards that are available in merchandise fates. An arrangement of confirmed WRs can
contribute towards diminishing the working capital necessities of both agriculturists and dealers
by WRs financing through banks.

For enhancing the wage of the ranchers through ware prospects market, Federation of Indian
Chamber of Commerce and Industries (FICCI) has proposed to the administration, the annulment
of Essential Commodities Act, Mandi Tax and APMC Act (Agricultural Marketing Produce
Committee Act) with the expectation of complimentary development of rural products crosswise
over states, and to diminish data costs

Liberalized Market
After autonomy, the Constitution of India brought the subject of "Stock Exchanges and Futures
markets" in the Union rundown or the focal rundown and thus decreased the part of states.
Therefore, the obligation regarding regulation of item prospects markets was lapsed on the
Government of India. With a specific end goal to manage the fates market in India, the
Government of India had passed a bill

on the premise of the report put together by Shroff council, and in December 1952, the Forward
Contracts (Regulation) Act, 1952, was instituted. Fates and also forward exchanging the things
got to be idle amid the seventies because of either suspension or preclusion of enrolled
affiliations. Reintroduction of future exchanging was suggested by the Khusro Committee (June
1980)18. With the presentation of financial changes, one more board was setup under the
Chairmanship of Prof. K.N. Kabra. The Committee prescribed that prospects exchanging be
presented in nine products like basmati rice, cotton and kapas, crude jute and jute merchandise
and silver to give some examples. The board of trustees likewise suggested that a percentage of
the current item trades might be moved up to the level of universal prospects markets.

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The National Agricultural Policy in 2000 imagined the evacuation of value control in
horticultural market and promoted the utilization of prospects contracts for supporting. Setting
up of the across the country Multi thing trade, Central warehousing company and presentation of
guaranteed Warehouse Receipts (WRs) frameworks will help in diminishing amount and value
hazards that are available in merchandise fates. An arrangement of confirmed WRs can
contribute towards diminishing the working capital necessities of both agriculturists and dealers
by WRs financing through banks.

For enhancing the wage of the ranchers through ware prospects market, Federation of Indian
Chamber of Commerce and Industries (FICCI) has proposed to the administration, the annulment
of Essential Commodities Act, Mandi Tax and APMC Act (Agricultural Marketing Produce
Committee Act) with the expectation of complimentary development of rural products crosswise
over states, and to diminish data costs

Indian Agricultural sector

Indian agriculture sector offers promising future on both the demand and supply frond. India is a
country with large population 1.22 billion people and the demand for commodity will naturally
come from the size of population. India is located in such a position that it has access to Middle
East and Southeast Asia (Asias best trade centers) hence supply/import is relatively simple. One
if the main concern is commercialization of agriculture is how to improve productivity,
streamline supply chain, improve price discovery. There is lot of restrictions in free movement of
agriculture goods across states, in marketing of goods outside the regulated market etc. There
exist fragments of small farming lands which escalate the cost of production because of lack of
economies of scale. Decreasing natural resources and uncertainties of the monsoon and over
dependence on rainfall is yet another concern.

Commodity Spot Markets

Spot market trade or physical market trade take place in two different ways one is through
Mandisthe local market or through online exchanges. The spot market trades in various states are
regulated by Agricultural Produce Marketing Committee (APMC). The role of APMC is to
regulate the buying and selling of agricultural produce 24 and this regulatory agency comes
under the Agricultural Produce Marketing (Regulation) Act (APMC Act). Regulation of most of

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the wholesale commodity market and rural primary commodity markets comes under this APMC
Act. This committee is allowed to collect a fee form the traders of commodity as prescribed by
the APMC Act. One of the main problems with agricultural commodity market is the need for
the free movement of agricultural produce. Single window fee clearance is only solution left for
fee movement form sate to sate for better price for farmer and end customers.25 One of the
recommendations of Inter-Ministerial Group (IMG) (2011) on curbing inflation and food prices
was restructuring of APMC Acts to support supply-chain efficiency.
Under the governance of Agricultural Produce Marketing Committee (APMC) there are
regulated markets 7557 in number each market is regulated market and will have a
approximately population of 1, 35,000 therefore can imagine the influence this committee can
make to the Indian development.26 Barrier-free countrywide commodity market and sincere
efforts to encourage public private partnership is the key for improvement in agricultural sector.

MANDIS
The Ministry of Agriculture classifies commodities into two principle commodities and non-
principal commodities. This categorization is based on the basis of total cropped area in the
country occupied by cultivation of the commodity. Rice is the largest principle commodity with
50% area under cultivation other principle crop includes wheat, pulses, oilseeds, sugarcane and
cotton.
Mandis27 play a very important role in Indian commodity markets price discovery. Mandis are
set up only with the permission of state government. State Agriculture Marketing Board (SAMB)
sets up Mandi Board that looks into the setting up of new mandis. Mandi Inspector inspects the
quality and quantity of the crop, the seller/farmer is given a certificate of the type and quantity of
the produce. Each mandi usually trades on single primary commodity which is produced in the
locality. With the quality certificate the framers has a free access to other mandis in the district to
get the best price. Mandi board of various districts takes the responsibility of collecting all
information on prices from different mandis and reports to Ministry of Agriculture. It is ensured
that the spot market prices are available to the public for every trade day via daily news papers,
bulletins and prices are displayed on the website www.agmarknet.nic.in. In spite of this,
collecting real time data for research is a difficult task. National commodity and derivatives
exchange (NCDEX) ventured into this online real time tracking of spot commodity prices based

25
on the polling process, similar to the concept of spot price polling of London Interbank Offer
Rate (LIBOR) and Mumbai Interbank Offer Rate (MIBOR). Spot prices of various commodities
collected from the key mandis across the country are cleaned by a process called boot strapping
to arrive at a price that represent the prices of various mandis across the country.

