A STUDY OF INVESTOR PERCEPTION TOWARDS THE INVESTMENT PATTERN IN COMMODITY MARKET

ABSTRACT In the developing country like India, every individual wants to invest his money in a hassle free way. People are now a day busy with their own works and thus prefer etrading rather than going to the brokers and waiting for getting the delivery of shares in their Trading Account. As a basic result of all this, traditional investing has experienced a revolution due to the rise of the e-brokerage industry, which enables investors to use the internet to conduct secure trading. Two factors are contributing to the enormous growth of online investing. irst, the Internet gives ready access to raw data. !econd, investment houses can offer transactions at lower prices than traditional methods by eliminating the need for brokers or financial advisers. "ut for discussing all this, the first and foremost thing that must be known is the meaning of Trading and about the share market. And in this pro#ect it$s all about share market, Trading, Indiabulls, all the services and products which they provide, competitive study with other "rokerage firm and analysis. Till some months ago, this wouldn%t have made sense. or retail investors could have done very little to actually invest in commodities such as gold and silver -- or oilseeds in the futures market. This was nearly impossible in commodities except for gold and silver as there was practically no retail avenue for punting in commodities. &owever, with the setting up of three multi-commodity exchanges in the country, retail investors can now trade in commodity futures without having physical stocks' The Pro#ect was undertaken to find out the preference of investors towards (ommodity and find out the different strategies available in commodity trading. The ultimate reason behind this was to know how far commodity trading activity carries out, who is the preferred investor. )hat is the kind of preference they opt for* )hat are the various strategies available* &ow they carry on the activity* &ow they make profit in spot market* &ow can profit me made by future contract or market etc

CHAPTER 1 INTRODUCTION (ommodity markets are the places where raw or primary products are interchanged. These raw commodities are traded on synchroni+ed commodities exchanges in which they are trading in standardi+ed contracts. Trading in commodities refers to the futures market for commodities. (ommodities comprise any supplies which are unbranded and are commonly traded in the market. They include farming commodities like wheat, rice, tea, #ute, spices, !oya, groundnut, coffee, rubber, cotton etc, valuable metals like gold and silver, base metals like iron ore, lead, aluminium, nickel, +inc etc, and energy commodities like crude oil and coal The global commodity trade market is massive about thrice the si+e of the e,uities trade market. The domestic commodity market is still in a budding stage, but is growing by leaps and limits. The commodity market is predicted to nurture at an annual rate of -. percent in another five years. (ommodity markets ease trading in various commodities. It may be a spot market or a derivative market. In case of a spot market, the commodities trade for immediate delivery. In case of a commodities derivative market, various financial instruments based on the commodities are traded on the exchanges. Profitability i Co!!o"ity Mar#$t% The one element to improve investor$s portfolio is investing in commodities. )hile price fluctuations in the sector could get rather volatile depending on the category returns are relatively high. (ommodities allow a portfolio to recover return at the similar level of risk. Investors should reali+e the demand cycle that commodities go through and should have a idea on what factors may affect this. This study also aims to suggest few suggestions which help the company to serve their clients properly and to show them the positive aspects of the commodity trading.

/any people have become very rich in the commodity markets. It is one of a few investment areas where an individual with limited capital can make extraordinary profits in a relatively short period of time. 0evertheless, because most people lose money, commodity trading has a bad reputation as being too risky for the average individual. The truth is that commodity trading is only as risky as you want to make it. Those who treat trading as a get-rich-,uick scheme are likely to lose because they have to take big risks. If you act prudently, treat your trading like a business instead of a giant gambling casino and are willing to settle for a reasonable return, the risks are acceptable. The probability of success is excellent. The process of trading commodities is also known as futures trading. 1nlike other kinds of investments, such as stocks and bonds, when you trade futures, you do not actually buy anything or own anything. 2ou are speculating on the future direction of the price in the commodity you are trading. This is like a bet on future price direction. The terms 3buy3 and 3sell3 merely indicate the direction you expect future prices will take. If, for instance, you were speculating in corn, you would buy a futures contract if you thought the price would be going up in the future. 2ou would sell a futures contract if you thought the price would go down. or every trade, there is always a buyer and a seller. 0either person has to own any corn to participate. &e must only deposit sufficient capital with a brokerage firm to insure that he will be able to pay the losses if his trades lose money. In addition to speculators, both the commodity%s commercial producers and commercial consumers also participate. The principal economic purpose of the futures markets is for these commercial participants to eliminate their risk from changing prices. 4n one side of a transaction may be a producer like a farmer. &e has a field full of corn growing on his farm. It won%t be ready for harvest for another three months. If he is worried about the price going down during that time, he can sell futures contracts e,uivalent to the si+e of his crop and deliver his corn to fulfill his obligation under the contract. 5egardless of how the price of corn changes in the three months until his crop will be ready for delivery, he is guaranteed to be paid the current price.

4n the other side of the transaction might be a producer such as a cereal manufacturer who needs to buy lots of corn. The manufacturer, such as 6ellogg, may be concerned that in the next three months the price of corn will go up, and it will have to pay more than the current price. To protect against this, 6ellogg can buy futures contracts at the current price. In three months 6ellogg can fulfill its obligation under the contracts by taking delivery of the corn. This guarantees that regardless of how the price moves in the next three months, 6ellogg will pay no more than the current price for its corn. In addition to agricultural commodities, there are futures for financial instruments and intangibles such as currencies, bonds and stock market indexes. 7ach futures market has producers and consumers who need to hedge their risk from future price changes. The speculators, who do not actually deal in the physical commodities, are there to provide li,uidity. This maintains an orderly market where price changes from one trade to the next are small. 5ather than taking delivery or making delivery, the speculator merely offsets his position at some time before the date set for future delivery. If price has moved in the right direction, he will profit. If not, he will lose. The functions of the futures markets8 3In addition to reducing the costs of production, marketing and processing, futures markets provide continuous, accurate, well-publici+ed price information and continuous li,uid markets. utures trading are 9thus: beneficial to the public which ultimately consumes the goods traded in the futures markets. )ithout the speculator futures markets could not function.3 !ince speculators perform the valuable functions of providing li,uidity and assuming the risk of price fluctuation, they can earn substantial returns. The potentially large profits are available precisely because there is also a risk of substantial loss.

INDUSTRY PROFI&E (apital market is a market for raising capital. It is an organi+ed market for meeting long term financial needs of the companies. In India, companies are the important of business organi+ation. These companies, particularly public limited companies raise long term capital by selling securities such as shares, debentures or bonds. These companies are public ; private sector companies. A rural investor in the country seldom buys these securities from the companies. The players in the capital market are thus, borrowers of money who demand funds and the lenders of money who supply funds. "orrowers are #oint stock companies and lenders are public i.e. investors. There are intermediaries who deal with the lenders on one hand and the borrowers on the other hand. T'$ (a)ital !ar#$t i* "i+i"$" i to t,o )art*8 1- Primary market, and .- !econdary market. In case of primary market the companies directly sale securities to the investors in order to raise long term capital. There is a public issue of securities through prospectus. These securities are made to buy or sell these securities through the stock market which is known as secondary market. In the secondary market the securities already issued by the companies are exchanged. This market also deals with securities of the central government, state governments and financial institutions such as I (I, I<"I, !I<"I and ! (s. Hi*tory of (a)ital !ar#$t The history of the capital market in India dates back to the eighteenth century when 7ast India (ompany securities were traded in the country. 1ntil the end of the nineteenth century, securities trading were unorgani+ed and the main trading centers were /umbai, 6olkata. 4f the two, /umbai was the chief trading center wherein bank shares were the ma#or trading stock. /umbai stock exchange was recogni+ed in /ay =>?@ under the /umbai securities contract control =>?A. In the =>A.$s century textiles, Tata steel, "ombay dyeing, 0ational rayon, 6ohinoor mills where the favorite scrip$s of speculators.

