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1.1 INDUSTRY PROFILE
What is commodity?Commodity may be defined as an article, a product or material that is
bought and sold. It can be classified as every kind of movable property,
except actionable claims, money and securities.
The Indian economy is witnessing a mini revolution in commodity
derivatives and risk management. Commodity option trading and cash
settlement of commodity futures had been banned since 1952 and until
2002 commodity derivatives market was virtually nonexistent.
Commodity Derivatives An Overview: The history of organized commodity derivatives in India goes back to the
nineteenth century when the Cotton Trade Association started futures
trading in 1875, barely about a decade after the commodity derivatives
started in Chicago. Over time the derivatives market developed in several
other commodities in India. Following cotton, derivatives trading started in
oilseeds in Bombay (1900), raw jute and jute goods in Calcutta (1912),
wheat in Hapur (1913) and in Bullion in Bombay (1920).
However, many feared that derivatives fuelled unnecessary speculation in
essential commodities, and were detrimental to the healthy functioning of
the markets for the underlying commodities, and hence to the farmers. Witha view to restricting speculative activity in cotton market, the Government of
Bombay prohibited options business in cotton in 1939. Later in 1943,
forward trading was prohibited in oilseeds and some other commodities
including food-grains, spices, vegetable oils, sugar and cloth.
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After Independence, the Parliament passed Forward Contracts (Regulation)
Act, 1952 which regulated forward contracts in commodities all over India.
The Act applies to goods, which are defined as any movable property otherthan security, currency and actionable claims. Under the Act, only those
associations/exchanges, which are granted recognition by the Government,
are allowed to organize forward trading in regulated commodities. The Act
envisages three-tier regulation:
1.The exchange which organize forward trading in commodities canregulate trading on a day-to-day basis;
2.The Forward Markets Commission provides regulatory oversightunder the powers delegated to it by the central Government, and
3.The Central Government - Department of Consumer Affairs, Ministryof Consumer Affairs, Food and Public Distributionis the ultimate
regulatory authority.
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Structure of commodity market:
Ministry of Consumer Affairs, Food and
Public Distribution
FMC
Regional
Exchanges (22)
National
Exchanges
MCX NCDEX NMCE
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Government Policy:After, the Indian economy embarked upon the process of liberalization and
globalization in 1990, the Government set up a Committee in 1993, toexamine 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 of the Forward Markets Commission, and
certain amendments to Forward Contracts (Regulation) Act 1952,
particularly allowing options trading in goods and registration of brokers
with Forward Markets Commission. The Government accepted most of these
recommendations and a future trading was permitted in all recommended
commodities.
Commodity futures trading in India remained in a state of hibernation for
nearly four decades, mainly due to doubts about the benefits of derivatives.
Finally a realization that derivatives do perform a role in risk management
led the government to change its stance. The policy changes favoring
commodity derivatives were also facilitated by the enhanced role assigned to
free market forces under the new liberalization policy of the Government.Indeed, it was a timely decision too, since internationally the commodity
cycle is on the upswing and the next decade is being touted as the decade of
commodities.
Requirements of Commodity Derivatives:India is among the top-5 producers of most of the commodities, in
addition to being a major consumer of bullion and energy products.
Agriculture contributes about 22% to the GDP of the Indian economy. It
employees around 57% of the labor force on a total of 163 million
hectares of land. Agriculture sector is an important factor in achieving a
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GDP growth of 8-10%. All this indicates that India can be promoted as a
major center for trading of commodity derivatives.
It is unfortunate that the policies of FMC during the most of 1950s to
1980s suppressed the very markets it was supposed to encourage and
nurture to grow with times. It was a mistake other emerging economies
of the world would want to avoid. Derivatives are used to reduce or
eliminate price risk arising from unforeseen price changes. A derivative is
a financial contract whose price depends on, or is derived from, the price
of another asset.
Two important derivatives are futures and options.
a) Commodity Futures Contracts:A futures contract is an agreement for buying or selling a commodity for a
predetermined delivery price at a specific future time. Futures are
standardized contracts that are traded on organized futures exchanges that
ensure performance of the contracts and thus remove the default risk. The
commodity futures have existed since the Chicago Board of Trade (CBOT,
www.cbot.com) was established in 1848 to bring farmers and merchants
together. The major function of futures markets is to transfer price risk from
hedgers to speculators.
b) Commodity Options contracts:Like futures, options are also financial instruments used for hedging and
speculation. The commodity option holder has the right, but not the
obligation, to buy (or sell) a specific quantity of a commodity at a specified
price on or before a specified date. Option contracts involve two partiesthe
seller of the option writes the option in favor of the buyer (holder) who pays
a certain premium to the seller as a price for the option. There are two types
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of commodity options: a call option gives the holder a right to buy a
commodity at an agreed price, while a put option gives the holder a right to
sell a commodity at an agreed price on or before a specified date (calledexpiry date). The option holder will exercise the option only if it is beneficial
to him; otherwise he will let the option lapse.
Indian Commodity Exchanges:To make up for the loss of growth and development during the four decades
of restrictive government policies, FMC and the Government encouraged
setting up of the commodity exchanges using the most modern systems and
practices in the world. Some of the main regulatory measures imposed by
the FMC include daily mark to market system of margins, creation of trade
guarantee fund, back-office computerization for the existing single
commodity Exchanges, online trading for the new Exchanges,
demutualization for the new Exchanges, and one-third representation of
independent Directors on the Boards of existing Exchanges etc.
Responding positively to the favorable policy changes, several, Nation-wide
Multi-Commodity Exchanges (NMCE) have been set up since 2002, using
modern practices such as electronic trading and clearing. The new
commodity exchanges in India are
1. National Commodity And Derivative Exchange (NCDEX)
2. Multi Commodity Exchange (MCX)
3. National Multi-Commodity Exchange of India Limited (NMCEIL)
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I. National Commodity & Derivatives Exchange Limited(NCDEX) :
National Commodity & Derivatives Exchange 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 of India (LIC), 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.
II. Multi Commodity Exchange of India Limited (MCX):Headquartered in Mumbai Multi Commodity Exchange of India Limited
(MCX), is an independent and de-mutualized 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 operations for commodity futures
markets across the country.
MCX started offering trade in November 2003 and has built strategic
alliances with Bombay Bullion Association, Bombay Metal Exchange,
Solvent Extractors Association of India, Pulses Importers Association and
Shetkari Sanghatana.
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III. National Multi-Commodity Exchange of India Limited(NMCEIL):
National Multi Commodity Exchange of India Limited (NMCEIL) is the first
de-mutualized, Electronic Multi-Commodity Exchange in India. On 25th
July, 2001, it was granted approval by the Government to organize trading
in the edible oil complex. It has operationalized from November 26, 2002. It
is being supported by Central Warehousing Corporation Ltd., Gujarat State
Agricultural Marketing Board and Neptune Overseas Limited. It got its
recognition in October 2002.
Features of Commodity Market:Features of emerging trend in India as far as the commodity market is
concerned are as under :
1) Expansion of commodity trade:Very clearly, trade volumes are set to expand rapidly. Demand for a wide
variety of commodities covering food, fiber, metals and energy is certain to
expand. India is likely to produce many of the aforesaid commodities,as
investment in production facility expands. If demand growth outstrips
domestic supply growth, imports will become inevitable. The possibility
exporting certain commodities also exists. In commodity production,
consumption and trade, India will become an important player in the
international market. This will lead to a massive expansion in commodity
trade volumes over the next, say, 15-20 years.