Spot Market Exchanges

National Commodity & Derivative Exchange Ltd. (NCDEX) powered commodity Spot
Exchange NCDEX Spot Exchange is online spot exchange which allows delivery based
commodity trade, across India a spot market for agriculture and non-agriculture commodities.
This spot exchange will facilitate framers to trade and take delivery. One of the advantages of
this kind of exchange is farmers will come to know the best possible price available in market
without the help of middleman. Spot commodity exchange was established on October, 18 2006.
For the non-agricultural producers users of commodities this spot exchange bring in access to
real time data, better business transaction, and reduction of raw material cost or input cost
.Ministry of Consumer Affairs have extended the role of Forward Market Commission to
regulate all online spot exchange, but in the near future we may see one more regulator for these
spot exchanges. Having an integrated, organized regulator looking after both the physical
commodity trade an online commodity trade is very important for the market development.
National Spot Exchange Limited (NSEL) is the national level online spot exchange commenced
its operation on October 15, 2008. It is considered to be the largest online spot exchange having
a market share of 99% 29 .NSEL deals with 52 commodities across 16 states in India. They have
come out with NSEL's e-Series. This is an e-product required to have compulsory demat
account, the contracts include e-gold, e-silver, e-copper etc. which have bought in lot of interest
in the retail investor in online commodity spot trading. E-series facilitate investors to buy and
sell commodities just like in equity market and make cash settlement within T+2 days. This
exchange also takes care of the procurement requirement of the buyers and enters into
procurement agreement for charge of 2%. NSEL owns warehouses for facilitating better
infrastructure for commodity trade and also helps in warehouse receipt funding30. 29
http://www.nationalspotexchange.com 30 Warehouse Reliance Spot Exchange is a business to
business spot exchange started its operation in 2009 with metal commodities and started the

26
bullion trade in 2011. This exchange is part of Reliance Capital and intends to get multi
commodity spot trade status by introducing more commodities to its basket.

National Spot Exchange Ltd. Scam: Need for refinement in regulations

There was an estimated Rs.550031 cr. Default of money by the National Spot Exchange Limited
(NSEL) to its investors .NSEL is a prominent spot exchange in India promoted by Financial
Technologies (FT) and National Agricultural Cooperative Marketing Federation of India
(NAFED) .The scam came to lime light in July 2013 the main reason for the scam was that the
transactions on this exchange were done on paper that is there was no underling commodities in
the warehouse receipts. The contract included steel, sugar paddy and ferrochrome to name a few.
The electronic warehouse receipt was not verified correctly to the extent that commodities did
not exist in the warehouses. There were irregularities in the operation of the exchange as they
facilitated financing of these fake receipts.
Scam gets created by making use of the loopholes in the regulatory environment. In NSEL case
the Forward Contracts (Regulation) Act (FC(R) A), 1952 clause 27.Sopt exchanges / electronic
mandis is one which physical delivery takes place within T+2 days .Under Forward Contracts
(Regulation) Act any contract that is settled in T+11 day that is the transaction date and eleven
days were considered as spot transaction and would not come under the definition of forward
trade .Due to this reason spot exchange transaction did not come under the preview of Forward
Market Commission (FMC) and Department of Consumer Affairs were the regulator. Since there
were no securities involved it did not come under the governance of Securities Exchange Board
of India (SEBI). Since there was no direct lending and borrowing undertaken by the exchange it
did not come under the regulation of (RBI).
The exchange encouraged paired trade , the investors was motivated to take up this
arrangement because of the huge margin (almost 15% p.a. and broker would get 3% on the same
transaction).This paired trade had a parallel relation to the financing program badla financing
.Most of the investors where business houses and it was easier to get loan through the spot
exchange form the bank by collateralizing stock of commodities. This was going on for more
than a year in July 16th the T+25 financing period was reduced to T+10 investors did not receive
this change well and stopped rolling over to next contract. The borrowers did not payback the
cash and exchange and financers could not collect the money back by selling the recovered

27
commodities as the warehouses did not possess the stock. There were almost 15000 unsettled
traders, initial attempt of payment with a 30 week settlement chart in September 2013 failed.
Department of Consumer Affairs under Ministry of Consumer Affairs37 indistinctly regulates
commodities spot exchange. This abnormality was discovered in April 2012 and show cause
notice was issued by the ministry to the NSEL but it was kept under deep freezer and gave room
for more defaults by the exchange until it came out as a big scam worth millions and no absolute
person to pay the defaulters money.
The persons who profited from the scam include high net worth individuals (HNI) who operated
the warehouses, the brokers, the promoters and management who was the chief architect of the
scam. Three senior executives of the exchange and two investors were arrested .
Warehouse Receipts (WRs)
Warehouse receipts (WR) are negotiable instrument backed by underlying commodities, this
provide logistic support to the commodity market. Warehousing ensures that there is
uninterrupted supply of commodity in all season.
The need for WR in commodity market
Agriculture is very influential sector in India contributing more than 22 percentage to Gross
Domestic product (GDP), moreover 72% of Indian population is employed in this sector is a fact
that central government cannot dispense with. The central bank of India that is the Reserve Bank
of India (RBI) in their effort to bring in more financial support to farmers is encouraging banks
to lend to farmers though warehouse receipts40. Currently banks41 are not permitted to
participate in commodity trading but this effort of RBI on warehouse financing will bring in
opportunities to banking sector to participate indirectly in commodity market and help in
developing it. The working group set up by RBI on Warehouse Receipts & Commodity Futures
also looked at the possibilities of banks providing innovative commodity derivative based
products to farmers that would facilitate the farmers to hedge their risks as most farmers do have
knowledge in hedging through an exchange. In developed market WR acts as instrument of trade
finance with lesser interest, and transaction cost. WR can be clubbed with other trading strategies
to reduce the margin money. WR facilitates farmers to attain better price for their agriculture
produce.