In the =>@.$s, "adla trading was resumed under the disguised form of hand-delivery contracts to revive the capital market. &owever, the capital market received another severe setback on Bth Culy =>@-, when the Dovernment promulgated the dividend restriction ordinance. The =>E.$s witnessed an explosive growth of securities market in India. The decade of =>E.s was characteri+ed by an increase in the number of stock exchanges, listed companies, and paid F up capital and market capitali+ation. The =>>.s will go down as the most important decade in the history of capital market of India. Giberali+ation and globali+ation were the new terms coined and marketed during this decade. 7mergence of !7"I as a regulator of capital market invited more concentration of investors. In its broadest sense, an investment is a sacrifice of current money or other resources for future benefits. 0umerous avenues of investment are available today. 2ou can either deposit money in a bank or purchase a long-term government bond or invest in the e,uity shares of a company or contribute to a provident fund account or buy a stock option or ac,uire a plot of land or invest in some other form. The two key aspects of any investment are time and risk. The sacrifice takes place now and is certain. The benefit is expected in the future and tends to be uncertain. In some investments Hlike government bondsI the time element is the dominant attribute. In other investments Hlike stock optionsI the risk element is the dominant attribute. In yet other investments Hlike e,uity sharesI both time and risk are important. Co!!o"iti$* Mar#$t i I "ia (ommodities actually offer immense potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. 5etail investors, who claim to understand the e,uity markets, may find commodities an unfathomable market. "ut commodities are easy to understand as far as fundamentals of demand and supply are concerned. 5etail investors should understand the risks and advantages of trading in commodities futures before taking a leap. &istorically, pricing in commodities futures has

been less volatile compared with e,uity and bonds, thus providing an efficient portfolio diversification option. In fact, the si+e of the commodities markets in India is also ,uite significant. 4f the country%s D<P of 5s =J,?.,@J. crore H5s =J,[email protected] billionI, commodities related Hand dependentI industries constitute about AE per cent. (urrently, the various commodities across the country clock an annual turnover of 5s =,-.,... crore H5s =,-.. billionI. )ith the introduction of futures trading, the si+e of the commodities market grows many folds here on. Gike any other market, the one for commodity futures plays a valuable role in information pooling and risk sharing. The market mediates between buyers and sellers of commodities, and facilitates decisions related to storage and consumption of commodities. In the process, they make the underlying market more li,uid.

The orward /arket (ommission under the department of (onsumer Affairs, /inistry of (onsumer Affairs ood and Public <istribution, Dovernment of India is the regulating authority of all utures Trading in (ommodity utures 7xchange in India. The Dovernment of India has removed all restriction on futures trading in almost all commodities under orward (ontracts 5egulation Act H (5AI, which includes agricultural commodities, industrial commodities and base metals. The 7xchanges has brought commodity-trading revolution in the country to make sure India emerges as a Dlobal commodities trading hub in the near futures. The year ?..B saw a remarkable performance in the commodities market as an asset class in investment.

The net oil exports as a percentage of the D<P of the 1! and Asia Pacific is back to the levels which prevailed during the decade =>@.-=>E. and any persistent increase in the energy prices would lead to a growth of demand in precious metals. Added much awaited Indian Dold 7xchange Traded unds H7T I skewed up the price of the metals. The agricultural commodities which have been left behind are most likely to regain their place again thus, the focus could shift to agricultural commodities in the year [email protected] the year ?..B the two metals were in competition with each other generating the aggregate (ompounded Annual Drowth 5ate H(AD5I of ==.B-K for gold and =?.EJK on silver during the last seven years. Therefore it is necessary to learn the customer preferences,

comfort and their awareness towards the commodity market. !o that traders could do better trade and utili+e the prevailing condition. rom this study most fre,uently traded commodity in case of metals can be identified and it is used for the study of forecasting volatility. Volatility The degree of variation of any variable is known as Lolatility measures. It is the measurement of the change of price over a given period. It is often expressed s a percentage computed as the annuali+ed !tandard <eviation of the percentage change in daily price. Lolatility is a statistical measure of the dispersion of returns for a given security or market index. The volatility of the overall e,uity market is crucial input to portfolio selection and to asset pricing models. Tactical investment decisions, and valuation of short-lived derivatives such as stock index options, fre,uently focus on short- term prediction of volatility. If the stock price goes down, it can be much lower than the exercise price that is called as Dreater volatility. To call holder, however, this does not matter because the potential loss is limitedM it is said to be truncated at he exercise price. If the possibility of lower stock prices is accompanied by the possibility of higher stock price, the option holder will benefit, and the option will be priced higher when the volatility is higher. The effect of the volatility on the put price is same as that for a call. &igher volatility increases the possible gains for a put. )henever high market volatility occurs, the tendency seems to be to blame it on whatever new is going on at time. 4ne of the most extraordinary innovations to occur in recent years has been the advent and explosive growth of options and futures trading

&i*t of E/('a 0$* i I "ia =. "hatinda 4m ; 4il 7xchange Gtd., "atinda. ?. The "ombay (ommodity 7xchange Gtd., /umbai J. The 5a#kot !eeds oil ; "ullion /erchantsN Association Gtd -. The 6anpur (ommodity 7xchange Gtd., 6anpur A. The /eerut Agro (ommodities 7xchange (o. Gtd., /eerut B. The !pices and 4ilseeds 7xchange Gtd. @. Ahmedabad (ommodity 7xchange Gtd. E. Li#ay "eopar (hamber Gtd., /u+affarnagar >. India Pepper ; !pice Trade Association, 6ochi =.. 5a#dhani 4ils and 4ilseeds 7xchange Gtd., <elhi ==. 0ational "oard of Trade, Indore =?. The (hamber 4f (ommerce, &apur =J. The 7ast India (otton Association, /umbai =-. The (entral India (ommercial 7xchange Gtd., Dwalior =A. The 7ast India Cute ; &essian 7xchange Gtd. =B. irst (ommodity 7xchange of India Gtd, 6ochi =@. "ikaner (ommodity 7xchange Gtd., "ikaner =E. The (offee utures 7xchange India Gtd, "angalore =>. 7sugarindia Gimited ?.. 0ational /ulti (ommodity 7xchange of India Gimited ?=. !urendranagar (otton oil ; 4ilseeds Association Gtd ??. /ulti (ommodity 7xchange of India Gtd ?J. 0ational (ommodity ; <erivatives 7xchange Gtd ?-. &aryana (ommodities Gtd., &issar ?A. e-(ommodities Gtd 4f these ?A commodities exchanges the MC12 NCDE1 and NMCEI& are the ma#or (ommodity 7xchanges.

COMPANY PROFI&E Indiabulls !ecurities Gimited is India$s leading capital markets company with All-India Presence and an extensive client base. Indiabulls !ecurities is the first and only brokerage house in India to be assigned the highest rating "O F = by (5I!IG. Indiabulls !ecurities Gtd is listed on 0!7, "!7 ; Guxembourg stock exchange Pro!ot$r* !ameer Dehlaut, 5a#iv 5attan and !aurabh /ittal started Indiabulls in /ay ?... as an online stock brokerage. The three founders of Indiabulls are engineering graduates from the Indian Institute of Technology, <elhi. Abo3t T'$ Co!)a y In middle of =>>>, when e-commerce was #ust about starting in India, !ameer Dehlaut and his close IIT <elhi friend 5a#iv 5attan got together and bought a defunct securities company with a 0!7 membership and started offering brokerage services. A ew months later, their friend !aurabh /ittal also #oined them. "y <ecember =>>>, the company embarked on its #ourney to build one of the first online platforms in India for offering internet brokerage services. In Canuary ?..., the J founders incorporated Indiabulls inancial !ervices and made it as the flagship company. In mid ?..., Indiabulls inancial !ervices received venture capital funding from /r G.0. /ittal ; /r &arish abiani. In late ?..., Indiabulls !ecurities, a subsidiary of Indiabulls inancial !ervices started offering online brokerage services and simultaneously opened physical offices across India. "y ?..J, Indiabulls securities had established a strong pan India presence and client base through its offices and on the internet. In !eptember ?..-, Indiabulls inancial !ervices went public with an IP4 at 5s => a share. In late ?..-, Indiabulls inancial !ervices started its financing business with consumer loans. In /arch ?..A, Indiabulls Properties Private Gtd, a subsidiary of

Indiabulls

inancial !ervices, participated in government auction of Cupiter /ills, a

defunct == acre textile mill owned by 0T( in Gower Parel, /umbai. Indiabulls Properties private Gtd won the mill in auction and that purchase started Indiabulls real estate business. A few months later, Indiabulls 5eal 7state company pvt ltd bought 7lphinstone mill in Gower Parel, another textile mill auctioned by 0T(. )ith real estate business gaining si+e, Indiabulls inancial !ervices demerged the real estate business under Indiabulls 5eal 7state and each shareholder of Indiabulls inancial !ervices received additional share of Indiabulls 5eal 7state through the demerger. !ubse,uently, Indiabulls inancial !ervices also demerged Indiabulls !ecurities and each shareholder of Indiabulls inancial !ervices also received a share of Indiabulls !ecurities. In year ?..@, Indiabulls 5eal 7state incorporated a =..K subsidiary, Indiabulls Power, to build power plants and started work on building 0ashik ; Amrawati thermal power plants. Indiabulls Power went public in !eptember ?..>. Today, Indiabulls Droup has a networth of 5s =B,@>B (rore ; has a strong presence in important sectors like financial services, power ; real estate through independently listed companies and Indiabulls Droup continues its #ourney of building businesses with strong cash flows. SERVICE PROFI&E OF THE COMPANY I "iab3ll* 4ro3) is one of the country%s leading business houses with business interests in Power, inancial !ervices, 5eal 7state and Infrastructure. Indiabulls Droup companies are listed in Indian and overseas financial markets. The 0et worth of the Droup is 5s =B,E-- (rore and the total planned capital expenditure of the Droup by ?.=J-=- is 5s JA,... (rore. I "iab3ll* Po,$r is currently developing Thermal Power Pro#ects with an aggregate capacity of A-.. /). The first unit is expected to go on stream in /ay ?.=?. The net worth of Indiabulls Power is 5s J,>=> (rore. The company has a total capital expenditure of 5s ?@,A.. (rore. The company has been assigned %"""% rating.