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2) Competition from imports:Whether or not domestic producers like it, the competition from imported
commodities is inevitable. This could be true in case of food crops, metals
and energy. In the short/medium-term, indigenous output will trail
consumption demand because of the lagged effect of investment. To fuel
growth and rein in inflation, the government and the business houses will
have to resort to imports. As imports are unrestricted (Quantitative
Restrictions have been abolished), there will be liberal inflow of goods from
abroad. Often, imports from developed countries are low-priced and
subsidized. Such competition will result in inefficient domestic units falling
by the wayside, but will eventually lead to greater efficiency among domestic
producers.
3) Role of MNCs:Multinational corporations cannot be wished away. They bring with them a
certain superior knowledge of operating in developing or emerging
economies. They also have deep pockets and, often, are long-term players.
In the Indian commodities sector, global companies will increasingly play a
role as producers, suppliers, traders and service providers. Indian
producers will have to learn to face competition from MNCs.
4) Consolidation of fragmented capacities:It is well-known that commodity producers and industrial consumers in
India suffer poor scale economies because of their small size. Fragmentation
of business that is resulting in scale-diseconomies and other infirmities is
likely to give way to consolidation. Competition is now driving smaller
players to explore opportunities for merger. Bigger companies with
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Several corporate have already begun to employ IT to derive value, ITC's e-
chapel being a remarkable initiative.
Benefits to Traders, Industrialist and Consumer:1. Commodities can be traded with only margin amount instead of giving
the contract / whole price.
2. One can sell the commodities that he buys from a ready / spot marketand can protect himself from loss happening from fall in prices.
3. For those who have kept their commodities in the central warehouse,loans are available on the basis of the stock.
4. More choice of commodities to trade which was previously impossibledue to geographical reasons.
5. Inventory planning and other activity can be scheduled by knowingthe prices in advance.
6. One can be sue that the commodity is available when they require it.7. One can buy goods without agents.8. Assured quality of the commodities.9. Domain knowledge to trade in commodities helps to take sound
decisions.
Benefits of Commodities Futures Market:1. Long term benchmark and price discovery.2. Real time commodity prices for price fixing.3. Enabling decisions on crop sowing and time of sale.4. Increased bargaining power of farmers.
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5. Promoting gradation and quality of certification.6. Promoting storage and logistics facilities.7.
Promoting warehouses receipts and financing.
8.Trade and payment guarantee with no counter party and quality risk.
Types of Commodities
Plantation Products Polymers
Pules Metals
Cereals Energy
Spice Precious metals
Fibers
Oil & Oilseeds
Products of commodity market
Agriculture-
commodity
OthersNon-Agriculture
commodit
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A.Agriculture Products :1.Plantation Products
Rubber
Coffee Robusta
Cashew2.Pulse
Chana
Masoor
Yellow Peas3.Cereals
Wheat
Barley
Maize4.Spice
Pepper
Turmeric
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Jeera
Chili
Coriander5.Fibers
Indian 28.5mm Cotton
V-797 Kapas
Raw jute6.Oil & Oilseeds
Castor seedSeame seedCotton seed oil cakeSoy complex
Mustard complexPalm complex
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B.Non-Agriculture Products :1 Polymers
Polypropylene
Linear low densityPolyethylene
Polyvinyl chloride2 Metals
Steel
Copper
Zinc
Aluminum
Nickel3 Energy
Crude oil
Furnace oilThermal coalBrent crude oilNatural gas
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4 Precious Metals
Gold
Silver
PlatinumC.Others Products :
Guar seedGuar gumPotato
Sugar
Menthe oil
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Introduction about Gold
Gold is the oldest precious metal known to man and for thousands of
years it has been valued as a global currency, a commodity, an
investment and simply an object of beauty.
Major Characteristics : Gold is unique as it is both a commodity and a monetary
asset.
Its stability and high value makes it virtually indestructibleand ensures that it is almost always recovered and recycled.
There is no true consumption of gold in the economic senseas the stock of gold remains essentially constant while
ownership shifts from one party to another.
Although gold mine production is relatively inelastic, recycledgold (or scrap) ensures there is a potential source of easily
traded supply when needed, and this helps to stabilise gold
price.
Economic forces that determine the price of gold are differentfrom, and in many cases opposed to the forces that influence
most financial assets.
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Global Supply Demand Scenario : The total above ground stocks of gold is estimated to be
around 1,63,000 tonnes by Gold Fields Minerals Services
(GFMS) as on end of 2008 .
Out of this total stock, 51% is estimated to be present as jewellery, 18% as official reserves, 17% held as investment,
12% used for industrial purposes and 2% is unaccounted for.
Jewellery accounts for almost two-thirds of annual golddemand with investment and industry being the other main
drivers. The total annual global demand for gold has averaged
3530 tonnes in the last three years (2005 - 2008). However, it
is expected to dip slightly in 2009, owing to the sharp rise in
prices.
Five countries, viz., India, China, USA, Turkey, Saudi Arabiaand UAE account for above 60% of gold demand, with each
market driven by a different set of socio-economic and
cultural factors.
The total global mine production is relatively stable, averagingapproximately 2,455 tonnes per year over the last three
years. Recycling of old gold scrap and official sector sales are
the other major sources of supply, which have averaged 1084
tonnes and 378 tonnes in the last three years.
South Africa has been a major gold producer since 1880s andit is estimated that about 50% of all gold ever produced has
come from this nation. While, during the early 1980's it
produced about 1000 tonnes, the output in 2007 dropped to
just 272 tonnes.
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China with a production of 276 tonnes, overtook South Africaas the world's largest gold producer in 2007 for the first timesince 1905 that South Africa has not been the largest. The
other major producers are USA, Australia, Russia and Peru.
World Gold Markets :OTC markets at London (LBMA), New York and Zurich
Gold derivative exchanges at New York CME (COMEX), Tokyo
(TOCOM),Mumbai(MCX) , Istanbul, Dubai, Hong Kong and Singapore
are doorways to important consuming regions .
India in World Gold Industry
(Rounded Figures) India (In Tons) World (In Tons) % Share
(Rounded Figures) India (In Tons) World (In Tons) % Share Total Stocks 15000 160000 9Central Bank holding 558 30,100 2Annual Production 3 2450 0Annual Recycling 250 1100 23Annual Demand 700 3550 20Annual Imports 600 --- ---Annual Exports 60 --- ---
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Indian Gold Market : India is the world's largest consumer of gold. Indians normallybuy about 25 per cent of the world's gold, purchasing around
700 - 750 tonnes of gold every year.
However, the sharp price increase in 2008 and 2009 hasimpacted demand with total demand in 2008 dipping to 660tonnes. It is further expected to shrink in 2009 with demand infirst three quarters of 2009 totaling only around 265 tonnesagainst 553.5 tonnes in the same period of the previous year.
As India's domestic primary production of gold is very less, ataround 2-3 tonnes a year, the country imports most of itsdomestic requirement.
Thus, India is also the largest importer of the yellow metal andhas averaged imports of around 600 tonnes a year. However,2008 imports dipped to around 400 tonnes of gold and it isfurther expected to dip to around 200-220 tonnes in 2009 owingto high prices.
India's gold demand is firmly embedded in cultural and religioustraditions. It is also valued in India as a savings and investmentvehicle and is the second preferred investment after bankdeposits.