28
Warehousing Development and Regulatory Authority (WDRA)
Warehousing (Development and Regulation) Act, 2007 looks after the progress and regulation of
warehouses. It also regulates the negotiability of warehouse receipts and upholds systematic
growth of the warehousing/storage. 45 Warehouses acts as a backbone to the infrastructure
development of commodity market. Total available warehousing capacity in India is 108.75
million MTs, all existing facility provided by public, cooperative and private sector put together.

Dematerialization of warehouse receipts

Warehouse receipt in physical form has a lot of limitations as the receipt cannot be separated into
smaller denomination and there can be treating of theft or damage to the instrument. By
dematerialization of warehouse receipts the person depositing commodity will get a direct credit
entry in itsdemat account. The time for the user is reduced drastically as not waiting for the
physical paper copy to arrive, hence transition and settlement time gets reduced. Electronically
networked farmers and consumers will go a long way in doing away with intermediaries or
middleman who usually takes a lion share of the profit. There will be no room for any forgery
and miss-representation and there will be quick access to information.
In United States the WR are similar to a performance bond which is similar to insurance bond47.
The uses of WRs are not for agriculture it is used extensively for bullion market in Dubai.
Dubais Commodity Receipt (DCR) system WRs are negotiable instruments and is
membershipbased available to individuals and business on the background of business history
and financial stability.
Trading and Settlement of Commodity Futures Contract
Trading in commodities futures is just like a trade in equity market, need to choose a broker say
ICICI commtrade with ICICI direct. Then you can initiate the trade by bringing in the margin
money, which you pay to the exchange trough the broker. The margin money ranges between 5
to 10 percentages based on the value of the contract. The minimum fund required to trade for a
retail investor is approximately Rs.5000. Placing the trade is done using the commodity code.
Modern online trading practices standardized commodity futures contracts; makes warehouse
support up to date, introduce clearing arrangement and ensure wide dissemination of daily price
change. Having said that, the complexity of futures contract like large size (10 tonnes contract)
rules out the participation of resources-poor farmers/cultivators. In turn the big institution players

29
and the brokers would indulge in arbitraging activity in the market and the inter market
operations are intense to exploit the price difference. Jeera, guar, chana, soya oil & seed, menthe
oil, masure, Burmese urad and wheat are very popular futures contract in volume of trade but
their weight or contribution to national income is very less. Whereas commodities like castor
seeds, pepper, turmeric, jute cotton commodities have a significant impact. This is due to their
higher contribution to national income and influences the macroeconomic fundamentals 49of the
Indian economy.

Daily Price Limit

By daily price limit we mean when commodity prices, rises (falls) above (below) 4% on the
opening price, the exchange becomes more cautious and a relaxation is allowed up to 6% rise or
fall without cooling off period. If the price rise (fall) beyond 6% a stoppage of trade for 15
minutes is given called as cooling off period to a maximum limit of 9%. In case the international
commodity price rises above 9% the exchange allows the prices to increase by 3% more on a
gradual manner.

Commodity Margin
Margin is the money or equity that a trader in commodity futures has to bring in to transaction in
commodity futures market. It acts as a security at the time of loss in the commodity futures
market. Like the equity market commodity futures trading also have need of initial and
maintenance margin.

Initial margin
An individual trading in commodity exchanges has to bring in an initial margin of 5 percentage
on the contract value or margin based on the trading algorithm SPAN50 whichever margin is
higher. This is a measure taken by the exchange for reducing the default by the counterparty.
This initial margin acts like collateral for the futures buyer to open a position in the market

Maintenance margin
It is the margin you have to maintain with the broker to carry on your trade. That is the minimum
level your trading account can fall it is different among different brokers and you trade with.

30
Additional and/ or Special Margin
Additional margin has to be brought in to the exchange if the investor has to carry forward the
position. So you have additional long margin and additional short margin based on the short or
long position of contract. In case of high volatility a special margin can be called by the
exchange with respect to the outstanding position. 2 formsof special marginspecial long margin
and special short margin. on 25th march 2013 initial margin of 5% and a trader margin of 6% (in
total of 11%) on the contract value was charged for cotton contracts traded in MCX and the
contract would expire on 29th March 2013. A delivery margin of 25% was also charged on
Cotton MCX 51 MCX and the contract would expire on 29th March 2013. A delivery margin of
25% was also charged on Cotton MCX.

Delivery Margin
Traders with open position to buy commodity futures need to inform the exchange that he/she is
interested in squaring off the position by cash settlement or taking a physical delivery within
three days of the expiration of contract. It is an international practice that the delivery center for
commodities can be left to the choice of the seller, provided it is one of the recognised delivery
centers by the exchange. But in the case of buyer he has to go by the given delivery center
mentioned in the contract specification. The delivery margin is collected for both the buyer and
the seller when they intimate exchange that they wish to take physical delivery of commodity.
Taking delivery margin is mainly done to keep the speculators away, form the market at the time
of expiration. In Indian exchanges the delivery margin is kept at 25% on the contract value.
On investors has to ensure the required money is deposited in the clearing and settlement
exchange. The seller has to clear all his warehouse charges on expiration of contract. Both the
parties have to pay sales tax and position will be closed by the exchange of commodity by seller
and payment of money by the buyer.