I "iab3ll* Fi a (ial S$r+i($* is one of India$s leading non-banking finance companies providing &ome Goans, (ommercial Lehicle Goans and !ecured !/7 Goans. The company has a net worth of 5s -,BB= crore with an asset book of 5s ?J,@>? (rore. The company has disbursed loans over 5s A.,... (rore to over J,..,... customers till date. Amongst its financial services and banking peers, Indiabulls inancial !ervices ranks amongst the top few companies both in terms of net worth and capital ade,uacy. Indiabulls inancial !ervices has been assigned PAAQ$ rating and has presence in over E@ cities and towns with a total branch network of =@. branches. I "iab3ll* R$al E*tat$ is among India%s top 5eal 7state companies with development pro#ects spread across residential complexes, integrated townships, commercial office complexes, hotels, malls, !pecial 7conomic Rones H!7RsI and infrastructure development. Indiabulls 5eal 7state partnered with arallon (apital /anagement GG( of 1!A to bring the first <I into real estate in the country. The company has a networth of 5s @,A.A (rore and has purchased prime land, mostly in the metros and other Tier = cities worth 5s -,... (rore in government auctions alone. Indiabulls 5eal 7state is currently developing B-.J? million s,ft into premium ,uality, high-end commercial, residential and retail spaces. The company has been assigned %AQ% rating. I "iab3ll* S$(3riti$* is one of India%s leading capital markets companies providing securities broking and advisory services. Indiabulls !ecurities also provides depository services, e,uity research services and IP4 distribution to its clients and offers commodities trading through a separate company. These services are provided both through on-line and off-line distribution channels. Indiabulls !ecurities is a pioneer of online securities trading in India. Indiabulls !ecurities$ in-house trading platform is one of the fastest and most efficient trading platforms in the country. Indiabulls !ecurities has been assigned the highest rating "O-= by (5I!IG.

I "iab3ll* Co!!o"ity S$r+i($* Indiabulls (ommodity offers one of the best online commodity trading solutions to individual clients through its Individual Trading desk. The Individual Trading desk enables a client to trade in any commodity futures, listed on the national commodity exchanges, with a slew of value-added services attached to it at no extra cost. The Indiabulls (ommodity (orporate <esk offers trading and hedging solutions to corporate clients. It acts only on the clients% instructions S orders. And, based on their independent decision, I"(!G helps them in their hedging process, including implementation and continuous monitoring of their positions. 4ur guidance helps clients withstand the vagaries of commodity price fluctuations in their businesses, which may generate higher risk-ad#usted return on their capital. Indiabulls (ommodity offers a range of limited risk products through its Arbitrage <esk. These products may offer a steady source of returns irrespective of market movements. The products are based on commodity price discrepancies and mean price deviation of a particular commodity in different traded markets. These include spot-futures tradingM inter exchange and intra exchange spreads. Arbitrage trade has the potential to generate returns e,ual to or greater than the returns provided by the traditional money S debt markets. &owever, it should be clearly understood that the returns are not guaranteed or assured and may vary from time to time based on market opportunities. The Arbitrage <esk keeps track of price movement of commodities across markets and spots arbitrage opportunities on real time basis. The desk then, based on the clients% instructions S orders helps them from the stage of procuring the commodity, storage and selling, till making delivery of the same. )ith its wide spread network, Indiabulls (ommodity%s Arbitrage <esk has a reach in all ma#or mandis across the country

OB5ECTIVES OF THE STUDY Pri!ary Ob6$(ti+$ To study the investors perception towards investment in commodities market S$(o "ary Ob6$(ti+$* To study the factors influencing the investments in commodities. To study of the various trends in commodity trading To study the investor$s opinion on investment decision in commodities To study the investors$ satisfaction level towards the services offered by Indiabulls securities. To analy+e the present situation of the company in commodities and suggest for any improvements there after to render a better investor service. NEED FOR THE STUDY The main focus of this study is to know the various reasons which encourage the investors to invest in commodity. To invest in commodity futures one should understand the different investment strategies involved. (ommodities investment could be one of the elements to improve investor$s portfolio. Price fluctuations in the sector could get rather volatile depending on the category returns are relatively high. (ommodities allow a portfolio to improve return at the same level of risk. Investors must understand the demand cycle that commodities go through and should have a view on what factors may affect this

SCOPE OF THE STUDY The study on factors affecting profitability in commodity market is an in-depth survey done through interview schedule. The investment in commodity market depends on various factors like price variations, economic conditions, government policies, climatic conditions etc. This study focuses on various factors affecting profitability in commodity market. This study is helpful for the investors to take a wise investment decision. It helps to improve their rate of return from the commodity market. To find out the factors that may affect the price variations of different commodities and the profitability in commodity market investment. RESEARCH METHODO&O4Y% R$*$ar(' D$*i0 % <escriptive 5esearch Co +$ i$ ($ *a!)li 0% It is method of sampling were the items that most conveniently available are selected as part of the sample. It is not appropriate to apply statistical analysis to samples in this manner. At the convenience of the researcher investors were interviewed. Sa!)l$ *i7$% The number of individuals in a sample is called the sample si+e. A sample of =.. investors will be surveyed for this study purpose Sa!)l$ 3 it% In this pro#ect study the sample units are investors who are involved in commodity trading. Fi$l" a " *(o)$ of *t3"y The study will be conducted by meeting respondents who are clients of Indiabulls, T.0agar "ranch, and (hennai. M$t'o"* of Data Coll$(tio The data used for this study purposes are two types8

Primary data !econdary data

Pri!ary "ata% Primary data can be collected using survey techni,ue, survey research techni,ues. !urvey research techni,ue is a systematic gathering of data from respondents through ,uestionnaires. Ouestionnaires may be administered by mail, telephone survey, and personal interview for this study purpose. The ,uestionnaire used for this study purpose consists of ,ualitative and ,uantitative data. This was done to know about the preference of the commodity investors. S$(o "ary "ata% !econdary data collection method has also been adopted in order to gather data pertaining to the daily price of the different commodity, its product specification. R$*$ar(' i *tr3!$ t% The research instrument used for this study purpose is the ,uestionnaire for collecting primary data. Data A aly*i* Tool Analytical techni,ues are used to obtain findings and arrange the information in a logical se,uence from the raw data collected. After tabulation of data the following ,uantitative techni,ues are used for analysis. simple percentage analysis chi-s,uare test Two-)ay A04LA

REVIEW OF &ITERATURE

A"ib$ a " F$i 8.99:; in their research work have discussed the gold$s importance and its relevance to the macro economy. According to Adibe and ei, in order to fully understand the gold-rates fluctuations and its current status, one cannot totally disregard its history associated with the world economy. A widely used ornamental metal used in rituals, #ewelries and decorations. Its uni,ue chemical characteristics - highly dense, superior malleability and lasting shine - and its rarity all contribute towards Dold being the most sought after commodity in almost all cultures Hp JI.

Adibe and ei further explain how gold achieved a center stage status of global economy. They revealed in their research paper that when gold was set as a standard for backing the monetary policies and paper currency in the late nineteenth century, its importance increased many folds in view of the global economy. Adibe and ie concluded that as opposed to the widespread belief about the gold$s mysterious behavior during economic and inflationary trends - and gold widely regarded as a negative beta asset, having inverse price fluctuation as compared to the economic trends F their study revealed that gold is a +ero- beta asset. Their study also disproved gold$s use as an inflation hedge in the shortterm. Adibe and ei further revealed that there is a significant relationship between the price movement of gold and the value of 1! <ollar Hp J.I.

In another related study, 43lati a " Mo"y 81:<.; mention that in =>B.$s the 1! found its monetary gold stock depleting. !o in its attempt to maintain the gold value of dollar HT =SJAth of an ounceI, in =>@=, therefore, the 1! stopped dollar conversion in gold and also depreciated the dollar. In =>@J, the %fixed% exchange rate system was discarded in favor of the %floating% exchange rate system Hunder which market forces are allowed to ascertain the exchange rates, sub#ect to intervention by central banksI Hp =EBAI.