Gold hoarding tendency is well engrained in the Indian societyand unofficial stocks held by Indians is estimated to be wellabove 15,000 tonnes, which is around 9% of the total global goldstocks.
Domestic consumption is dictated by monsoon, harvest andmarriage season. Indian jewellery off take is sensitive to priceincreases and even more so to volatility.
In the cities gold is facing competition from the stock market anda wide range of consumer goods.
Facilities for refining, assaying, making them into standard bars,
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coins in India, as compared to the rest of the world, areinsignificant, both qualitatively and quantitatively.
In July 1997 the RBI authorized the commercial banks to importgold for sale or loan to jewellers and exporters. At present, 13banks are active in the import of gold. This reduced the disparitybetween international and domestic prices of gold from 57percent during 1986 to 1991 to 8.5 percent in 2001.
Market Moving Factors : Indian gold prices are highly correlated with international prices.
However, the fluctuations in the INR-US Dollar impact domestic
gold prices and have to be closely followed.
The global prices are driven by a host of factors with macro-economic factors like strength of the economy, rising importance
of emerging markets, currency movements, interest rates being
major influencing factors.
Supply-demand is a major influencer, amid rising global investordemand and almost stable supplies.
Shifts in official gold reserves, reports of sales/purchases bycentral banks act as major price influencing factors, whenever
such reports surface.
The investment in gold is influenced by comparative returnsfrom other markets like stock markets, real estate other
commodities like crude oil.
Domestically, demand and consequently prices to some extentare influenced by seasonal factors like marriages. The rural
demand is influenced by monsoon, agricultural output and
health of the rural economy.
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Introduction about Silver
General Characteristics : Silver's unique properties make it a very useful 'Industrial
Commodity', despite it being classed as a precious metal.
Demand for silver is built on three main pillars; industrial uses,photography and Jewellery & silverware accounting for 342, 205 and
259 million ounces respectively in 2002.
Just over half of mined silver comes from Mexico, Peru and UnitedStates, respectively, the first, second and fourth largest producing
countries. The third largest is Australia.
Primary mines produce about 27 percent of world silver, whilearound 73 percent comes as a by-product of gold, copper, lead, and
zinc mining.
The price of silver is not only a function of its primary output butmore a function of the price of other metals also, as world mine
production is more a function of the prices of other metals.
The tie between silver and economic activity is strong, given thataround two-thirds of total silver fabrication is in the industrial and
photographic sectors.
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Often a faster growth in demand against supply leads to drop instocks with government and investors.
Economically viable primary silver mine is a function of the worldsilver price level.
World Silver Supply from Above-ground Stocks MillionOunces :
2001 2002Implied Net Disinvestment -9.5 20.9Producer Hedging 18.9 -24.8Net Government Sales 87.2 71.3Sub-total Bullion 96.6 67.4Scrap 182.7 184.9Total 279.3 252.3
Indian Scenario : Silver imports into India for domestic consumption in 2002 was 3,400
tons down 25 % from record 4,540 tons in 2001.
Open General License (OGL) imports are the only significant source ofsupply to the Indian market.
Non-duty paid silver for the export sector rose sharply in 2002, up byclose to 200% year-on-year to 150 tons.
Around 50% of India's silver requirements last year were met throughimports of Chinese silver and other important sources of supply being
UK, CIS, Australia and Dubai.
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Indian industrial demand in 2002 is estimated at 1375 tons down by13 % from 1,579 tons in 2001. In spite of this fall, India is still one of
the largest users of silver in the world, ranking alongside Industrialgiants like Japan and the United States.
By contrast with United States and Japan, Indian industrial offtakefor fabrication in hardcore industrial applications like electronics and
brazing alloys accounts for only 15 % and the rest being for foils for
use in the decorative covering of food, plating of Jewellery and
silverware and jari.
In India silver price volatility is also an important determinant ofsilver demand as it is for gold.
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1.2 COMPANY PROFILE
Arcadia Stock & Share Broking Pvt. Ltd. :Arcadia came to life in 1995, right on the wave of a post-liberalization
market economy. As financial services became a major contributor to
economic growth, Arcadia has steadily shaped into a leading financial
service provider. In 1995, we were a small company with just 5 employees.
Today, we have a market presence across the country, with over 275
branches & franchisee outlets. We have established a strong retail networknot only in metros but also in tier two and tier three cities. Traditionally, our
operation was concentrated in fast-moving capital market of Western India.
But sensing great potential, we have launched strong expansion plans in
the North and the South. This systematic presence-building and efficient
delivery of service has put Arcadia among the fastest growing retail broking
houses in the country, with memberships in:
NATIONAL STOCK EXCHANGE OF INDIA (NSE) BOMBAY STOCK EXCHANGE (BSE) MULTI COMMODITY EXCHANGE (MCX) NATIONAL COMMODITY & DERIVATIVES EXCHANGE (NCDEX) DEPOSITORY PARTICIPANT OF CDSL ASSOCIATION OF MUTUAL FUNDS IN INDIA (AMFI)
Today Arcadia has accumulated acknowledged leadership in execution and
clearing services on exchange-traded derivatives and cash-market products.
Working with the leading stock exchanges and noted financial institutions
has drilled in us the importance of real-time information and use of
analytical tools in investment decisions. Practicing this over the years has
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made us experts in understanding investor requirements. Arcadia's
integrated and innovative use of technology provides clients with the ability
to trade offline & online. Clients also have constant access to their accountinformation via internet.
Top Management :I. MR. ANTONY SEQUEIRA
( FOUNDER, MANAGING DIRECTOR)
The chief promoter of Arcadia has been associated with capital markets for
over26 years.Mr. Sequeira has a rich 19 years of banking experience with
Corporation Bank & Syndicate Bank. For six years he was the Chief
Executive of M/S Uday S. Kotak, now known as Kotak Securities. Mr.
Sequeira is respected in the organization for being a complete taskmaster.
His thrust for client satisfaction is an energizing force within the
organization. He is completely committed towards making Arcadia a one-
stop financial service provider.
II. MR. NITIN BRAHMBHATT( DIRECTOR )
The director is an arbitrage consultant by profession, with 25 years
experience in the capital market. Between 1985 and 1995, he played the
role of a leading market maker in the Bombay Stock Exchange. He has a
rich experience in the field of arbitrage. The credit for building the arbitrage
team for Arcadia goes to him. It is his innovative ideas that have made
Arcadia a leading arbitrage player in the country. Under his leadership,
Arcadia has created a mammoth network of branches & franchisees.
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III. MR. ARJUN MUDDA(EXECUTIVE DIRECTOR )
Mr. Arjun has 14 years of practical experience in hard core operations client
development, setting up retail business and customer service from the
broking market. He is basically a self starter a team builder who had
performed very well in the broking field by running the startup companies
on his own efforts and took it to a highly progressive level. He has always
shown to be the back bone of the company and continues to be the same.
He has been instrumental in setting up and developing retail business.
Since so many years, he has had hands on experience in building up goodnetwork and excellent relationship building in the market.