Commodity transaction tax (CTT)

Commodity transaction tax (CTT) got introduced in 2013 budget, transaction tax of 0.17 percent
on the purchase and sale of commodity derivatives contracts. This was done to bring in a level
playing ground for equity and commodities. Securities transaction tax (STT) was introduced in
2004 and keeps track of the cash flowing into the stock markets and acts as a check on the black

31
money being channeled into the market. Pavaskar and Ghosh (2008) comments CTT will provide
little revenue for the government and at the same time give bitter feeling towards commodity.

Trading with Commodity Futures in Indian Exchanges.

32
 CHAPTER-4

ANALYSIS AND INTERPRETATION

33
Introduction

The study has been taken as a sample survey. The respondent profile is basically the investors
trading in derivative market , who have a bettere knowledge of the market mechanisms and
movement. The survey was conduted through the help of a structured questionnaire. the sample
size has been choosen as around 50, hence the analysis, interpretation and findings are based on
these 50 respondents.

TABLE NO: 4.1 GENDER STATUS

Sl.no. Gender No of respondents Percentage

1 Male 34 68.00
2 Female 16 32.00
3 Total 50 100.00
Source : Field survey

GRAPH NO:4.1 GENDER STATUS

GENDER

32% male

68% female

INTERPRETATION

34
Table No4.1 classifies the respondents on the basis of gender status. 34 respondents i.e 64% are
male and 16 respondent i.e 32% are female.To conclude the study found that the financial
derivatives is dominated by male compared to female.

TABLE NO 4.2: SHOWING AGE STATUS

Sl.no Age No of respondents Percentage

1 Less than 30 25 50.00
2 31-40 21 42.00
3 Above 40 4 8.00
4 Total 50 100.00
Source : Field survey

GRAPH NO. 4.2 SHOWING AGE STATUS

AGE
50%
50%
42%
40%
30%
20%
Column1
10% 8%
0%
Less than 30
31-40
Above 40

INTERPRETATION:

Table No. 4.2 portrays the classification of respondents on the basis of age. Age group is one of
the important parameters to study the awareness, performance and perception ,the above table
reveals that the majority of the respondents i.e., 25 are in the age group that is 50% falls under
less than 30 years, the next highest number of respondents is 21 i.e.,42% which falls under the

35
age category 31 to 40 years and rest are 4 of the respondents i.e., 8% are falls under above 40
years to conclude maximum no. of the respondents belongs to age group of less than 30 years.

TABLE NO 4.3:SHOWING EDUCATION QUALIFICATION STATUS

Sl No Education No of respondents Percentage

1 Up to puc 9 18.00
2 Graduate 28 56.00
3 Post graduate 8 16.00
4 Others 5 10.00
5 Total 50 50.00
Source : Field survey

GRAPH NO.4.3:SHOWING EDUCATION QUALIFICATION STATUS

56%
60%

50%

40%

30% Series 1
18% 16%
20%
10%
10%

0%
Up to puc Graduate Post graduate Others

INTERPRETATION:

Table No. 4.3 represents the classification of respondents based onthere education qualification.
From this table it was found that majority if the respondents are belongs to graduation level
i.e.28 out of 50 i.e 56% and second highest is 9 respondents which belongs to up to puc and 8

36
respondents belongs to post graduation and rest 5 respondents are falls under other qualification.
To conclude majority respondents that are 28 are under graduation level.

TABLE NO. 4.4SHOWING INVESTORS OCCUPATION STATUS.

SL.NO. OCCOUPTION No Of respondents Percentage

1 Self employed 10 20.00
2 Private 13 26.00
3 Others 27 54.00
4 Total 50 100.00
Source: Field survey

GRAPH NO4.4SHOWING INVESTORS OCCUPATION STATUS.

OCCOUPTION

20%

Self employed
54%
26% Private
Others

INTERPRETATION:Accordingto table No 4.4 classified the respondents on the basis of

thereoccupation . 27 of the respondents are belongs to other occupation i.e. 54% and second

37
highest is 13 respondents are unemployed and rest of 10 respondents are in self employed
occupation.

To conclude majority if the investors are 27 of the respondents are belongs to others type of
occupation.

TABLE NO:4.5SHOWING AREA OF DOMICILE:

Sl.no. particulars No. of respondents Percentage

1 Rural 8 16.00
2 Semi-urban 16 32.00
3 urban 26 52.00
4 Total 50 100.00
Source : Field survey

GRAPH NO:4.5SHOWING AREA OF DOMICILE:

16%

Rural

52% Semi-urban
urban
32%

INTERPRETATION:

38
Table No,4.5 found that 26 respondentsi.e. 52% are belongs to urban domicile and 16
respondents are falls under semi urban area i.e. 32% and rest of 8 respondents i.e. 16% will falls
under urban geographical area.

Thus it is obvious from the above table the large no. of investors are from urban area .

TABLE NO 4.6 :SHOWING MARITAL STATUS OF RESPONDENTS

SL.NO PARTICULARS NO. OF PERCENTAGE

RESPONDENTS
1 Married 31 62.00
2 unmarried 19 38.00
3 TOTAL 50 100.00
Source : Field survey

GRAPH NO.4.6SHOWING MARITAL STATUS OF RESPONDENTS

MARITAL STATUS
70%
62%
60%

50%

40% 38%

Series 1
30%

20%

10%

0%
Married unmarried

INTERPRETATION:
39
From the table No4.6 classified respondents on the basis of there marital status it was highlighted
that 62% of the respondents are married and 32% of the respondents are unmarried. So the
maximum no. of respondents are married .to conclude majority respondents that are 31
respondents are married.