Blo*$ 81::=; compared gold fund returns with returns on gold bullion. &e found that all the mutual funds have a greater standard deviation than gold "ullion, indicating that the total risk for the funds is greater than for gold. Dold "ullion has a significantly negative beta, but the 5? value was low. H...=-I. &e concluded that the market has a very little, if any, impact on both gold bullion and gold mutual funds. If an investor Hfor the purpose of diversificationI is looking for an asset which is largely uncorrelated with the market, gold or any of the mutual funds will serve that purposeM however gold may be marginally better in this regard than the mutual funds. SOURCE80( / <erivatives ; (ommodities /arket /odule, 6.5. enchH=>E@I, Cournal 4f "usiness. ama, 7. ., ;

Bar*#y a " Kilia 8.99>; have revealed some significant findings on the effects of oil prices$ fluctuations and the resulting effects on the macro economy. "arsky and 6ilian, while commenting on &amilton$s H=>EEI sectoral shifts model F that explained how and oil price shock would lower real D<P F mentioned that an increase in oil price will result in reduced purchases of fuel-goods such as automobiles. !uch purchases may have large dollar value relative to the gasoline-cost. This demand shift results in sectoral reallocation of labor Hp =?.I.

(rude 4il, as defined by the 1.!. 7nergy Information Administration, is a mixture of hydrocarbons that exists in li,uid phase in natural underground reservoirs and remains li,uid at atmospheric pressure after passing through surface separating facilities. Gi,uids produced at natural gas processing plants are excluded. (rude oil is refined to produce a wide array of petroleum products, including heating oilsM gasoline, diesel and #et fuelsM lubricantsM asphaltM ethane, propane, and butaneM and many other products used for their energy or chemical content.

THEORETICA& BACK4ROUND OF THE STUDY Co!!o"ity I +$*t!$ t Lolatility is one of the most important factors when pricing options are considered. The pricing of options depends on volatility of the underlying asset. The price of a call or a put is directly related to the volatility of the underlying stock. The variables that appear in the "lack F !choles differential e,uation for pricing options are8 (urrent !tock Price Time !tock Price Lolatility The 5isk- ree 5ate of Interest

The only parameter in the "lack F !choles pricing formulas that cannot observe is the volatility of the stock price. T'$ Si/ Co *i"$ratio * of For$(a*ti 0% If volatility either exceeds or falls short of the level indicated by fundamental economic factors, however the result is mispricing and, as a conse,uence, misallocation of resources The investors begin to see financial markets as the province of the speculator and the insider, not of the rational, long-term investor. If this view becomes pervasive, investors may supply withdraw from the market* Lolatility may be called necessary evil. The six considerations for forecasting volatility are The <ecision 7nvironment and Goss unction The orecast 4b#ect The orecast !tatement The orecast &ori+on The Information !et /ethods and (omplexity

There is enormous amount of literature in the field of volatility, tests for volatility and forecasting volatility. The study of volatility and what causes it have made researches dive into uncharted waters. The human curiosity has paid much-deserved dividends in the form of new discoveries and inventions. !ome of them have been useful and some of them went unnoticed. "ut the indomitable spirit of the researchers marches on. The literature review starts with the roots of volatility, that is, the early research done on the sub#ect, to the current day topics, which include using volatility models for hedging options positions. T'$ I itial Wor#*% The temporal behavior of the stock market volatility has received increasing interest over the decades. 7mpirical research on the statistical properties of the stock returns dates back to the pioneering works of Ma "$lbrot 81:=?; a " Fa!a 81:=@I. 7arly research on timeFvarying volatility extracted volatility estimates from asset return data before specifying a parametric time-series model of volatility. Offi($r 81:A?;2 for example, used a rolling standard deviation to estimate volatility at each point in time. 4ther researchers have used the difference between the high and low prices on a given day to estimate volatility for that H4ar!a a " Kla** 81:<9;;2 Par#i *o 81:<9I. !uch methods implicitly assume that volatility is constant over a period of time. S'ill$rB* Wor# o E/($** Volatility% !ince S'ill$rB* 81:<1a; seminal article examining excess volatility in the 1! stock prices, many articles have used his data set, or extensions of it, to assess the performance of the alternative volatility tests that have been discussed above. !hiller argues that the level of stock market volatility is too high relative to the ex post variability of dividends. In present value models such as !hiller$s, a change in the volatility of either future cash flows or discount rates causes a change in the volatility of the sock return. 5ecently, there have been many attempts to relate changes in stock market volatility to changes in expected returns to stocks, including M$rto 81:<9;2 Pi "y(# 81:<>;2

Boll$r*l$+2 E 0l$2 a " Wool"ri"0$ 81:<<;2 a " Ab$l 81:<<;- Ma*(aro a " M$lt7$r 81:<?; a " &a3t$rba(' 81:<:I, who find the macroeconomic volatility, are related to interests. A generali+ation of the A5(& class of models published in =>EB introduced by Tim "ollerslev proposed DA5(& or UGeneralized Autoregressive Conditional Heteroskedasticity Models. The DA5(& model allows for a much more flexible lag structure than the A5(& models. The extension of the A5(& process to the DA5(& process bears much resemblance to the extension of the time standard time series A5 process to the general A5/A process and permits a more parsimonious description.

T'$ Natio al Co!!o"ity a " D$ri+ati+$* E/('a 0$ &i!it$" C NCDE12 (o "3(t* (o!!o"ity tra"i 0 i a lar0$ +ari$ty of (o!!o"iti$* t'at i (l3"$ t'o*$ li*t$" '$r$% A0ro Pro"3(t* (ashew, (astor !eed, (hana, (hili, (offee - Arabica, (offee - 5obusta, (ommon 5aw 5ice, (ommon Parboiled 5ice, (rude Palm 4il, (otton !eed 4ilcake, 7xpeller /ustard 4il 4ra"$ A Parboiled 5ice, Drade A 5aw 5ice, Duar, Dum ,Duar !eeds, Dur, Ceera, Cute sacking bags, Gemon, Tur Gong !taple (otton, /aharashtra Gal Tur, /edium !taple (otton /entha 4il, /ulberry Dreen (ocoons, /ulberry 5aw !ilk, /ustard !eed, Pepper, 5aw Cute, 5"<, Palmolein, 5efined !oy 4il ,5ubber ,!esame !eeds ,!oybean ,2ellow !oybean /eal ,!ugar ,Turmeric, 1rad, )heat ,2ellow Peas ,2ellow 5ed /ai+e ,"ase /etals, 7lectrolytic (opper (athode ,/ild !teel Ingots

Pr$(io3* M$tal* F4ol", Sil+$r E $r0yDBr$ t Cr3"$ T'$ (o!!o"iti$* tra"$" o t'$ M3lti Co!!o"ity E/('a 0$ of I "ia &t" C MC12 include8 Aluminum, Art !ilk 2arn, Arhar (huni, Aniseed "a#ra, "arley, "etel nut, (elery !eed, (amphor, (hara or "erseem, (ardamom, (innamon, (oriander !eed, (astor oil, (astor 4il (ake, (astor !eed, (hilly, (love, (offee, (opper Al*o% V (oconut 4il, (oconut 4ilcake, (opra, (otton, (otton (loth, (otton 2arn, (ottonseed V (ottonseed 4il, (ottonseed 4ilcake, (ottonseed Pods, Duar, Dinger, Dold, Dram &usk V Dram, Droundnut, Droundnut 4il, Droundnut 4ilcake, Dur, &essian, Cowar, Cute Doods V Cute !acking, 6ulthi 6apas, 6handsari !ugar, Gakh H6hesariI, Gead, Ginseed, Ginseed 4il V Ginseed 4ilcake, /oth /asur, /ung (huni, /ai+e, /ethi, /ung, 0utmegs, 0ickel, Peas V Pepper, Potato, 5agi, 5apeseed 4il, /ustard 4il, 5apeseed, /ustard !eed, 5apeseed 4ilcake, 5aw Cute, 5ice "ran, 4ilcake, 5ice, 4il ,5ubber, !mall /illets, !afflower, !afflower oil, !afflower 4ilcake, !esame, !esame 4il, !esame 4ilcake, !hellac, !ilk yarn V !ilver, !ilver (oins, !oya /eal, !oybean, !oybean 4il, !taple, ibre, 2arn, !ugar, !unflower 4il, !unflower 4ilcake, !unflower !eed, Tamarind seed 4il, Tea, Tin, Tur, Turmeric, 1rad, Lanaspati, )heat, Rinc, !ugar /-J., !ugar!-J., Duar gum V /entha 4il

COMMODITY SPECU&ATION (ommercial speculation, i.e. speculation by buyers and sellers of commodities, has been used since the =>th century to enable commodity traders and processors to protect themselves against short term price volatility. "uyers are protected against sudden price

increases, sellers against sudden price falls.

or commodity buyers and sellers,

commercial speculation is a form of price insurance. 0oncommercial speculation takes place not to protect against or UhedgeW price risk, but to benefit by anticipating and Ubetting longW for prices to go up or UshortW for prices to go down. 0on-commercial speculators provide capital to enable the ongoing function of the market as commercial speculators li,uidate their contract positions by paying for the contracted commodity or selling the contract to offset the risk of other contract positions held. 0on-commercial speculation is an investment, but one that can overlap with the interests of agriculture when appropriately regulated. &owever, today$s speculation has become excessive relative to the value of the commodity as determined by supply and demand and other fundamental factors. or example, according to the A4, as of April ?..E corn volatility was J. percent and soybean volatility -. percent beyond what could be accounted for by market fundamentals. Price volatility has become so extreme that by Culy some commercial or UtraditionalW speculators could no longer afford to use the market to hedge risks effectively. Prices are particularly vulnerable to being moved by big speculative UbetsW when a commodity$s supply and demand relationship is UtightW due to production failures, high demand andSor lack of supply management mechanisms.

