Commodity Future Market in india

Are commodity derivatives new in India

India has always been a country of market imperfections and prices fluctuations. Though India has an agricultural economy, it never had a national common market for agricultural products. There were lways shortages and surpluses – with wide discrepancy in the prices at various levels. 

There was lways price heterogeneity because of information asymmetry in the markets. In rural India, mandis were the traditional market places for food and agri-commodities. In different parts of India, mandis developed as wholesale trading hubs for vegetables, grains, pulses, spices, condiments, fruits, timber, gems, diamonds and livestock.

Commodity future calls in Market reviews and complaints

Is speculation good for commodity futures markets

The Forwards Market Commission and many analysts claim that speculators are different from gamblers since they do not create risk, but merely accept the risk which already exists in a futures market. 

According to them, speculators try to assimilate all the possible price-sensitive information, on the basis of which they can expect to make profit. Therefore, it is claimed that the speculators contribute in improving the efficiency of price discovery function of the futures market.

MCX Trading As an Investment Vehicle

There are many inherent advantages of commodity futures as an investment vehicle over other investment alternatives such as savings accounts stocks bonds options real estate and collectibles.

The primary attraction, of course, is the potential for large profits in a short period of time. The reason that futures trading can be so profitable isleverage.

MCX Comdex Structure

Need for the study of MCX Comdex

Theoretically, the Spot and the Futures prices of the assets are related and that a perfect correlation is expected, such that neither market leads the other, but is not so in real life due to the presence of imperfect information dissemination. An attempt is made to study the temporal relationship between the Spot and the Futures prices of the Commodity Market by analyzing the data of the Comdex.

Sanjay Sehgal, Namita Rajput, Rajeev Kumar Dua (2012) studied the price discovery relationship for Agricultural Commodities in Indian markets. They found an efficient price discovery process in place. They recommended the strengthening of the market regulatory framework. An emphasis on the autonomy of Forwards Market Commission (FMC) was made. Their study also revealed the need for well developed warehousing and market linkages. 

A Beginner’s Guide to Indian Commodity Futures Markets

What are the main differences between commodity spot and derivatives markets?

There are two types of commodity markets: spot (physical) and derivatives (such as futures, options and swaps).

NCDEX Commodity

In a spot market, a physical commodity is sold or bought at a price negotiated between the buyer and the seller. The spot market involves buying and selling of commodities in cash with immediate delivery. There are spot markets for individual consumers (retail market) and the business-to-business (wholesale market) category. Spot markets also include traditional markets such as Delhi’s Azadpur Mandi that deal in fruits and vegetables. 

UNDERSTANDING COMMODITIES MARKET

What is a commodity?

Commodities are products that can be bought, sold or traded in different kinds of markets. Commodities are the raw materials that are used to create products which are consumed in everyday life around the world, from food products in India to building new homes in Europe or to running cars in the US. 

NCDEX Commodity

                                        There are two main types of commodities: 

                                        Soft commodities – agricultural products such as corn, wheat, coffee,                                                     cocoa, sugar and soy bean; and livestock. 

                                        Hard commodities – natural resources that need to be mined or processed                                             such as crude oil, gold, silver and rubber. 

Throughout history, commodities have played a major role in shaping the global political economy and have affected the lives and livelihoods of people. History is replete with examples of how shortage of critical commodities sparked huge public outcry and social unrest. Of late, the world community is concerned over the environmental and health costs of production and consumption of certain commodities and impact on society.

HOW THIS GUIDE IS ORGANIZED MARKETS

Commodity Market future Guides

Explains the basics of commodity futures markets in a historical and theoretical context. It provides a basic understanding of concepts and terminology related to commodities, derivatives, commodity futures trading, commodity exchanges and market participants. The fictionalization of commodities and its implications are critically examined in this section besides discussion of some of the important scandals in the global commodity markets.

Gold

Specifically deals with issues and concerns related to the Indian commodity futures markets. It examines the policy environment that has shaped the rise of Indian commodity futures markets in the recent times. In particular, instances of frequent manipulation and some recent trading scandals in the Indian commodity futures markets are discussed at length. This section also explores the efficacy of commodity transaction tax and provides policy recommendations to strengthen the regulation and supervision of Indian commodity futures markets.