Head Office :328, NINAD, Bldg No.7, Service Road,
Near Bhavishya Nidhi Bhavan,
Bandra (East),
Mumbai-400051. CONTACT NUMBERS: +91 22 67739999
TOLL FREE: 1800 22 1555
FAX NUMBER: +91 22 26478988
EMAIL:info@arcadiashare.com
WEBSITE:www.arcadiastock.com
mailto:info@arcadiashare.commailto:info@arcadiashare.commailto:info@arcadiashare.comhttp://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.comhttp://arcadiastock.com/Static/www.arcadiastock.commailto:info@arcadiashare.com -
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Vision And Mission : To be a reputed Provider of reliable, reddy-to-use, high-integrity
financial services
To offer customer delight with best value for money and maximummarket access
To persistently expand territorial presence and enlarge clientele base To be an involved business, with focus on technology, innovation and
creativity
To continually develop quality products, keeping pace with emergingmarket needs
To create a principled work atmosphere that empowers employees tolearn and grow
PRODUCT & SERVICESWe have a wide range of products specially designed to meet financial
requirements of individual and corporate inventors, both Indians and non-
Resident Indians.
CAPITAL MARKET
We offer trading in the National Stock Exchange (NSE) that has played a
catalytic role in reforming the Indian securities market in teams of
microstructure, market practices and trading volumes. Here we trade both
in the capital and the futures & options markets.
We also take you to trade in Bombay Stock Exchange Limited, the oldest
exchange in Asia, with a world-famous index, the sensex.
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COMMODITIES MARKET
We help you trade at the independent and de-mutulised Multi-Commodity
Exchange (MCX)
We facilitate trading in the National Commodity & Derivatives Exchange
Limited (NCDEX), a professionally managed on-line commodity exchange.
NRI
We have a separate desk to guide Non-Resident Indian investors about
Initial Public Offerings (IPO), the secondary market of listed stocks and
mutual funds.
INTERNET-BASED TRADING
The biggest advantage of online trading is that investors command an
expansive access to information. Corporate analysis and financial results
are available at the click of the mouse. In order to facilitate smooth and safe
trading on the Net, we employ the latest risk-management software. Also,
our trading terminals are linked with HDFC Bank and UTI Bank systems tofacilitate hassle-free transfer of funds.
MUTUAL FUNDS
Mutual funds are one of the best investments in the contemporary market
because they are cost-efficient and easy to manage. Its the mutual fund
manager who decides the direction of your investment. In fact, by pooling
money together in a mutual fund, small investors themselves can purchase
stocks and bonds playing much lower trading costs. This is where we came
in and offer active involvement in overall investment strategy. We bring
customized insights on how to handle your precious savings.
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IPO
Timely investment in Initial Public Offerings, better known as IPOs, offer
great opportunities for netting high returns in a short time span.
CATCH THE MARKET LIVE
Our Daily Market Report (DMR) contains updates and comprehensive
market information with guided insight into the investment environment
and market swings of the day. These are offered as pre-market directions
before trading, commences every day.
You can also get our live flashes on intraday trading, as well as investment
advice on our trading terminals online as well as offline. On request, we
make available the same information also on SMS.
BOOK-KEEPING IN BACKOFFICE
Not for from the trading terminals are our 24 X 7 back office software =.
Here the clients can access absolutely updated balances, stock holdings and
contract notes round the clock.
DEPOSITORY SERVICES
In the times of T+2, having a demate account linked to your trading
account becomes really convenient. You can open a demat account
with us so that we can track your profile better.
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Here are some reviews related with commodity market, commodity
market investment, its risk and return etc. which can help us for
conducting this project report. These are as follow:
1.Risk management of precious metals:( BY Shawkat Hammoudeh , LeBow College of Business , Drexel University ;
Farooq Malik , College of Business , University of Southern Mississippi ;
Michael McAleer , Econometric Institute , Erasmus School of Economics ,
Erasmus University Rotterdam ; and Tinbergen Institute , The Netherlands
and Department of Quantitative Economics Complutense University of
Madrid in march 2011)
Abstract :
This examined volatility and correlation dynamics in price returns of gold,
silver, platinum and palladium, and explores the corresponding risk
management implicationsfor market risk and hedging. Value-at-Risk (VaR)
is used to analyze the downside marketrisk associated with investments in
precious metals, and to design optimal risk management strategies. They
compute the VaR for major precious metals using the calibrated
RiskMetrics, different GARCH models, and the semi-parametric Filtered
Historical Simulation approach. The best approach for estimating VaR
based on conditional and unconditional statistical tests is documented. The
economic importance of the results is highlighted by assessing the daily
capital charges from the estimated VaRs.
Conclusion :
This paper examines the volatility dynamics in precious metals and explores
the corresponding risk management implications. The conditional volatility
and correlation dynamics in the price returns of gold, silver, platinum and
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palladium are modeled using daily data from January 1995 to November
2009. Value-at-Risk (VaR) is used to analyze the risk associated with
precious metals, and to design optimal risk management strategies. Wecompute the VaR for all precious metals using the calibrated RiskMetrics,
alternative empirical GARCH models, and the semi-parametric Filtered
Historical Simulation approach. Different risk management strategies are
suggested based on conditional and unconditional statistical tests. The
economic importance of our results is highlighted by calculating the daily
capital charges from the estimated VaRs using different methods for 19all
precious metals. This exercise shows that portfolio managers engaged in
precious metals who want to follow a conservative strategy should calculate
VaR using GARCH-t as this will yield fewer violations, though with lower
profitability. Our results are very timely and useful for financial market
participants as the global financial markets continue to experience
unprecedented volatility and the need for investment in precious metals
remains high.
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2.Expected commodity future returns :(BY Saqib Khan , Zeigham Khokher ,Timothy Simin in March
2008)
Abstract :
In this article, they posit an empirical beta pricing model of expected
commodity futures returns to explore predictable variation in their returns.
Their model allows commodity futures returns to vary with the holdings of
hedgers and allows these holdings to vary with business conditions. The
model also allows for time variation in expected returns with relative
scarcity of the commodity. Their evidence suggests that a large portion of
the predictable variation in futures returns is explainable by these asset
specific factors and that movements in these factors are related to
macroeconomic variables. This evidence is consistent with rational return
predictability.
Conclusion :
There is a large literature debating the predictability of returns. One path to
reconciling evidence of predictability and the efficient market hypothesis is
by way of intertemporal equilibrium pricing models. In these models
rational investors expect asset returns to vary with time varying risk premia
related to the state of the macro-economy. Also consistent with return
predictability are models of inefficient markets such as those by Shiller
(1984) and Summers (1986). Irrational bubbles might be indistinguishablefrom rational timevarying risk premia, as Fama (1991) notes in a sequel to
his seminal article on market efficiency. But, as he conjectures, exploring
the link between expected returns and the demand for capital goods may be
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fruitful in judging predictability. By incorporating holdings of hedgers that
vary with standard predictor variables, we present evidence on this issue.
The documented evidence suggests strong covariance between hedgers
holdings for capital goods like crude oil and macroeconomic state variables.
To a lesser extent we find similar results for supply conditions of capital
goods. Furthermore, variation in 15 expected commodity futures returns
can be explained, in part, by hedging responses to changing
macroeconomic conditions. This evidence is consistent with inter-temporal
asset pricing models with time varying risk premia that provide a rational
explanation for predictability in asset returns. While the evidence speaksdirectly to questions of market efficiency, precise judgments on the degree of
efficiency remain subject to priors.