TABLE NO 4.7: SHOWING MONTHLY INCOME OF RESPONDENTS

SL.NO Particulars No. Of respondents Percentage

1 Upto 30000 31 62.00
2 31000-50000 5 10.00
3 Above 50000 14 28.00
4 total 50 100.00
Source : Field survey

GRAPH NO4.7 :SHOWINGMONTHLY INCOME OF RESPONDENTS

INCOME

Above 50000 28%

31000-50000 10%
INCOME

Upto 30000 62%

0% 10% 20% 30% 40% 50% 60% 70%

INTERPRETATION:

Table No 4.7 represents the classification of respondents based on their monthly income. From
this table it was found that the majority of the respondents come under the income group up to

40
30000 numbering to 31 out of 50 respondents followed by 14 respondents having monthly
income of31000 to 50000 and the next 14 respondents having income above 50000. The rest 5
respondents fall under 31000 to 50000. Therefore most of the investors are of income group upto
30000 per month.

TABLE NO 4.8: SHOWING TOTAL ANNUAL INVESTMEN STATUS

Sl.no Particulars No of respondents Percentage

1 Upto 50000 39 78.00
2 50000-100000 5 10.00
3 Above 100000 6 12.00
4 Total 50 100.00
Source : Field survey

GRAPH NO 4.8:SHOWING TOTAL ANNUAL INVESTMENT STATUS.

ANNUAL INVESTMENT
78%
80%
70%
60%
50%
Series 1
40%
30%
10% 12%
20%
10%
0%
Upto 50000 50000-100000 Above 100000

INTERPRETATION:

Table No. 4.8 classifies the respondents on the basis of annual investment it can be inferred that
39 respondents i.e. 78% of respondents are made there annual investment up to 50000 than

41
fallowed by 6 of the respondents that is 12% of the respondent are made there annual investment
above 100000 and remaining 5 respondents i.e. 10% made there annual investment above
100000. To conclude the majority of the respondents made there annual investment 50000.

TABLE NO4.9:CUSTOMER PREFERENCE TOWARDS VARIOUS INVESTMENT

PATTERN

SL NO Particulars No of respondents Percentage

1 Fixed deposit 16 32.00
2 Mutual funds 18 36.00
3 Equity share market 10 20.00
4 Commodity market 6 12.00
5 Total 50 100.00
Source: Field survey

GRAPH NO 4.9 CUSTOMER PREFERENCE TOWARDS VARIOUS INVESTMENT

PATTERN

Investment paterns
36%
40% 32%
35%
30%
25% 20%
20% 12% Investment paterns
15%
10%
5%
0%
Fixed Mutual Equity share Commodity
deposit funds market market

42
INTERPRETATION

From the table No 4.9 classifies respondents based on the different investment pattern as risk
management tool. It can be inferred that majority of the investors numbering to 18 i.e 36%
towards mutualfunds. These has followed by 16 respondents i.e 32%prefer fixed deposits, 10
respondents i.e 20% prefer equity shares, and 6 respondents i.e 12% prefer to invest in
commodity market. To conclude majority of investors want to invest in mutual funds.

TABLE NO 4.10: SHOWING RISK ASSOCIATED WITH VARIOUS INVESTMENTS.

Sl No Particulars No of respondents Percentage

1 Fixed deposit 2 4.00
2 Mutual funds 18 36.00
3 Equity share market 12 24.00
4 Commodity market 18 36.00
5 Total 50 100.00
Source: Field survey

GRAPH NO 4.10: SHOWING RISK ASSOCIATED WITH VARIOUS INVESTMENTS.

Series 1

40%
35%
30%
25%
20% Series 1
15%
10%
5%
0%
Fixed deposit Mutual funds Equity share Commodity
market market

43
INTERPRETATION

From the Table No 4.10 classifies respondents based on their preference towards risk
management tool. It can be inferred that for majority of the investors numbering to 18 i.e. 36%
for both mutual fund and commodity market diversification was the first priority to be used as a
risk management tool. This has followed by 12 respondents i.e. 24.00% prefer Equity shares and
2respondents representing i.e. 4% prefer to invest in fixed deposits.To conclude majority of
investors believe that investing in mutual fund and commodity market have high risk.

TABLE NO 4.11:SHOWING TYPE OF INVESTOR

Sl.no particulars No of respondents Percentage

1 Long term 22 44.00
2 Medium term 16 32.00
3 Short term 12 24.00
4 Total 50 100.00
Source: Field survey

GRAPH NO4.11: SHOWING TYPE OF INVESTOR

12

22 Long term
Medium term
Short term

16

INTERPRETATION

Table No found that 22 respondents i.e 44% of the investors are like to invest in long term in
order to get maximum return,16 respondents i.e 32%of the respondents are like to invest in

44
medium term and remaining 12 respondents i.e 24 % investors would like to invest in short term
basis.

To conclude most of the investorspreference is to invest in long term investment to get maximum
return.

