Professional Documents
Culture Documents
By
SRISHTY JAIN
Roll number: BM-016249
(2016-18)
1
DECLARATION
I, Srishty Jain, do hereby declare that the Summer Internship Project entitled Study on
Commodity market, Analysis on Gold has been undertaken by me as part of my studies in the
degree of Master of Business Administration. I have completed this study under the guidance of
Mr. Gaurav Dawar, Professor of Finance, Institute of Management Studies, Gzb. And Dr. Ravi
Singh (Research Head, SMC Global Securities Ltd.)
I also declare that this work has not been submitted for the award of any degree, diploma,
associateship or fellowship or any other title in this Institute or any other College/ University.
2
ACKNOWLEDGMENTS
I thank Mr. Gaurav Dawar, for his support and guidance during the course of my summer
internship. I remember him with much gratitude for his patience and motivation, but for which I
could not have submitted this work.
I thank my parents for their blessings and constant support, without which this summer
internship would not have seen the light of day.
Srishty Jain
Roll No. BM-016249
3
TABLE OF CONTENTS
Bibliography 62
Annexure 63-66
4
LIST OF TABLES
5
EXECUTIVE SUMMARY
Indian Stock Market has undergone through various ups and downs. This report is the collective
research of Fundamental and Technical Analysis of gold. Past gold prices were analyzed in order
to understand the current and the future scenario.All the factors affecting the prices of gold was
included in the fundamental analysis to understand the factors and its impact on gold.
Also it includes the international analysis i.e. export, import, consumption, reserves. All the
fundamental facts are also included in the analysis i.e. Subprime Crises, US Non-Employment
Payroll and Impact Of FED Rate increase. After that the statistical tools are applied to define the
relationship of gold with USD and Silver.And in the last part of gold analysis the strategies are
defined for the future predictions by using the technical tools. Also the portfolio of nifty 50 is
6
Chapter 1
COMMODITY MARKET
A virtual market place for buying, selling and trading raw or primary products, for the people who
want to invest. There are currently about 50 major commodity markets which are worldwide to
provide facilities to the investors to trade in around 100 primary commodities. Commodities are
divided into two types: hard and soft commodities. Hard commodities include natural resources
that must be mined or extracted (gold, rubber, oil, etc.), whereas soft commodities include
agricultural products or livestock (corn, wheat, sugar, coffee, soybeans, pork, etc.)
It is one of the online based commodity exchange in India. It was commenced on 9, May 2003
and began its operations on 15 December, 2003. It is the only exchange in India which is being
Non- Agri Products such as steel, copper, Gold (100 gm), Gold Hedge, Silver, Silver Hedge
7
Timings
Products Timings
Weekdays
Agri commodities 10 a.m 5 p.m.
Saturdays
Agri commodities 10a.m- 2p.m.
MCX is the youngest stock exchange out of the three stock exchanges. It is established in
November 2003 and is based in Mumbai. It is the commodity derivatives exchange that facilitates
online trading, and clearing and settlement of commodity futures transactions, thereby providing
MCX Timings
Indices
8
Products Traded on MCX
A. Bullions- Gold, Gold Mini, Silver, Silver Mini, Silver Micro, Silver 1000, Gold Petal
B. Base Metals- Aluminum, Copper, Zinc, Nickel, Aluminum Mini, Copper Mini, Zinc Mini,
Nickel Mini.
C. Energy: Crude Oil, Crude Oil Mini, Crude Oil Brent, Natural Gas
D. Agro Commodities- Cardamom, Cotton, Crude Palm Oil, Mentha Oil,Castor seeds, Kapas.
Hedgers- A hedger is a one who takes steps to reduce the risk by offsetting the investment.