Fama and French (1991) note that a problem that lurks on the horizon in
all tests of multifactor ICAPMs, is trying to explain why a state variable
that can explain common variation in returns might be of special hedging
concern to investors and so earn a special premium. We have in some
sense, circumvented this problem by directly incorporating proxies for
hedgers holdings and supply conditions that vary with business conditions
into a model of expected returns. Our preliminary evidence on net hedging
pressure coupled with the cross-market effects of hedging pressure found in
DeRoon et al. (2000) may lead to a better understanding of how hedging
demands interact with the business conditions to move expectations of
returns across assets. Most general equilibrium model of commodity
markets assume risk neutrality, our results on how commodity marketscarcity relates to risk premia may be similarly beneficial.
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3.Do Precious Metals Markets Influence Stock Markets?(A Volatility Approach by Luca Morales)
Abstract :
This paper investigates the nature of volatility spillovers between stock
returns and precious metals returns for the G-7 countries over the 1995-
2006 period. They divide our sample into a number of sub periods, prior to,
during and after the Asian crisis, with the objective to provide a wide
analysis of the behaviour of these two markets taking into account the
effects of the Asian crisis; they use EGARCH modelling which takes into
account whether bad news has the same impact on volatility as good news.
The results show that there is no evidence of volatility persistence from
stock returns to precious metals returns, but overall the results are
significant in the other way around. In terms of volatility spillovers effects,
the main findings are that there is evidence of volatility spillovers running in
a bidirectional way in almost all the cases. And finally, the results from
asymmetric spillover effects show that negative news have a stronger impactin these financial markets than positive news.
Conclusion :
The existing literature shows that little attention has been paid to the study
of interlinkages between stock markets and precious metals markets and in
particular to the analysis of volatility spillovers between them. The
relationships between stock returns and precious metals returns demandmore research, as these two markets are very important in terms of portfolio
and risk management decisions. Hillier, Draper and Faff (2006) notice that
gold, platinum and silver have the potential to play a diversifying role in
investment portfolios, as precious metals exhibit some hedging capability
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during periods of abnormal markets volatility. Wolfle (2006) analysed
relationships between commodities and two stock markets and he
concluded that information transmission between stock and commoditymarkets is rejected; consequently his findings support the use of
commodities to diversify risk in stock portfolios. Therefore, our analysis is
motivated but the results of previous studies, where precious metals
markets appeared to be an interesting option for investors to diversify their
portfolios and to implement their hedging techniques.
The main findings could be summarised as follows: in terms of volatility
persistence, our analysis shows that overall there are no significantcoefficients from stock returns to precious metals returns, while there is an
opposite result in the opposite case, where almost all the coefficients appear
to be significant. The analysis of the coefficients for the volatility spillovers
shows that the results are quite consistent across countries, and markets
over time in most of the cases, meaning that information from stock
markets affects precious metals markets and vice versa. The results from
the asymmetric spillovers analysis show that overall good news have less ofan impact in the markets than bad news.
Our results are consistent with Wolfle (2006) with regard to insignificant
evidence effects that were found running from the stock markets to the
commodities markets, but our results differ in the opposite direction, where
we found significant coefficients in some of the cases.
After getting the results from our EGARCH methodology and taking into
account that even the results are showing that stock returns and precious
markets returns are influenced by the information, reactions, shocks,
events that take place in any of them, a question that will be necessary to
address in a future research is which markets are being affected to a greater
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extent. If we found that stock returns are affected more negatively than
precious metals it will mean that investors will be able to use precious
metals to diversify their portfolio. As even the economy becomes in crisis ofshock, probably metal markets will suffer a lower effect than stock markets.
This is because they are characterized as a store of value and they will tend
to keep their value for a longer period than in the case of the stock markets;
then the use of precious metals markets could be important in order to
prevent bigger loses.
Investors can use precious metals markets to diversify their portfolio in
situations were the national currency is depreciating or where the stockmarkets returns decrease. Also it will be interesting to analyse if in some
occasions it could be possible that the precious metals returns could be
higher than the stock markets returns. Tully and Lucey (2006) found that
dollar depreciation and a growing risk of dollar devaluation are likely to
strengthen investors demand for gold. Financial analysts have attributed to
the rise in golds price, the depreciation of the dollar value on international
markets. Traditionally gold has played a significant role during times ofpolitical and economic crises and during equity market crashes. This is still
the case in a post Bretton-Woods era.
Our results provide evidence of the need for further research in this area.
Possible extensions could focus to implement this analysis in the case of the
European markets, using multivariate techniques where key indicators such
as economic growth, the interest rates and exchange rates should be
included in the analysis in order to get information of the reaction of themarkets when changes in interest rates or currency
depreciation/appreciation occur.
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4.Term structure model of commodity prices :(By Delphine Lautier)
Abstract:
This review article describes the main contributions in the literature on term
structure models of commodity prices. A first section is devoted to the
theoretical analysis of the term structure. It confines itself primarily to the
traditional theories of commodity prices and to their explanation of the
relationship between spot and futures prices. The normal backwardation
and storage theories are however a bit limited when the whole term
structure is taken into account. As a result, there is a need for an extension
of the analysis for long-term horizon, which constitutes the second point of
the section. Finally, a dynamic analysis of the term structure is presented.
Section two is centered on term structure models of commodity prices. The
presentation shows that these models differ on the nature and the number
of factors used to describe uncertainty. Four different factors are generally
used: the spot price, the convenience yield, the interest rate, and the long-term price. Section three reviews the main empirical results obtained with
term structure models. First of all, simulations highlight the influence of the
assumptions concerning the stochastic process retained for the state
variables and the number of state variables. Then, the method usually
employed for the estimation of the parameters is explained. Lastly, the
models performances, namely their ability to reproduce the term structure
of commodity prices, are presented. Section four exposes the two main
applications of term structure models: hedging and valuation. Section five
resumes the broad trends in the literature on commodity pricing during the
1990s and early 2000s, and proposes futures directions for research.
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Conclusion:
In this study, they can identify some of the broad trends in the literature on
commodity pricing during the 1990s and early 2000s.
Firstly, considering the main developments on term structure models of
commodity prices, it is possible to determine some specificity of
commodities that distinguish them from other assets. Commodities are
indeed characterized by mean reversion in spot and futures prices.
Moreover, because arbitrage relationships between the futures market and
the physical market are limited, price volatility is positively correlated with
the degree of backwardation. Prices are also sometimes affected by
seasonality.
Lastly, the term structure is characterized by the Samuelson effect.
Secondly, independently of the number of state variables included, the term
structure models of commodity prices are generally conceived in a partial
equilibrium framework consequently, the .selection of the state variables
can be considered as somehow arbitrary. However, the choice is most of the
time based on the traditional theories. Moreover, autonomous spot price,
convenience yield and long-term price may be regarded as the reduced form
of a more general model in which these variables are endogenously
determined by production, consumption and storage decisions. Still, until
now, nobody has really proved that the convenience yield is a better choice
than the long-term price as a second factor. The comparison between the
models is quite difficult to undertake.
Future developments in term structure model of commodity prices will
probably introduce a more precise description of the prices behaviour. Until
now, the leptokurtic nature of commodity returns (Dusak, 1973), and the
fact that commodity returns distribution are negatively skewed were for
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example ignored. The introduction of such characteristics in term structure
models could lead to animprovement of the performances. However, in that
case, the question of the arbitrage between reality and simplicity arises.Although such an introduction may improve the performances of the
models, there will be a balance to find between the fidelity of the prices
models and the need for parsimony, especially when the models are
conceived for the evaluation of more complex derivatives products, as real
options.