CHAPTER > DATA ANA&YSIS E INTERPRETATION TAB&E 1% SHOWIN4 SOURCE OF INFORMATION ABOUT COMMODITY MARKET O)tio * !pot market "rokers 4ther investors /edia Total No of r$*)o "$ t* == BA => A 199 P$r($ ta0$ F ==K BAK =>K AK 199F

CHART 1% SHOWIN4 SOURCE OF INFORMATION ABOUT COMMODITY MARKET

70% 60% 50% 40% 30% 20% 11% 10% 0% Spot market Brokers Other investors Media 5% 19% 65%

I f$r$ ($ In this above table ==K of the respondents source information from the spot market, BAK of the respondent source through brokers, =>K of respondents get the information through other brokers, and AK of the respondents source the information through media.

TAB&E .% SHOWIN4 DURATION OF INVESTMENT IN COMMODITY MARKET O)tio * Gess than B months B months-= year =-A years /ore than A years Total No of r$*)o "$ t* > =@ J= -J 199 P$r($ ta0$ F >K =@K J=K -JK 199F

CHART .% SHOWIN4 DURATION OF INVESTMENT IN COMMODITY MARKET

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Less than 6 months 6 months-1 ear 1-5 ears More than 5 ears 9% 17% 31% 43%

I f$r$ ($% In the above table, >K of the respondent says that they are investing in commodity market for less B months, =@K says it is in-between B months F = year, J=K says it is in between =-A years, and -JK of them says it is more than A years

TAB&E ?% SHOWIN4 TYPE OF COMMODITY YOU TRADE

O)tio * "ullion "ase metals Agro Products 7nergy Products 4thers Total

No of r$*)o "$ t* == ?J ?A JJ E 199

P$r($ ta0$ F ==K ?JK ?AK JJK EK 199F

CHART ?% SHOWIN4 TYPE OF COMMODITY YOU TRADE

35% 30% 25% 20% 15% 10% 5% 0% B"##ion Base meta#s $%ro &rod"'ts (ner% &rod"'ts Others 23% 25% 33%

11% !%

I f$r$ ($% ==K of the respondents say that they trade on bullions, ?JK of the respondents says they trade on base metals, ?AK on the agro products, JJK on the energy products and rest EK on other commodities.

TAB&E >% SHOWIN4 TIME OF MAKIN4 INVESTMENTS O)tio * 7very month No of r$*)o "$ t* > P$r($ ta0$ F >K

4nce in three months 4nce in six months 4nly in last ,uarter of year Total

?J JA JJ 199

?JK JAK JJK 199F

CHART >% SHOWIN4 TIME OF MAKIN4 INVESTMENTS

40% 35% 30% 25% 20% 15% 10% 5% 0% (ver month On'e in three months On'e in si) months On# in #ast *"arter o+ ear 9% 23%

35%

33%

I f$r$ ($% >K of the respondents say they make investment every month, ?JK of them said they make investments once in J months, JAK of them said once in B months they make investments and the rest JJJK of them said only in last ,uarter they make investments.

TAB&E @% SHOWIN4 IMPORTANT FACTOR AT THE TIME OF INVESTMENT O)tio * 5isk 5eturn "oth No of r$*)o "$ t* ?A J= -P$r($ ta0$ F ?AK J=K --K

Total

199

199F

CHART @% SHOWIN4 IMPORTANT FACTOR AT THE TIME OF INVESTMENT

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% ,isk ,et"rn 25% 31%

44%

Both

I f$r$ ($% ?AK of the respondents say the most important factor considered at the time of investment is risk, J=K say it is return and the rest --K of them say it is both.

TAB&E =% SHOWIN4 E1PECTATION IN RISE OF INCOME FROM INVESTMENTS O)tio * 1p to =AK =A-?AK ?A-JAK /ore than JAK Total No of r$*)o "$ t* =A ?J JJ ?> 199 P$r($ ta0$ F =AK ?JK JJK ?>K 199F

CHART =% SHOWIN4 E1PECTATION IN RISE OF INCOME FROM INVESTMENTS

35% 30% 25% 20% 15% 10% 5% 0% -p to 15% 15-25% 25-35% More than 35% 15% 23% 33% 29%

I f$r$ ($% ABK of the respondents said their income raised 1p to =AK due to investment, ?JK of them said it raised to =A-?AK, JJK of them said it raised to?A-JAK and the rest ?>K of them said it increases more than JAK.

TAB&E A% SHOWIN4 E1PERIENCE IN COMMODITIES INVESTMENT

O)tio * &ighly satisfied !atisfied 0either satisfied nor dissatisfied <issatisfied &ighly dissatisfied Total

No of r$*)o "$ t* =A J@ =B ?A @ 199

P$r($ ta0$ F =AK J@K =BK ?AK @K 199F

CHART A% SHOWIN4 E1PERIENCE IN COMMODITIES INVESTMENT

40% 35% 30% 25% 20% 15% 10% 5% 0% .i%h# satis+ied Satis+ied /either satis+ied nor dissatis+ied 0issatis+ied .i%h# dissatis+ied 15% 16% 25% 37%

7%

I f$r$ ($% =AK of the respondents are highly satisfied with the experience in (ommodities investment, J@K of them are satisfied, =BK of them are neither satisfied nor dissatisfied, ?AK of them are dissatisfied and the rest @K of them are highly dissatisfied.

TAB&E <% SHOWIN4 PREFERENCE IN INVESTIN4 O)tio * No of r$*)o "$ t* P$r($ ta0$ F

!afety &igh return Tax saving Protection against risk "uySsell flexibility 7asy diversification Gow cost (apital appreciation Gi,uidity Total

JA ?B =J > A J . A 199

JAK ?BK =JK >K AK JK .K AK -K 199F

CHART <% SHOWIN4 PREFERENCE IN INVESTIN4

40% 35% 30% 26% 25% 20% 15% 10% 5% 0% Sa+et .i%h ret"rn 1a) savin% &rote'tion 2#e)i3i#it 0iversi+i'ation 13% 9% 5% 3% 0% Lo4 'ost $ppre'iation Li*"idit 5% 4% 35%

I f$r$ ($% About the preference to invest in particular commodity, JAK of employees say safety, ?BK says because of &igh return, =JK of the respondents says they invest due to tax saving, >K of the respondent says that it is protection against risk, AK of the respondent says that it is because of buy and sell flexibility, JK of the respondents says that easy diversification, AK of the respondent says it is because of capital appreciation, -K of the respondents says li,uidity. TAB&E :% SHOWIN4 TRADE IN COMMODITIES MARKET O)tio * &edging !peculation No of r$*)o "$ t* A@ ?B P$r($ ta0$ F A@K ?BK

Investment Total

=@ 199

=@K 199F

CHART :% SHOWIN4 TRADE IN COMMODITIES MARKET

60% 50% 40% 30% 20% 10% 0% .ed%in% Spe'"#ation 5nvestment 26% 17% 57%

I f$r$ ($% As far the *trategies involved in commodity trading, A@K respondents says that they do hedging, ?BK says that they do speculation and the rest do investment.

TAB&E 19% SHOWIN4 AWARNESS OF DIFFERENT STRATE4IES IN COMMODITY TRADIN4 O)tio * No of r$*)o "$ t* P$r($ ta0$ F

2es 0o Total

BJ J@ 199

BJK J@K 199F

CHART 19% SHOWIN4 AWARNESS OF DIFFERENT STRATE4IES IN COMMODITY TRADIN4

70% 60% 50% 40% 30% 20% 10% 0% 6es /o 37% 63%

I f$r$ ($% BJK of respondents says yes that they aware about the different strategies available in commodity trading, and rest J@K says no that they are not aware about the different strategies available in commodity trading

TAB&E 11% SHOWIN4 PREFERENCE OF SMA&& CAPITA&IGATION COMPANIES FOR INVESTMENT D PERSONA& PREFERENCE O)tio * &igher 5eturns No of r$*)o "$ t* BJ P$r($ ta0$ F BJK

!trong undamental (apital Appreciation Total

?E > 199

?EK >K 199F

CHART 118 SHOWIN4 PREFERENCE OF SMA&& CAPITA&IGATION COMPANIES FOR INVESTMENT D PERSONA& PREFERENCE

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

63%

2!%

9%

.i%her ,et"rns

Stron% 2"ndamenta#

7apita# $ppre'iation

I f$r$ ($% 4ut from personal preference, BJK of the respondents say higher return make them to go for these mid and small capitali+ation companies for investment, ?EK says strong fundamentals and the rest >K of them said capital appreciation.