TABLE NO 4.12: SHOWINGNUMBER OF YEARS ASSOCIATED WITH CAPITAL

MARKET

Sl.no Particulars No of respondents Percentage

1 Less than 1 year 21 42.00
2 1 -2 year 25 50.00
3 3-5 years 3 6.00
4 More than 5 years 1 2.00
5 Total 50 100.00
Source: Field survey

CHART NO4.12 : SHOWINGNUMBER OF YEARS ASSOCIATED WITH CAPITAL

MARKET

60% 50%
42%
40%

20%
6% Series 1
0%
2%
Less than 1
1 -2 year
year 3-5 years
More than 5
years

INTERPRETATION

45
Table No 4.12 Represents the no of years that the investors associated with capital market. It is
absorbed that 25 i.e 50% of the respondent are associated in capital market from 1 to 2 years, 21
respondents i.e 42% are associated with capital market less than 1 year, 3 respondents i.e 3% are
associated with 3 to 5 years and remaining 1 respondent i.e 2% associated more than 5 years.

To conclude majority of the investors associated with capital market for the period of 1 to 2
years.

TABLE NO 4.13: SHOWING WHAT MAKES INVESTOR TO INVEST IN

COMMODITY MARKET

Sl.no particulars No of respondents Percentage

1 Low risk 7 14.00
2 Low investment 21 42.00
3 High return 14 28.00
4 liquidity 8 16.00
5 Total 50 100.00
Source: Field survey

CHARTNO4.13: SHOWING WHAT MAKES INVESTOR TO INVEST IN

COMMODITY MARKET

50% 42%
40%
28%
30%
14% 16% Series 1
20%

10%

0%
Low risk Low High return liquidity
investment

INTERPRETATION

46
Table No 4.13 classifies the respondents based on theremajor factors to invest in commodity
market. It is absorbed that 21respondents i.e 42% are considered by investing in commodity
market because it has low investment, 14 respondents i.e 28% believed that investing in
commodity market will give the maximum return on their investment,8 respondents i.e 16%
investors believed that by investing in commodity market will have more liquidity, and 7
respondents i.e 14% believes that by investing in commodity market will fetch them low risk.To
conclude that majority of the respondents believes that investing in commodity market at low
investment.

TABLE NO 4.14: SHOWING FREQUENCY IN TRADING IN DERRIVATIVE

MARKET:

Sl.no Particulars No of respondents Percentage

1 Daily 15 30.00
2 Weekly 12 24.00
3 Monthly 16 32.00
4 Occasionally 7 14.00
5 Total 50 100.00
Source: Field survey

GRAPH NO4.14: SHOWING FREQUENCY IN TRADING IN DERRIVATIVE

MARKET:

47
 14%
30%

Daily
32% Weekly
Monthly
24% Occasionally

INTERPRETATION

The Table No 4.14 revels that 16 No of respondents i.e. 32.00% of respondents prefer maturity
period of 1 month, 15 No of respondents i.e. 30.00% of respondents would like to trade on daily
basis ,12 No of respondents i.e. is 24.00% of respondents is liked to trade on weekly basis, and 7
respondents i.e 14% of respondents like to trade occasionally.

To conclude that majority of the investors would like to trade monthly basis.

TABLE NO4.15: SHOWING HOW DO YOU TRADE IN COMMODITY MARKET:

Sl.no Particulars No of respondents Percentage

1 On own 3 6.00
2 Through broker 5 10.00
3 Both 42 84.00
4 total 50 100.00
Source: Field survey.

GRAPH NO4.15: SHOWING HOW DO YOU TRADE IN COMMODITY MARKET:

48
 TRADE

6%
10%

On own
Through broker

84% Both

INTERPRETATION

Table no 4.14 classifies respondents on the basis of how they trade in commodity market. 42
respondents i.e 84% are trade in commodity market by both way ,5 respondents i.e 10% are trade
in commodity market through broker, and 3 respondents i.e 6% trade in commodity market by
there own.

To conclude majority of the investors are trading through both with brokers as by there own.

TABLE NO 4.16:SHOWING CLASSIFICATION OF THE INVESTOR ON THE BASIS

OF THERE PREFERENCE TOWARDS RISK MANAGEMENT TOOL.

Sl.no Particulars No of respondents Percentage

1 Risk natural 19 38.00
2 Risk aversive 6 12.00
3 others 25 50.00
4 total 50 100.00
Source:Field survey

49
GRAPH NO 4.16: SHOWING CLASSIFICATION OF THE INVESTOR ON THE BASIS
OF THERE PREFERENCE TOWARDS RISK MANAGEMENT TOOL.

50%
50%
45%
38%
40%
35%
30%
Series 1
25%
20%
12%
15%
10%
5%
0%
Risk natural Risk aversive others

INTERPRETATION

From the table No 4.15 classifies respondents based on there preference towards risk
management tool. It can be inferred that the majority of the investors numbering to 25 i.e 50%
other type of risk associated with the investor. These has followed by 19 i.e 38% of the
respondents are proffered risk natural and 6 respondents i.e 12% prefer risk aversive.

To conclude majority of the investors belives in other type of risk in order to manage the risk.

TABLE NO4.17: SHOWING TECHNIQUES USE TO MANAGE THE RISK.

Sl.no Particulars No of respondents Percentage

1 Avoidance 16 32.00
2 Exit with minimum 7 14.00
loss
3 Diversification 15 30.00
4 Average down 3 6.00

50
5 Invest with the trend 9 18.00
in market
6 Total 50 100%
Source:Field survey

GRAPH NO4.17: SHOWING TECHNIQUES USE TO MANAGE THE RISK .

32% 30%
35%
30%
25% 18%
20% 14%
15% 6%
10%
5% Series 1
0%

INTERPRETATION

Table No 4.17 represents classification of respondent based on techniques used in manage risk in
derivatives market.16 respondents i.e32% out of 50 consider its better to avoid the risk,and 15
respondents i.e 30% diversification is the second priority to be use as an risk management tool.
These has followed by 9 respondents i.e 18% prefer to invest in according to trend in themarket,7
respondents i.e14% belives that exit with a minimum loss, and 3 respondents i.e 6% prefer
Average down.