As far as the applications of term structure models are concerned, almost
two directions can be drawn. For hedging purposes, to be adapted bypractitioners, the literature could progress towards practical
considerations, like the transactions costs associated with hedging
portfolios or the rebalancing of these portfolios. Moreover, there is a need to
quantify the risk associated with these portfolios, using for example value
at risk methods (Cabedo and Moya (2003)). For the valuation ofreal assets
relying on the theory of real options, it could be interesting to introduce
other sources of uncertainty in the valuation process. Until now, theanalysis framework taken into consideration is most of the time simplistic,
and the main source of uncertainty is the price of the commodity.
However, the introduction of new sources of uncertainty prevents probably
from pricing several options simultaneously. Once again, some arbitrages
must be done.
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5.Is the Gold-to-Silver Price Ratio a Valid Indicator forInvestment Strategies based on Sector, Style, or Size?
(Preliminary paper)
Abstract:
Historically, gold and silver have been regarded as the most precious of all
metals. However, their main uses in modern times are quite distinct: gold is
mainly an investment vehicle, while silver is a key industrial commodity.
Using the data from January 1972 to December 2008, we address whether
the gold-to-silver price ratio is a viable indicator that can be used as thebasis of size and style investing strategies. In addition, they examine the
possibility of employing this ratio as the basis of a profitablerotation trading
strategy among the ten sectors in S&P 500 indexes.
Conclusion:
In this preliminary paper they examine the relationship of average daily rate
of return for gold, silver, and S&P 500 index from January 1972 toDecember 2008. They analyze and compare these relationships in the
overall period and in periods defined by the NBER as contractionary or
expansionary. They find evidence of the significant inverse relationship
between returns on small firms and the gold-to-silver price ratio. This
relationship also holds for small size growth size firms. These preliminary
results indicate that gold-to-silver price ratio may serve as an indicator for
the rotation strategies in time investing and sector investing. The complete
version of the paper will have a fully developed literature review. They were
investigate the risk-adjusted returns of the portfolios in the two sub-periods
within the framework of Fama and French (1993) and Carhart (1997).
Furthermore, they were adopt the change of gold-to-silver ratio/75-day
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average gold-to-silver ratio as a signal of the status of the economy and
forecast the forward looking returns for the large capitalization portfolio,
small-capitalization portfolio, and the ten sectors in the S&P 500 index. Amodified ratio (that is the forward price of gold/forward price of silver) is
also used. They expect that the paper, when completed, were provide insight
into the suitability of employing the gold-to-silver price ratio as a leading
indicator for the bullish and bearish markets. Further, the completed paper
will show whether it is possible to create a profitable trading strategy based
on the gold-to-silver price ratio.
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3.1 Problem definition: The problem related to know about future investment opportunity and
the risk & return on their investment in precious metal like gold and
silver of commodity market.
3.2 Research Objective:Primary objectives:
To know the investment opportunity in commodity market. To know the relationship between precious metal in commodity
market and U.S. dollar.
To know risk and return from the investment in precious metal ofcommodity market.
To know the performance of precious metal in Indian commoditymarket.
Secondary objective:
To get knowledge about commodity market. To understand about commodity derivatives. To know the fluctuation in gold price , silver price and also U.S.
dollar.
3.3 Research Design : Research design is the conceptual structure within which research is
conducted; it constitutes the blueprint for collection, measurementand analysis of data.
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For this study we have choose DESCRIPTIVE research design.
3.4 Data collection method :Primary data:
Consists of information gathered for some specific purposes and
primary data is also that u collects through researches, surveys and
experiments.
Secondary data:
Secondary data is consists of information that already exists
somewhere having being collected for some purposes and is been
utilize for references.
Here in this report, we have taken secondary data method and
collected data from following sources.
Internet Books Companys record Companys journals
http://www.blurtit.com/q347507.htmlhttp://www.blurtit.com/q347507.html -
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3.5 Limitations of Research :Even though we gave our best to complete this project, certain
limitations are still remaining which are as follows.
The report conduct only precious metal commodity so this report nothelps out to that investor who wants to invest in other commodity.
Tools which we used for calculating risk and return are not enough.
It contains only gold and silver commodity.
For the very few contract of platinum, we cant consider platinum.
Time duration is also one of the limitations of this project.
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TABLE: 1 RISK & RETURN ON CLOSING CONTRACT PRICE
OF GOLD
Month Value ( rs. Inlakhs )s. In
Goldreturn
(x-x) (x-x)2
Mar(2008) 13303709.69
Apr 9783636.87 -26.4593 -29.817273 889.0697752
May 10057079.86 2.794901 -0.5630391 0.317012978
Jun 12407210.28 23.36792 20.0099801 400.3993045
Jul 18939267.3 52.64727 49.2893259 2429.437643
Aug 15149048.75 -20.0125 -23.370428 546.1769083
Sep 19956929.49 31.73718 28.3792388 805.3811964
Oct 15051936.16 -24.5779 -27.935836 780.410938
Nov 12313028.42 -18.1964 -21.554322 464.5887926
Dec 14873513.2 20.79492 17.4369827 304.0483655
Jan(2009) 18612360.13 25.13762 21.7796777 474.3543597
Feb 20429157.13 9.761239 6.40329892 41.00223711
Mar 24137358.49 18.15151 14.7935739 218.8498287
Apr 13914323.29 -42.3536 -45.711519 2089.542999
May 13139779.36 -5.56652 -8.9244628 79.64603566
Jun 12430826.49 -5.39547 -8.7534104 76.62219433
Jul 10072292.46 -18.9733 -22.331208 498.6828667
Aug 8105614.81 -19.5256 -22.883561 523.6573776
Sep 12607367.37 55.53869 52.1807531 2722.830996
Oct 12519294.37 -0.69858 -4.0565239 16.45538621
Nov 17474643.5 39.5817 36.2237564 1312.160529
Dec 21554174 23.34543 19.9874887 399.499706
Jan(2010) 15823072.03 -26.5893 -29.947231 896.8366418
Feb 17272860.54 9.162497 5.80455675 33.69287905
Mar 17082508.35 -1.10203 -4.4599708 19.89133959
Apr 14540787.51 -14.8791 -18.237025 332.5890715
May 21556973.93 48.25176 44.8938233 2015.455372
Jun 23183162.45 7.543677 4.18573685 17.520393 Jul 21812082.37 -5.91412 -9.2720605 85.97110509
Aug 16812739.39 -22.9201 -26.278003 690.5334483
Sep 18094300.42 7.622559 4.26461899 18.1869751
Oct 19349094.58 6.934748 3.57680782 12.79355415
Nov 19609159.08 1.344065 -2.0138748 4.055691865
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S.D= -2
/ n
CHART: 1
Interpretation:
The above table shows the contract closing price of the gold in commodity
market and it also shows the risk and return on the contract by calculatingthe standard deviation. And chart shows the fluctuation on return of gold
contract price.