TAB&E 1.% SHOWIN4 PREFERENCE OF SMA&& CAPITA&IGATION COMPANIES FOR INVESTMENT D COMPANY PREFERENCE O)tio * Drowth prospects !afety No of r$*)o "$ t* BA JA P$r($ ta0$ F BAK JAK

Total

199

199F

CHART 1.% SHOWIN4 PREFERENCE OF SMA&& CAPITA&IGATION COMPANIES FOR INVESTMENT D COMPANY PREFERENCE
70% 60% 50% 40% 30% 20% 10% 0% 8ro4th prospe'ts Sa+et 35% 65%

I f$r$ ($% 4ut from company preference, BAK of the respondents prefer small and medium capitali+ation companies due to their growth prospects and the rest said due to safety.

TAB&E 1?% SHOWIN4 FACTOR THAT AFFECT RETURNS IN COMMODITY MARKET O)tio * (limatic conditions Dovernment policies Price variations No of r$*)o "$ t* ==> JA P$r($ ta0$ F =-K =>K JAK

Timely information All the above Total

?? =. 199

??K =.K 199F

TAB&E 1?% SHOWIN4 FACTOR THAT AFFECT RETURNS IN COMMODITY MARKET

40% 35% 30% 25% 20% 15% 10% 5% 0% 7#imati' 'onditions 8overnment po#i'ies &ri'e variations 1ime# in+ormation $## the a3ove 14% 10% 19% 22% 35%

I f$r$ ($ =-K of the respondents says that climatic conditions affect the profitability in commodity market, =>K of the respondent says that government policies affect the profitability in commodity market, JAK says that price variation, ??K says that timely information, and rest =.K says all the above TAB&E 1>% SHOWIN4 YOUR FINANCIA& ADVISOR O)tio * !elf 5elatives riends inancial (onsultants Total No of r$*)o "$ t* AJ =A =@ =A 199 P$r($ ta0$ F AJK =AK =@K =AK 199F

CHART 1>% SHOWIN4 YOUR FINANCIA& ADVISOR

60% 50% 40% 30% 20% 10% 0% Se#+ ,e#atives 2riends 2inan'ia# 7ons"#tants 15% 17% 15% 53%

I f$r$ ($% AJK of the respondents said they are their own financial advisors, =AK of them said their relatives, =@K said their friends and the rest =AK of them said financial consultants.

TAB&E 1@% SHOWIN4 DECISION MAKIN4 WHI&E INVESTIN4 IN COMMODITIES MARKET O)tio * und availability 5eliable research report (ommodity index volatility 4verall market movements Total No of r$*)o "$ t* -= =A ?= ?J 199 P$r($ ta0$ F -=K =AK ?=K ?JK 199F

CHART 1@% SHOWIN4 THE KIND OF FOOD HABIT FO&&OWED SHOWIN4 DECISION MAKIN4 WHI&E INVESTIN4 IN COMMODITIES MARKET
45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 2"nd avai#a3i#it ,e#ia3#e resear'h report 7ommodit inde) vo#ati#it Overa## market movements 15% 21% 23%

41%

I f$r$ ($% -=K of respondents say that that investment decision in commodities market is done due to fund availability, =AK of the respondents says it is reliable research report, ?=K says it is commodity index volatility, and ?JK of the respondent says overall market movements.

TAB&E 1=8 SHOWIN4 AWARNESS OF FACI&ITIES PROVIDED BY INDIABU&&S O)tio * !trongly agree Agree 0either Agree nor disagree <isagree !trongly <isagree Total No of r$*)o "$ t* => ?E AJ . . 199 P$r($ ta0$ F =>K ?EK AJK .K .K 199F

CHART 1=% SHOWIN4 AWARNESS OF FACI&ITIES PROVIDED BY INDIABU&&S

60% 50% 40% 30% 20% 10% 0% Stron%# a%ree $%ree /either $%ree nor disa%ree 0% 0isa%ree 0% Stron%# 0isa%ree 19% 2!% 53%

I f$r$ ($ =>K of the respondents strongly agree that they are ware of the facilities provided by Indiabulls, ?EK of them agree this, AJK of the respondents neither agree nor disagree this

TAB&E 1A8 SHOWIN4 TOU4HEST TIME OF PROFITABI&ITY OF COMMODITY MARKET IN HU4E BEATIN4 O)tio * 5ecession 0o <I Gocal Trade restrictions 4ther Total No of r$*)o "$ t* AA ?J =A @ 199 P$r($ ta0$ F AAK ?JK =AK @K 199F

CHART 1A8 S SHOWIN4 TOU4HEST TIME OF PROFITABI&ITY OF COMMODITY MARKET IN HU4E BEATIN4

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

55%

23% 15% 7%

,e'ession

/o 205

Lo'a# 1rade restri'tions

Other

I f$r$ ($% J=K respondent says the profitability takes a huge beating at recession, ?JK of the respondent says it is due to 0o <I, =AK of the respondent says it local trade restrictions, and @K of the respondent says it because of other factors.

TAB&E 1<% SHOWIN4 FO&&OWIN4 YIE&D BETTER RETURNS O)tio * /utual fund Property "onds ixed <eposit (ommodity market !hares 4ther Total No of r$*)o "$ t* ?= =@ == > ?? =J @ 199 P$r($ ta0$ F ?=K =@K ==K >K ??K =JK @K 199F

CHART 1<% SHOWIN4 FO&&OWIN4 YIE&D BETTER RETURNS

25% 20% 15% 10% 5% 0%
m ar ke t "t "a #+ "n d Sh ar es ep os it on ds op er t O th er

21% 17% 11%

22%

13% 9% 7%

&r

0 2i )e d

I f$r$ ($8 ?=K of the respondents said mutual funds will get better return, =@K of them said property investments, ==K said bonds, >K said <, ??K said commodities, =JK of them said shares and the rest said other. TAB&E 1:% SHOWIN4 SPECIFIC REASON FOR TRADIN4 IN INDIABU&&S O)tio * 5esearch !ervice "rokerage Investment tips are good Total No of r$*)o "$ t* =A JJ -A @ 199 P$r($ ta0$ F =AK JJK -AK @K 199F

CHART 1:% SHOWIN4 SPECIFIC REASON FOR TRADIN4 IN INDIABU&&S

7 om m

od it

50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% ,esear'h Servi'e 15% 33%

45%

7%

Brokera%e

5nvestment tips are %ood

I f$r$ ($8 =AK of the respondents said the specific reason for them to invest in Indiabulls is research, JJK of them said service, -AK of them said brokerage and @K of them said good tips for investments.

TAB&E .9% SHOWIN4 SATISFACTION WITH INDIABU&&S SERVICES O)tio * &ighly satisfied !atisfied 0either satisfied nor dissatisfied <issatisfied &ighly dissatisfied Total No of r$*)o "$ t* @ B= =E == J 199 P$r($ ta0$ F @K B=K =EK ==K JK 199F

CHART .9% SHOWIN4 SATISFACTION WITH INDIABU&&S SERVICES

70% 60% 50% 40% 30% 20% 10% 0% .i%h# satis+ied 7%

61%

1!% 11% 3% Satis+ied /either satis+ied nor dissatis+ied 0issatis+ied .i%h# dissatis+ied

I f$r$ ($8 @K of them are highly satisfied with the services of Indiabulls, B=K of them are satisfied, =EK of them are neutral to this statement, ==K of them are dissatisfied and the rest JK of them are highly dissatisfied.

TAB&E .1% SHOWIN4 CONTINUATION IN INVESTIN4 COMMODITY O)tio * 2es 0o Total No of r$*)o "$ t* @= ?> 199 P$r($ ta0$ F @=K ?>K 199F

CHART .1% SHOWIN4 CONTINUATION IN INVESTIN4 COMMODITY

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

71%

29%

6es

/o

I f$r$ ($8 @=K of the respondents said they will continue to invest in Indiabulls in future, ?>K of them said no for this.