To conclude majority of the investors belives in avoide the risk due to market fluctuation.

TABLE NO 4.18:SHOWINGADVANTAGES OF COMMODITY MARKET

Sl.no Particulars No of respondents Percentage

1 Transferability of risk 6 12.00
2 Low investment 10 20.00
3 High returns 16 32.00
4 High liquidity 18 36.00

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5 total 50 100.00
Source: Field survey

GRAPH NO 4.18: SHOWING ADVANTAGES OF COMMODITY MARKET

ADVANTAGES
40% 32% 36%
12% 20%
20%
0%
Series 1
Series 1

INTERPRETATION

Table No 4.18 represents the main advantage associated with commodity market.18
respondentsi.e 36% believed that in commodity market they have an advantage of high
liquidity,16 respondents i.e 32% belives that by investing in commodity market they can get high
returns, 10 respondents i.e 20%belives that in commodity market they can make minimum
investment on commodities, and 6 respondents i.e 12% proffered in transferability of risk.

To conclude 36% of the respondents believed that investing in commodity market they can have
an opportunity high liquidity.

TABLE NO4.19:DISADVANTAGES OF COMMODITY MARKET

Sl.no particulars No of respondents Percentage

1 Volatile 5 10.00
2 Returns not assured 8 16.00
3 Risky 21 42.00

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4 complexities 16 32.00
5 Total 50 100.00
Source: Field survey

GRAPH NO 4.19: DISADVANTAGES OF COMMODITY MARKET

10%
32%
16%
Volatile
Returns not assured
Risky
42% complexities

INTERPRETATION

From the table No4.19 21 respondents i.e 42% believed that by investing in commodity market
the risk factor is high. 16 respondents i.e 32% believed that complexity is
more,respondentsi.e16% feels that investing in commodity market the return will be not
predictable.5 respondents i.e 10% believes in will have more volatility.

To conclude by investing in commodity market the investors feels that the risk factor is high.

TABLE NO 4.20 : SHOWING INVESTORS SATISFACTION LEVEL IN COMMODITY

USERS

Sl. No. Particulars No. of respondent percentage

1 Fully satisfied 5 10.00
2 Partially satisfied 39 78.00

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3 Dissatisfied 6 12.00
4 total 50 100.00
Source: Field Survey

GRAPH NO 4.20 : SHOWING INVESTORS SATISFACTION LEVEL IN COMMODITY

USERS

80 78

70
60
50
40
30 Series 1
20 10
10 12
0

Fully satisfied Series 1

Partially satisfied
Dissatisfied

INTERPRETATION

From the table 4.20 it showing satisfaction level of investors who invest in commodity market. 5
respondents out of 50 are fully satisfied, 39 respondents are partially satisfied and remaining 6 respondent
out of 50 are dissatisfied investing in commodity market.

To conclude that majority of the respondent are partially satisfied in commodity market.

TABLE NO. 4.21 SHOWING INVESTORS BASED ON GAIN OR LOSS THEY MADE IN
COMMODITY MARKET

Sl.no. Particulars No of respondents percentage

1 Gain 31 62.00
2 Loss 19 38.00

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3 total 50 100.00
Source: Field Survey

GRAPH NO.4.21 SHOWING INVESTORS BASED ON GAIN OR LOSS THEY MADE IN

COMMODITY MARKET

Gain or Loss

38%
Gain
Loss
62%

INTERPRETATION

From the table No 4.21 it shows the classification of investors based on gain or loss they made in
commodity market. 62% of the respondent are gain in commodity market and remaining 38% are
occurs loss in commodity market.

To conclude that 62% of the investor enjoy more profit or gain in commodity market.

TABLE NO. 4.22 SHOWING SEBIS ROLE IN PROTESTING INTEREST OF INVESTORS

IN COMMODITY MARKET

SL.NO. PARTICULARS NO.OF RESPONDENTS PERCENTAGE

1 Highly satisfied 8 16%

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 2 Satisfied 32 64%
3 Not satisfied 10 20%
4 Total 50 100%
Source: Field Survey

GRAPH NO.4.22 SHOWING SEBIS ROLE IN PROTESTING INTEREST OF INVESTORS

IN COMMODITY MARKET

20% 16%

Highly satisfied
Satisfied
Not satisfied
64%

INTERPRETATION

From the table No 4.22 shows that SEBI role in protecting investors in commodity market. 32
respondents out of 50 are satisfied with the roles to protect them, 10 respondents are feels highly
satisfied and rest of 8% respondents feels that not satisfied for them.

To conclude that majority of the 64% investors are believe that they are satisfied with SEBI
guidelines.

TABLE NO. 4.23 SHOWING OPINION OF INVESTORS ON STATEMENT, COMMODITY

DERIVATIVES IS NEW, COMPLEX.

Sl.no. Particulars No of respondents Percentage

1 Yes 31 62%
2 No 17 34%

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 3 Cant say 2 4%
4 Total 50 100%
Source: Field Survey

GRAPH NO 4.23 SHOWING OPINION OF INVESTORS ON STATEMENT, COMMODITY

DERIVATIVES IS NEW, COMPLEX

100%

50% Series 1
62%
34%
4%
0%
Yes No Cant say

INTERPRETATION

Table No 4.23 shows opinions of investors towards commodity derivatives, 62% of the
respondents have positive opinion is yes, 34% of the respondents say no and remaining
respondents are unable to answer.