-60
-40
-20
0
20
40
60
80
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar r
Gold Return
Series1
Dec 14738043.13 -24.841 -28.198965 795.1815989
Jan(2011) 17572472.02 19.23206 15.8741169 251.987588
Feb 14083970.99 -19.8521 -23.210019 538.7049972
Mar 16308243.58 15.79294 12.4349961 154.6291292
S.D 24.11843707
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TABLE : 2 RISK & RETURN ON CLOSING CONTRACT PRICE
OF SILVER
Month Value ( rs. Inlakhs )s. In
Silverreturn
(x-x) (x-x)2
Mar(2008) 8063825.93
Apr 5516365.43 -31.5912 -38.5154 1483.433
May 4746409.57 -13.9577 -20.8818 436.0502
Jun 5498932.58 15.85457 8.930424 79.75247
Jul 7067360.33 28.5224 21.59825 466.4846
Aug 6177651.73 -12.589 -19.5131 380.7622
Sep 7331677.48 18.68065 11.7565 138.2154Oct 5536421.96 -24.4863 -31.4104 986.6155
Nov 3969335.59 -28.305 -35.2292 1241.096
Dec 4058994.55 2.25879 -4.66536 21.76558
Jan(2009) 5328398.71 31.27386 24.34971 592.9083
Feb 6320724.53 18.62334 11.69919 136.8711
Mar 6155244.33 -2.61806 -9.54221 91.05372
Apr 4365411.02 -29.0782 -36.0023 1296.168
May 5309828.42 21.6341 14.70995 216.3826
Jun 7715046.89 45.29748 38.37333 1472.512
Jul 4656576.05 -39.6429 -46.5671 2168.493
Aug 6001857.33 28.88992 21.96577 482.4952
Sep 8738445.07 45.59568 38.67153 1495.487
Oct 8440848.94 -3.4056 -10.3297 106.7036
Nov 10257322.7 21.52004 14.59589 213.0399
Dec 9601391.68 -6.39476 -13.3189 177.3933
Jan(2010) 8587938.45 -10.5553 -17.4794 305.5303
Feb 9826739.27 14.42489 7.500742 56.26113
Mar 8958236.42 -8.83816 -15.7623 248.4504
Apr 8083338.83 -9.7664 -16.6906 278.5746
May 10071362.56 24.59409 17.66994 312.2268
Jun 11130992.7 10.52122 3.59707 12.93891
Jul 10357543.78 -6.94861 -13.8728 192.4534
Aug 11564640.12 11.65427 4.730122 22.37406
Sep 12494975.15 8.044652 1.120502 1.255525
Oct 19538467.67 56.3706 49.44645 2444.951
Nov 26761011.14 36.96576 30.04161 902.4985
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CHART: 2
Interpretation:
The above table shows the contract closing price of the silver in commodity
market and it also shows the risk and return on the contract by calculating
the standard deviation. And chart shows the fluctuation on return of silver
contract price.
-60
-40
-20
0
20
40
60
80
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar r
Silvar Return
Series1
Dec 22289596.26 -16.7087 -23.6328 558.5112
Jan(2011) 25132683.5 12.75522 5.831071 34.00139
Feb 26894510.54 7.010103 0.085953 0.007388
Mar 35948167.34 33.66359 26.73944 714.9975
S.D 23.43354449
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TABLE: 3 MONTHLY DOLLAR RETURN
Month $ Price $ ReturnMar(2008) 40.14
Apr 39.97 -0.423518
May 41.88 4.7785839
Jun 42.76 2.1012416
Jul 42.72 -0.093545
Aug 42.92 0.4681648
Sep 45.42 5.8247903
Oct 48.62 7.0453545Nov 48.79 0.3496503
Dec 48.48 -0.635376
Jan(2009) 48.73 0.5156766
Feb 49.19 0.943977
Mar 51.21 4.1065257
Apr 50.06 -2.245655
May 48.55 -3.01638
Jun 47.75 -1.647786
Jul 48.44 1.4450262
Aug 48.33 -0.227085Sep 48.36 0.0620732
Oct 46.72 -3.391232
Nov 46.56 -0.342466
Dec 46.16 -0.859107
Jan(2010) 45.92 -0.519931
Feb 46.35 0.9364111
Mar 45.5 -1.833873
Apr 44.47 -2.263736
May 45.87 3.1481898
Jun 46.58 1.5478526
Jul 46.84 0.5581795
Aug 46.58 -0.555081
Sep 45.99 -1.266638
Oct 44.43 -3.392042
Nov 45 1.2829169
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Ri = Current Month Closing Price- Previous Month Closing Price *100
Previous Months Closing Price
CHART: 3
Interpretation:
The above table shows the dollar price and its average return during 2008 to
2011. And above chart shows the fluctuation in average dollar return.
-4
-2
0
2
4
6
8
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar r
Series1
$ Returm
Dec 45.12 0.2666667
Jan(2011) 45.4 0.6205674
Feb 45.42 0.0440529
Mar 44.97 -0.990753
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TABLE:4 RELATIONSHIP BETWEEN GOLD & DOLLAR
MONTH $ r$
Return
Gold
Return
x2 Y2 XY
Mar(2008)
Apr -0.423518 -26.4593 0.179367 700.0946 11.20598
May 4.7785839 2.794901 22.83486 7.811472 13.35567
Jun 2.1012416 23.36792 4.415216 546.0597 49.10165
Jul -0.093545 52.64727 0.008751 2771.735 -4.92491
Aug 0.4681648 -20.0125 0.219178 400.5002 -9.36915
Sep 5.8247903 31.73718 33.92818 1007.249 184.8624
Oct 7.0453545 -24.5779 49.63702 604.0732 -173.16
Nov 0.3496503 -18.1964 0.122255 331.109 -6.36238
Dec -0.635376 20.79492 0.403703 432.4287 -13.2126
Jan(2009) 0.5156766 25.13762 0.265922 631.8999 12.96288
Feb 0.943977 9.761239 0.891093 95.28179 9.214385
Mar 4.1065257 18.15151 16.86355 329.4773 74.53964
Apr -2.245655 -42.3536 5.042967 1793.827 95.11158
May -3.01638 -5.56652 9.09855 30.98614 16.79074
Jun -1.647786 -5.39547 2.715198 29.1111 8.890579
Jul 1.4450262 -18.9733 2.088101 359.9861 -27.4169
Aug -0.227085 -19.5256 0.051568 381.2491 4.433972
Sep 0.0620732 55.53869 0.003853 3084.546 3.447467Oct -3.391232 -0.69858 11.50046 0.488014 2.369047
Nov -0.342466 39.5817 0.117283 1566.711 -13.5554
Dec -0.859107 23.34543 0.738064 545.0091 -20.0562
Jan(2010) -0.519931 -26.5893 0.270328 706.9909 13.82459
Feb 0.9364111 9.162497 0.876866 83.95135 8.579864
Mar -1.833873 -1.10203 3.363089 1.21447 2.020983
Apr -2.263736 -14.8791 5.124502 221.3876 33.68236
May 3.1481898 48.25176 9.911099 2328.232 151.9057
Jun 1.5478526 7.543677 2.395848 56.90706 11.6765
Jul 0.5581795 -5.91412 0.311564 34.97682 -3.30114Aug -0.555081 -22.9201 0.308115 525.331 12.72251
Sep -1.266638 7.622559 1.604372 58.10341 -9.65502
Oct -3.392042 6.934748 11.50595 48.09073 -23.523
Nov 1.2829169 1.344065 1.645876 1.806511 1.724324
Dec 0.2666667 -24.841 0.071111 617.0753 -6.62427
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Jan(2011) 0.6205674 19.23206 0.385104 369.8721 11.93479
Feb 0.0440529 -19.8521 0.001941 394.1059 -0.87454
Mar -0.990753 15.79294 0.981591 249.417 -15.6469
r -0.180438
r2 0.032558
CHART: 4
Interpretation:
The above table and chart shows the return on silver contract closing price
as well as dollar and also shows co-relation between them. From the above
table we can say that there are negative relation between gold and dollar.