TAB&E ..% SHOWIN4 PERCENTA4E OF EARNIN4S YOU INVEST IN TRADIN4 O)tio * 1p to =.K 1p to ?AK 1p to A.K No of r$*)o "$ t* -= ?E ?= P$r($ ta0$ F -=K ?EK ?=K

Above A.K Total

=. 199

=.K 199F

CHART ..% SHOWIN4 PERCENTA4E OF EARNIN4S YOU INVEST IN TRADIN4

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% -p to 10% -p to 25% -p to 50% $3ove 50% 10% 2!% 21% 41%

I f$r$ ($8 -=K of the respondents are earning up to =.K out of commodities trading, ?EK of them are earning up to ?AK, ?=K of them are earning up to A.K and the rest =.K above A.K.

TAB&E .?% 4ENDER OF THE RESPONDENTS 4$ "$r /ale emale Total No of r$*)o "$ t* BA JA 199 P$r($ ta0$ F BAK JAK 199F

CHART .?% 4ENDER OF THE RESPONDENTS

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

65%

35%

Ma#e

2ema#e

I f$r$ ($8 In the above table it is found from the survey that BAK of the respondents are male and JAK of the respondents are female.

CHI C SHUARE ANA&YSIS H9 8N3ll 'y)ot'$*i*;

X

There is no significant relationship between gender of the respondents and the factor considered at the time of investment

H1 8Alt$r at$ 'y)ot'$*i*; X There is dependency between gender of the respondents and the factor considered at the time of investment .

OBSERVED FREHUENCY% 4$ "$rI Fa(tor 5isk 5eturn "oth Total Mal$ =J =E J=@ F$!al$ =? ?1 =J >> =. ?@ 199 Total .@

E1PECTED FREHUENCY% 4$ "$rI Fa(tor 5isk 5eturn "oth Total Mal$ =B.?A ?..=A ?E.B. =@ F$!al$ E.@A ?1 =..EA >> =A.-. ?@ 199 Total .@

CA&CU&ATION% O =J =? =E =J E =B.?A E.@A ?..=A =..EA ODE -J.?A J.?A -?.=A ?.=A 8ODE;. =..AB =..AB -.B? -.B? 8ODE; .I E ..BA =.?= ..?J ..-J

J=.

?E.B =A.-

A.-A.-

?>.=B ?>.=B

=..? =.E> @->?

J K8ODE; . I EL FORMU&A8 CHI SHUARE M J K8ODE; . I EL O C Ob*$r+$" fr$N3$ (y E C E/)$(t$" fr$N3$ (y

8O C E; M Diff$r$ ($ b$t,$$ ob*$r+$" fr$N3$ (y a " $/)$(t$" fr$N3$ (y8O C E; MSN3ar$ of t'$ "iff$r$ ($

D$0r$$ of fr$$"o!

M M M

8RD1; 8CD1; 8?D1; 8.D1; .

At @F l$+$l of *i0 ifi(a ($ t'$ tabl$ +al3$ i* @-::1 Cal(3lat$" +al3$ M @->?

Tabl$ +al3$ O (al(3lat$" +al3$ H9 i* a(($)t$". I f$r$ ($% &ence there is no dependency between gender of the respondents and the factor considered at the time of investment

TWO WAY ANOVA Y$ar* of i +$*t!$ t i (o!!o"iti$* V* tra"i 0 !$t'o" i (o!!o"iti$* !ar#$t 0ull &ypothesis H&4I F There is no significant difference between years of investment in commodities and trading method in commodities market Alternative &ypothesis H&AI F There is significant difference between years of investment in commodities and trading method in commodities market

E/)$ri$ ($ITra"$ !$t'o" Gess than B months B months-= year =-A years /ore than A years Total St$) 1%

H$"0i 0 S)$(3latio E ?? ?J @A ? J A =B .=

I +$*t!$ t J B 1A

Total > =@ J= -J 199

To find the (orrection actor H(. I 1IY Y1 Y. Y? Y> Total 11 E ?? ?J @A J11 11. =B B-EA?> 19:? J11. 1. ? J A =B .= J1. 1.. > ?A ?AB .:> J1.. 1? J B 1A J1? 1?. > JB =B =B AA J1?.

X YZ= Q YZ? Q YZJ X A@ Q ?B Q =@ X =..

X Total 0o. of 7ntries X-[-[X B-

X T? S 0 X HDrand TotalI? S 0o. of 7ntries X H=..I? S BX =.... S B-

X =AB.?A St$) .% !um of !,uares of deviations for Total Lariance !!T X H!um of s,uares of all the entriesI F (orrection factor X HYZ=? Q YZ?? Q YZJ?I - (. X H=.>J Q ?>- Q @@I F =AB.?A X =-B- F =AB.?A !!T St$) ?% !um of !,uares of deviations between the columns !!( X HHY(=? S n=I Q HY(?? S n?II \\\\. F ( X HHA@? S JI Q H?B? S JI Q H=@? S JII F =AB.?A X HJ?->SJ Q B@BSJ Q ?E>SJI F =AB.?A X H=.EJ Q ??A.JJ Q >B.JJI F =AB.?A X =-.-.BB F =AB.?A !!( St$) >% !um of !,uares of deviations between the rows !!5 X HHY5=? S nI Q HY5?? S nII \\\\. F ( X HH>? S -I Q H=@? S -I Q HJ=? S -I Q H-J? S -II F =AB.?A X H?..?A Q @?.?A Q ?-..?A Q -B?.?AI F =AB.?A X @>A F =AB.?A !!5 St$) @% !um of !,uares of deviations for 5esidual Lariance !!7 X !!T F H!!( Q !!5I X =J.@.@A F H=?-E.-= Q BJE.@AI X BJE.@A X =?-E.-= X =J.@.@A

X =J.@.@A F =EE@.=B !!7 St$) =% ANOVA TAB&E% !ource of Lariance Lariance "etween (olumns Lariance "etween 5ows 5esidual 7rror !um of !,uares H!!I =?-E.-= <egree of reedom H< I Hc F =I HJ F =I X? Hr F =I H-F =I XJ Hc-=I[ Hr-=I H?I[HJI XB /ean !um of !,uares H/!!I /!( X !!( S <. X =?-E.-= S ? X B?-.?= /!5 X !!5 S <. X BJE.@A S J X ?=?.>? /!7 X !!7 S <. X -A@>.-=S B X ->B.A@ -5atio Lariance 5atio HL5I (X/!(S/!7 X B?-.?=S->B.A@ X -B.-B X/!5S/!7 X ?=?.>?S->B.A@ X -?.?=
5

X -A@>.-=

Gevel of !ignificance T AK H?,BI X A.=-

HJ,BI X -.@B BJE.@A

-A@>.-=

)here

X Dreater Lariance S !maller Lariance

I t$r)r$tatio % 1 0ow we compare the variance of column with the residual variance. The (alculated Lalue of The Tabulated Lalue of &ere (alculated Lalue of X -B.-B for L=X= ; L?X= at AK level of significance is A.=] Tabulated Lalue of .

&ence we accept the 0ull &ypothesis. I t$r)r$tatio % . &ere we compare the variance of rows with the residual variance. The (alculated Lalue of X -?.?=

The Tabulated Lalue of &ere (alculated Lalue of

for L=X? ; L?X- at AK level of significance is -.@B ] Tabulated Lalue of .

&ence we accept the null hypothesis. Co (l3*io % rom both the cases, we come to know that there is no significant difference between years of investment in commodities and trading method in commodities market

CHAPTER @ FINDIN4S OF THE STUDY ==K of the respondents$ source information from the spot market, BAK of the respondent source through brokers, and =>K of respondents get the information through other brokers, and AK of the respondents source the information through media. >K of the respondent says that they are investing in commodity market for less B months, =@K says it is in-between B months F = year, J=K says it is in between =A years, and -JK of them says it is more than A years ==K of the respondents say that they trade on bullions, ?JK of the respondents says they trade on base metals, ?AK on the agro products, JJK on the energy products and rest EK on other commodities.

>K of the respondents say they make investment every month, ?JK of them said they make investments once in J months, JAK of them said once in B months they make investments and the rest JJJK of them said only in last ,uarter they make investments.

?AK of the respondents say the most important factor considered at the time of investment is risk, J=K say it is return and the rest --K of them say it is both. ABK of the respondents said their income raised 1p to =AK due to investment, ?JK of them said it raised to =A-?AK, JJK of them said it raised to?A-JAK and the rest ?>K of them said it increases more than JAK.

=AK of the respondents are highly satisfied with the experience in (ommodities investment, J@K of them are satisfied, =BK of them are neither satisfied nor dissatisfied, ?AK of them are dissatisfied and the rest @K of them are highly dissatisfied.