To conclude that majority of the respondents i,e 62% are find that commodity derivatives market
is new as well as complex.

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 CHAPTER-5

SUMMARY OF FINDINGS, SUGGESTIONS AND CONCLUSION

FINDINGS OF THE STUDY:

Based on the analysis responses, the major findings are as listed below:

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 The study found that in financial derivative market dominated by male compared to
female.
The investor age group 30 year and 31 to 40 years are more interested to invest in
commodity derivative market.
The study found that in commodity market more number of respondents are graduate.
54% of the investors have self employed.
The study found that in commodity derivative market 52% of the respondents are belongs
to urban area.
62% of the respondents are married and remaining 38% are un married in these study.
The investors of income upto 30000 are majority traders of derivative market.
The study found that total annual investment made by the investor come in the category
of upto 50000 i.e 78%.
18 respondents out of 50 will choose mutual fund and 16 respondents that are shows their
interest towards fixed deposits.
36% of the respondents in both the cases are equally feels to invest in mutual fund as well
as commodity market because it has high risk.
The study found that more number of investors that is 44 % is feels to invest in long term
and 32% of the respondents shows there interest to invest in medium term.
The study reviles that the majority of the investors feels that investing in commodity
market because there is a chance of low investment.
32% of the respondents like to trade in derivative market on monthly basis and 30% of
the respondent feels to trade on daily basis.
The study found that the respondent trade in commodity market by the both way through
a broker as well as by there own.
25 respondents out of 50 belief that they will found other type of risk which are macro in
nature.
32% of the respondents use the technique avoidance the risk and 30% of the investors
believes in risk diversified.

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 36% of the respondents feel that by investing in commodity market they can have
advantage of high liquidity and 32% of the investors feels that it give them high return on
investment.
The study found that the major disadvantage of commodity market. 40% of the
respondents feels that it is risky to invest and 32% of the investors feels that it is complex
in nature.
39 respondents out of 50 are partially satisfied with commodity market are remaining
respondents feels that different opinions.
62% of the respondents in commodity market enjoy more profit or gain.
64% of the respondents believes that SEBI protect the interest of investors and remaining
are not much satisfy.
Study found that 31 of the investors out of 50 are find that commodity market is new as
well as comlex in nature.

SUGGESTIONS FOR THE STUDY:

Based on the study, the following suggestions may be offered to investor, Some suggestions to
the investors which are useful for them during the time of trading are:

60
 1. Investors should take daily guidance from brokers in case of any fluctuation in market
take place or while any transactions,
2. They have to know every aspects, rules and regulations associated with the investments.
3. To identify the objectives before investing in forecast the future risk and returns.
4. Know the latest developments that are in the stock market.
5. Broker should inform the investors regarding the changes levied as the future trading.
6. Provide tips to the investors in order to minimize the risk or to increase the potential
profits.
7. Proper disclosure regarding their charges of the investors.
8. Should discuss with there clients regarding how to invest, how much to invest and should
secure there investments.
9. To know the exact happening the investors watch the related news channels like, Zee
business, etc in order to gain market knowledge.

CONCLUSION:

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A study mainly stress on the opinions, perceptions and different characteristics of an investors.
Who want to invest in commodities, but in todays world the investors are much aware of all
market fluctuations might be up trends or down trends happening in stock market, according to
these market changes the investors decide in which commodities they are interested to invest.

Thus investors expect more returns on there investment with minimum risk burden, now the
investors shows there involvement in trading activities and try to get more knowledge as much as
possible.

Financial Derivatives are of recent origin and are quite new to the Indian Financial markets, as a
finance professional one should have good working knowledge of instruments like options,
futures which is necessary for managing risks in the present-day financial world.

The derivatives market in Mysore is not as developed when compared to the metropolitan cities.
It is because of lack of exposure among investors in Mysore city towards derivatives, hence there
is a need to increase the awareness and educate the investors about derivatives, So that they can
make informed and wise decisions, which would lead to the growth in Derivatives market in
Mysore.

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BIBLIOGRAPHY:

Books:

1. Financial derivatives 2nd edition Miami.

2. Introduction to Derivatives Robert A. Strong.
3. Introduction to Future & Options Franklin R Edward, Tata McGraw-Hill.
4. Options, Futures and Other Derivatives John C. Hull.
5. Futures and options N Sridar
Journals:

1) Agnihotri and Sharma (2011) study of Convergence of Spot and Future Prices in
commodity market (with reference to Zeera, Channa, Zink and Natural gas for 2005-
2010) , International Journals of Multidisciplinary research ,ISSN: 22331-5780,
Volume 1 issue2, June 2011.
2) Malhotra (2012) Commodities Derivatives Market in India: The Road Traveled and
Challenges Ahead, Asian Journals of Business and Economics, ISSN 2231-3699,
Volume 2, no 2.
3) Logasakthi and Asokkumar (2012) A Study on Investors Awareness of commodity
market with reference to KIFS Securities Private Limited at Salem south Asian
Academic Research Journal, ISSN: 2249-7137, volume2, Issue 6, June2012, PP. 1-15.
4) Ravi (2013) Price discovery and volatility spillover in Indian Commodity Future
Markets using selected commodities PARIPEX-Indian journal of research, ISSN NO:
2250-1991, Volume: 2, Issue: 12, December 2013.
5) Bansal, Varsha and Ahmed (2014) Indian Commodity Market- a performance review
international research journal of management and commerce, ISSN no: 2348-9766,
Volume No-1, Issue-5, and August 2014.

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Websites:

1. www.nseindia.com
2. www.derivativesindia.com
3. www.sebi.co.in
4. www.bseindia .com

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