-60
-40
-20
0
20
40
60
80
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
mar
may
jul
sep
nov
jan
ma r r
Gold v/s $
Series1
Series2
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TABLE: 5 RELATIONSHIPS BETWEEN SILVAR &
DOLLAR
MONTH $ r$Return
SilverReturn
x2 Y2 XY
Mar(2008)
Apr -0.423518 -31.5912 0.179367 998.0039 13.37943
May 4.7785839 -13.9577 22.83486 194.8174 -66.698
Jun 2.1012416 15.85457 4.415216 251.3674 33.31428
Jul -0.093545 28.5224 0.008751 813.5273 -2.66814
Aug 0.4681648 -12.589 0.219178 158.4829 -5.89373
Sep 5.8247903 18.68065 33.92818 348.9667 108.8109
Oct 7.0453545 -24.4863 49.63702 599.5789 -172.515Nov 0.3496503 -28.305 0.122255 801.173 -9.89685
Dec -0.635376 2.25879 0.403703 5.102132 -1.43518
Jan(2009) 0.5156766 31.27386 0.265922 978.0543 16.1272
Feb 0.943977 18.62334 0.891093 346.8288 17.58
Mar 4.1065257 -2.61806 16.86355 6.854238 -10.7511
Apr -2.245655 -29.0782 5.042967 845.5417 65.29961
May -3.01638 21.6341 9.09855 468.0343 -65.2567
Jun -1.647786 45.29748 2.715198 2051.862 -74.6405
Jul 1.4450262 -39.6429 2.088101 1571.56 -57.285
Aug -0.227085 28.88992 0.051568 834.6275 -6.56047Sep 0.0620732 45.59568 0.003853 2078.966 2.830272
Oct -3.391232 -3.4056 11.50046 11.59811 11.54918
Nov -0.342466 21.52004 0.117283 463.1121 -7.36988
Dec -0.859107 -6.39476 0.738064 40.89296 5.49378
Jan(2010) -0.519931 -10.5553 0.270328 111.4144 5.488024
Feb 0.9364111 14.42489 0.876866 208.0775 13.50763
Mar -1.833873 -8.83816 3.363089 78.11307 16.20806
Apr -2.263736 -9.7664 5.124502 95.38257 22.10855
May 3.1481898 24.59409 9.911099 604.8693 77.42686
Jun 1.5478526 10.52122 2.395848 110.6961 16.2853
Jul 0.5581795 -6.94861 0.311564 48.28318 -3.87857
Aug -0.555081 11.65427 0.308115 135.822 -6.46907
Sep -1.266638 8.044652 1.604372 64.71643 -10.1897
Oct -3.392042 56.3706 11.50595 3177.645 -191.211
Nov 1.2829169 36.96576 1.645876 1366.467 47.424
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Dec 0.2666667 -16.7087 0.071111 279.1807 -4.45565
Jan(2011) 0.6205674 12.75522 0.385104 162.6956 7.915473
Feb 0.0440529 7.010103 0.001941 49.14154 0.308815
Mar -0.990753 33.66359 0.981591 1133.237 -33.3523
r -0.1703
r2 0.029002
CHART: 5
Interpretation:
The above table and chart shows the return on silver contract closing price
as well as dollar and also shows co-relation between them. From the above
table we can say that there are negative relation between silver and dollar.
-60
-40
-20
0
20
40
60
80
m
ar
m
ay
jul
sep
nov
jan
m
ar
m
ay
jul
sep
nov
jan
m
ar
m
ay
jul
sep
nov
jan
m
a r r
Silvar v/s $
Series1
Series2
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5.1 FINDINGS:
Major factors which affect the market price of gold & silveris world macro-economic factors- US Dollar, Interest Rate,
Domestic & International demand based on output &
market price.
Worlds biggest gold manufacturing country is South Africawith 297 tones followed by United Nations and Australia.
India is largest consumer of gold with annual demand of800 tones followed by United States.
The contract Price of the gold increased by 14.71 % duringthe period of Apr-2008 to Mar-2009.
The contract Price of the gold increased by 22.77 % duringthe period of Apr-2009 to Mar-2010.
The contract Price of the gold increased by 12.16 % duringthe period of Apr-2010 to Mar-2011
The contract Price of the silver decreased by 11.58 % duringthe period of Apr-2008 to Mar-2009.
The contract Price of the silver increased by 10.52 % duringthe period of Apr-2009 to Mar-2010.
The contract Price of the silver increased by 34.47 % duringthe period of Apr-2010 to Mar-2011.
Price of dollar decreased by 1.12% in last year. Gold and US $ has negative relationship where r = -0.18.
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Silver and US $ has negative relationship where r = -0.17. The standard deviation of gold contract is 23.43. The standard deviation of silver contract is 24.12.
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5.2 CONCLUSIONS:Members who have invested in share market should be explained
about the commodity market. There should be some experts
employed specially for analyzing performance of commodity such
as precious metals to provide fruitful results to investors. In
commodity there is only future and no other like option, swaps,
credit derivative are available. The investors should be given
protection for their investment in terms of increased margin. In
commodity market there should be lower quantity available for
precious metals so that investors can invest in precious metal
commodities. The investor should invest in gold and silver rather
than platinum because the risk is more in platinum as compare
to gold and silver.
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RECOMMENDATIONS
Gold :
Those investors who want to invest in Gold are advisable to do their
investment in it because the contract price of gold is increased
continuously during April-2008 to March-2011. There is negative
relationship between Gold and U.S. Dollar. As we know that Gold price is
going high day by day, so investor of gold can get maximum return at
minimum risk as gold price increased day by day and the possibilities of
decreasing the gold price is very low. So we can suggest that to invest in
gold is beneficial for the investors.
Silver :
Those investors who want to invest in Silver are advisable to do their
investment in it after knowing the market condition because during
April-2008 to March-2011 in first year silver contract price was
decreased but after that it is increased. So knowing the market condition
is very much important aspect for the investor. There is also negativerelationship between Silver and U.S. Dollar. But silver is also one of the
good precious metal which can get higher return at lower risk. So
investing in silver is also beneficial for the investors.
Platinum:
Platinum is very costliest metal and because of this there are very few
contracts are held in every year. So we can not consider it in our report
because it cannot give a right answer for investment. So we can suggest
to investor that rather than investing in platinum they can invest in gold
and silver.
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BIBLIOGRAPHY AND REFRENCES:
BOOKS : Commodities and Commodity Derivatives: Modeling and pricing for
Agricultural, Metals and Energy. (By Helyette Geman)
Precious metals investing for Dummies. (By Paul J. Mladjenovic)
WEBSITES : www.arcadia.com www.mcxindia.com www.kitco.com www.forex.com www.gfms.co.ukRESEARCH PAPERS : www.stocktradingmarket.net
http://www.arcadia.com/http://www.mcxindia.com/http://www.kitco.com/http://www.forex.com/http://www.gfms.co.uk/http://www.gfms.co.uk/http://www.gfms.co.uk/http://www.forex.com/http://www.kitco.com/http://www.mcxindia.com/http://www.arcadia.com/
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