About the preference to invest in particular commodity, JAK of employees say safety, ?BK says because of &igh return, =JK of the respondents says they invest due to tax saving, >K of the respondent says that it is protection against risk, AK of the respondent says that it is because of buy and sell flexibility, JK of the respondents says that easy diversification, AK of the respondent says it is because of capital appreciation, -K of the respondents says li,uidity

As far the *trategies involved in commodity trading, A@K respondents says that they do hedging, ?BK says that they do speculation and the rest do investment. BJK of respondents says yes that they aware about the different strategies available in commodity trading, and rest J@K says no that they are not aware about the different strategies available in commodity trading

4ut from personal preference, BJK of the respondents say higher return make them to go for these mid and small capitali+ation companies for investment, ?EK says strong fundamentals and the rest >K of them said capital appreciation.

4ut from company preference, BAK of the respondents prefer small and medium capitali+ation companies due to their growth prospects and the rest said due to safety.

=-K of the respondents says that climatic conditions affect the profitability in commodity market, =>K of the respondent says that government policies affect the profitability in commodity market, JAK says that price variation, ??K says that timely information, and rest =.K says all the above

AJK of the respondents said they are their own financial advisors, =AK of them said their relatives, =@K said their friends and the rest =AK of them said financial consultants.

-=K of respondents say that that investment decision in commodities market is done due to fund availability, =AK of the respondents says it is reliable research report, ?=K says it is commodity index volatility, and ?JK of the respondent says overall market movements.

=>K of the respondents strongly agree that they are ware of the facilities provided by Indiabulls, ?EK of them agree this, AJK of the respondents neither agree nor disagree this

J=K respondent says the profitability takes a huge beating at recession, ?JK of the respondent says it is due to 0o <I, =AK of the respondent says it local trade restrictions, and @K of the respondent says it because of other factors.

?=K of the respondents said mutual funds will get better return, =@K of them said property investments, ==K said bonds, >K said <, ??K said commodities, =JK of them said shares and the rest said other

=AK of the respondents said the specific reason for them to invest in Indiabulls is research, JJK of them said service, -AK of them said brokerage and @K of them said good tips for investments.

@K of them are highly satisfied with the services of Indiabulls, B=K of them are satisfied, =EK of them are neutral to this statement, ==K of them are dissatisfied and the rest JK of them are highly dissatisfied.

@=K of the respondents said they will continue to invest in Indiabulls in future, ?>K of them said no for this.

-=K of the respondents are earning up to =.K out of commodities trading, ?EK of them are earning up to ?AK, ?=K of them are earning up to A.K and the rest =.K above A.K.

BAK of the respondents are male and JAK of the respondents are female.

SU44ESTIONS Investors should be educated about the commodity market. People should be taught that commodity market is an easy and non-complex transparent market. (ompany should reduce the information asymmetry by tracking demand and supply of the commodity. People should be educated about various strategies available in commodity trading and the benefits of those strategies. (ompany should do proper fundamental and technical analysis to guide or suggest their clients about future scenario of commodity market. (ompany should educate their clients about stop loss order, market order tools which help them to minimi+e the clients$ loss and maximi+e their profit. Investors must understand the demand cycles that commodity go through and should have a view on what factors may affect this

There should be a massive campaign and education about the commodity market it will help in getting out the wrong ideas and thoughts in the minds of the people about commodity market.

(ompany must have a research team in place that prepares commodity charts and conducts detailed study on the trends of the commodity in ,uestion. Investing strategies based on this research are usually provided to clients. Larious investment protection funds should be brought in notice of people Dovernment should come forward to promote the commodity market and help investors.

CONC&USIONS The study has educated me on commodity market. It has brought out investors preference and choices. The study brings us to learn about strategies available in commodity trading and shows the benefit of using those strategies. The study also shows some of the best returns which can be getting from different products in commodity trading. The study highlights the level of risk and return for certain products over a period of time. The study makes it clear that commodity market helps the farmers and traders from future price fluctuations and educates clearly that there is no danger because of the commodity trading.

HUESTIONNAIRE 1- W'at i* yo3r *o3r($ of i for!atio abo3t t'$ (o!!o"ity !ar#$tP !pot market "rokers 4ther investors /edia .- Ho, lo 0 yo3 'a+$ b$$ "oi 0 t'$ i +$*t!$ t i (o!!o"ity !ar#$tP Gess than B months B months-= year

 =-A years /ore than A years ?- W'i(' ty)$ of (o!!o"ity "o yo3 tra"$ i P "ullion "ase /etals Agro Products 7nergy products 4ther specify >- W'$ "o yo3 !a#$ i +$*t!$ t*P 7very /onth 4nce in Three /onths 4nce in !ix /onths 4nly in the Gast Ouarter of the 2ear

@- W'at i* t'$ !o*t i!)orta t fa(tor yo3 (o *i"$r at t'$ ti!$ of I +$*t!$ tP 5isk 5eturn "oth =- Ho, !3(' yo3 (arry t'$ $/)$(tatio i Ri*$ of yo3r I (o!$ fro! I +$*t!$ t*P up to =AK =A-?AK ?A-JAK

 /ore than JAK A- Ho, i* yo3r $/)$ri$ ($ i Co!!o"iti$* i +$*t!$ tP &ighly satisfied !atisfied 0either satisfied nor dissatisfied <issatisfied &ighly <issatisfied <- W'y yo3 )r$f$rr$" to i +$*t i )arti(3lar (o!!o"ityP !afety &igh return Tax saving Protection against risk "uySsell flexibility 7asy diversification Gow cost (apital appreciation Gi,uidity

:- Ho, "o yo3 tra"$ i Co!!o"iti$* Mar#$tP &edging !peculation Investment 19- Ar$ yo3 a,ar$ of "iff$r$ t *trat$0i$* a+ailabl$ i (o!!o"ity tra"i 0P 2es 0o

11- Ho, "o yo3 )r$f$r t'$*$ !i" a " *!all (a)itali7atio (o!)a i$* for i +$*t!$ tP P$r*o al Pr$f$r$ ($ &igher 5eturns !trong undamental (apital Appreciation Co!)a y Pr$f$r$ ($ Drowth prospects !afety 1.- A((or"i 0 to yo32 ,'at i* t'$ fa(tor2 ,'i(' !ay aff$(t r$t3r * i (o!!o"ity !ar#$tP (limatic conditions Dovernment policies Price variations Timely information All the above

1?- W'o i* yo3r fi a (ial a"+i*orP !elf 5elatives riends inancial (onsultants

1>- O ,'at ba*i* yo3 ,ill ta#$ i +$*t!$ t "$(i*io * ,'il$ i +$*ti 0 i (o!!o"iti$* !ar#$tP und availability

5eliable research report (ommodity index volatility 4ver all market movements 1@- Ar$ yo3 a,ar$ of t'$ fa(iliti$* )ro+i"$" by I "iab3ll*P !trongly agree Agree 0either Agree nor disagree <isagree &ighly <isagree 1=- W'at i* t'$ to30'$*t ti!$ ,'$r$ t'$ )rofitability of (o!!o"ity !ar#$t* ta#$* a '30$ b$ati 0P 5ecession 0o <I Gocal Trade restrictions 4thers

1A- W'i(' of t'$ follo,i 0 yi$l" b$tt$r r$t3r *P /utual fund Property "onds

ixed <eposit

(ommodity market !hares 4ther 1<- W'at i* t'$ *)$(ifi( r$a*o for tra"i 0 ,it' I "iab3ll*P 5esearch !ervice "rokerage Investment tips are good 1:- Ho, !3(' *ati*fi$" yo3 ar$ ,it' I "iab3ll* *$r+i($*P &ighly satisfied !atisfied 0either satisfied nor dissatisfied <issatisfied &ighly <issatisfied .9- I f3t3r$2 ,ill yo3 (o ti 3$ to i +$*t i (o!!o"ityP 2es 0o .1- W'at "iff$r$ tiat$* yo3r (o!!o"iti$* tra"i 0 (o!)a y fro! ot'$r*P 8i r$0ar"* of bro#$ra0$2 *ati*fa(tio 2 *$r+i($*2 )ro"3(t* ;

..- W'at )$r($ ta0$ of yo3r $ar i 0* "o yo3 i +$*t i tra"i 0P 1p to =.K

 1p to ?AK 1p to A.K Above A.K .?- Ho, "o yo3 rat$ t'$*$ tra"i 0 (o!)a i$*P =. -. a. b. c. d. e. ?. A. 5eliance money I(I(I <irect India "ulls IG; ! I0L7!T!/A5T 4thers HPlease specifyI J.

.>- W'at !or$ fa(iliti$* "o yo3 t'i # i* r$N3ir$" ,it' yo3r I "iab3ll* a((o3 tP

P$r*o al I for!atio Na!$ % QQQQQQQQQ A0$% QQQQQQQQQQS$/% /ale emale Pr$*$ t A 3al I (o!$% QQQQQQ- 8I &a#'*;

O((3)atio % QQQQQQQQQQ

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