A study on

Commodity market-A new source of investment and

customer preference towards commodity market

Introduction
Ever since the dawn of civilization commodities trading has become an integral part in
the lives of mankind. The very reason for this lies in the fact that commodities represent
the fundamental elements of utility for human begins. The term commodity refers to any
material, which can be bought and sold. Commodities in a market’s context refer to any
movable property other than actionable claims, money and securities. Over the years
commodities market have been experiencing tremendous progress, which is evident from
the fact that the trade in this segment is standing as the boon for the global economy
today. The promising nature of this market has made them an attractive investment
avenue for investors.

In the early days people followed a mechanism for trading called barter system, which
involves exchange of goods for goods. This was the first form of trade between individual
and even nations. The absence of commonly accepted medium of exchange has initiated
the need for barter system. People used to acquire those commodities which they lacked
in exchange of those commodities which are in excess with them. The commodities trade
is believed to have its genesis in sumeria. The early commodity contract was carried out
using clay tokens as medium of exchange. Animals are believed to be the first
commodities, which were traded, among individuals. The internationalization of
commodity market integration that occurred after the European voyage of discovery
during the 15th century. The development of international commodities trade is
characterized by the increase in volumes of trade among the nations and the convergence
of price related to the identical commodities in different markets. The major impetus for
the commodities trade was provided by the changes in demand patterns, scarcity and the
supply potential both within and across the nations.

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Coming to Indian scenario, despite a long history, despite a long history of commodity
markets, commodity markets in India are still in their initial stages of development. The
reasons for this can be initial stages of development. The reasons for this can be
attributed to stringent regulatory innervations, intermediate ban on commodity trading
and policy innervations by the government. Commodity markets have a huge potential in
the Indian context particularly because of agriculture liberalization, commodities’ trading
in India has gained increased momentum in activities. To increase the efficiency of the
markets the forward Markets commission (FMC), the governing body of commodities
trading in India, has taken several initiatives for the establishment of national level multi-
commodity exchange in India. These exchanges serve as platforms for facilitating
transparent trading in multiple commodities, electronic delivery systems and efficient
regulatory mechanism, creating a world class environment for Indian traders. In order to
sustain the increasing volumes in commodities trade, the need for proper clearing and
settlement systems, warehousing facilities and efficient pricing mechanisms have been
identified. With the recent boom in commodities markets, Indian participants are gearing
up for exploiting the potential opportunities in future.

Commodity markets are of great help not only for their participants but also for the
economy as a whole. The twenty year bear market for commodity has drastically reduced
the prices of many commodities to their lowest levels. The present shift in trend in
commodity trading coupled with the global increase in demand will certainly hold a
promising future for the investment in this segment. Since 2003 Indian market is in the
evaluation and development of commodities markets and their significance in the arena
of strategic investment.

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Objective of study
1. To understand awareness of investor about commodity market.

3. To understand investment Pattern of investors for commodity market.

4. To understand comparing commodity market investment with other investment.

Description of the problem

The study is regarding Commodity market- A new source of investment and customer
preference towards commodity market. I have taken this topic because commodity
market investment is new investment avenue and many of the people are not aware and
those who are aware what are their investment pattern? Since these days as market are
volatile most of people who are investing in the market have different strategies and
ways.

Justification of purposed study

Globalization of the financial market has led to a manifold increase in investment. New
markets have been opened; new instruments have been developed; and new services have
been launched. Besides, a number of opportunities and challenges have also been thrown
open. Online Commodities trading is new as compared to other investment in India.
Mainly three exchanges are involved in online commodities trading MCX, NCDEX &
NMCE.

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Research design of the study
The study is based on survey technique. The study consists of analysis about customer’s
awareness and satisfaction of commodity market. For the purpose of the study 100
customers were picked up at random and their views solicited on different parameters.
The methodology adopted includes

 Questionnaire

 Random sample survey of customers

 Discussions with the concerned

Personal interviews and informal discussions will be held when I will be doing market
research with new customers to ascertain the awareness and existing consumers’
satisfaction level. Further applying simple statistical techniques has processed the data
collected.

Sources of data:
 Primary data: Questionnaire

 Secondary data: For the secondary data I have search some sites and some journal of
ICFAI university.

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Sampling plan:
 Sampling: Since I have selected commodities segment as per my profile to do market
research. 100% coverage was difficult within the limited period of time. Hence
sampling survey method was adopted for the purpose of the study.

 Population: Since this survey has to be completed in 3 months that’s why total no of
customers those who are investing in the market.

 Sampling size: A sample of hundred was chosen for the purpose of the study. Sample
consisted of small investors, large investors and traders.

 Sampling Methods: Probability sampling requires complete knowledge about all

sampling units in the universe. Due to time constraint non-probability sampling was
chosen for the study.

 Sampling procedure: From large number of customers & non consumers sample lot
were randomly picked up by me.

 Field Study: Directly approached respondents (businessmen, small shopkeepers,

physical commodities traders and service class people).

Hypothesis:
Null hypothesis: Most of people invest in commodity market.
H¹ Hypothesis-Most of people invest in other investment such as Equity,
mutual fund, Debt securities, bonds etc.

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Data collection instrument:
1. Collection of data through Questionnaires:

The data collected for the study purpose is through questionnaires. One hundred
customers and non consumer were selected randomly for the study purpose and then the
information revealed from the customers is analyzed and interpreted in the study.

2. Organization of field work

Initial field work has to be done for testing tools for data collection. The data was
collected through the direct interaction with the customers & non consumers through
questionnaires answered by them. One hundred customers were randomly chosen for the
purpose of the study in Mumbai.

Project schedule
The study is on commodity market and customer investment pattern and for research I
have to survey and have to compare commodity market investment with other alternative
investment such as in equity, mutual fund, insurance, and debt securities etc. therefore It
will require 3 months to complete the research report.

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REFERENCES
Website:-
1. WWW.GOOGLE.COM

2. WWW.SCRIBD.COM

3. WWW.MONEYCONTROL.COM

Journal:-
1. Commodity market- An Introduction (Edited by N JANARDHAN RAO)

2. Commodity markets- Recent developments (Edited by DHANDAPANI ALAGIRI)

3. Indian stock market-An Empirical study (Edited by O.P.GUPTA, AMITABH GUPTA,

CHANDRIMA SIKDAR, TAPAS MAHAPATRA)

Appendices
Copyright(c) 2009 Sunil D. Tiwari

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