Hedging strategies are used by the hedger to reduce the risk. Hedgers may reduce the risk but in
doing so, they can reduce the profit potential. Their main objective is to protect the profit and
For Instance- A cereal manufacturer wants to hedge against wheat price rising by buying a futures
Speculators-A speculators are the people who trade derivatives, commodities, bonds, equities or
currencies with a more risk in return for a higher than the average profit. Speculators take large
risks, to earn the higher profits. Speculators are typically sophisticated risk-taking investors as
9
they have expertise in the markets in which they are trading in; they use investments
like futures and options. These investors are call speculators because of their ability to predict
price changes. Normally, speculators do not operate for a short time period as the traditional
investors. For instance: An investor who is investing by seeing the bearish trend with a prediction
or expectation of an increase in trend in near future. This unpredictable and risky investment is
Arbitragers- An arbitrager is a attempting to profit from price differences in the market. These
people buy from one market and sell it to the other with the higher price range. They make the
risk-free profits.
For example, searching for the stocks registered in different markets, then buying the stock from
the market where the stock price is less and selling it to the other market where the stock price is
A stock exchange is the exchange which provides services to stock brokers and traders for trading
of stocks, bonds, and other securities. Stock exchanges provide facilities to issuing and redeeming
the securities and other financial instruments, and capital investments which includes the payment
of income and dividends. Securities which are being traded on a stock exchange include stocks,
unit trusts, derivatives, pooled investment products and bonds. Indian stock market is about 200
years old. Prior to this the bills of exchange were in used, which was considered as a form by
which virtual stock can be traded. The first stock market which was organized was governed by
the rules and regulations and it came into the existence in the form of The Native Share and Stock
Brokers Association in the year 1875. After going through number of changes this is the better
10
association today as Bombay Stock Exchange is. During this period many other exchanges were
also launched. There are 19 stock exchanges which are recognize and are presently there, out of
the 19, 4 are at national level exchanger and the remaining are regional level exchanger. National
stock exchange (NSE) was established in 1992 and was the last exchange. The regional level
exchanger exist but trading in the exchanger is negligible. In the terms of listing, trading and
volume, the Indian stock market leader are National stock exchange (NSE) and Bombay stock
exchange (BSE). The market has a gone the post liberalization of Indian economy and also it has
witness the formation of security and stock exchange board of India (SEBI). The last 15 years of
Indian security market is considered is the most important part and also the sustainable
transparency in share market capital brought by SEBI. SEBI has also managed to bring in trust of
NSE is the leading stock exchange of India headquarters in Mumbai and was established in 1992.
NSE was the first exchange to provide a modern, fully automated screen based on electronic
NIFTY 51
Nifty is the index of the NSE. It comprises of 51 stock index companies, 51th being the TATA
DVR which is recently added. Nifty represents the overall performance of the NSE
11
NSE Timings
9:15a.m to 9:50a.m- Block deal session (Block Deal is a single transaction, of a minimum
quantity of five lakh shares or a minimum value of Rs 5 crore, between two parties which are
mostly institutional players. The transaction happens through a separate trading window).
A. Equities: Equity is the value of share issued by the company. Equity is traded on the
secondary market i.e these are previously issued. Currently, more than 1300 securities are
B. Indices: A stock market index is a measure of the relative value of a group of stocks in
numerical terms. As the stocks within an index change value, the index value changes.
C. Mutual Funds: In mutual funds, funds are collected from investors for the purpose of
investing in securities such as stocks, bonds, money market instruments and similar assets.
The main advantages of mutual funds is that they give small investors access to
professionally managed, diversified portfolios of equities, bonds and other securities,
D. IPO (Initial Public Offerings) : IPO is issued in the primary market. IPO is offered in
the market to raise the funds and to expand the business of the issuing company. It is the
12
E. Security Lending and Borrowing Scheme (SLBS): The Securities Lending and
Borrowing mechanism allows short sellers to borrow securities for making delivery. Short
Selling means selling of a stock that the seller does not own at the time of trade.
F. Sovereign Gold Bond Scheme: Sovereign Gold Bonds are Government securities
and maximum to be 500 gms. They are substitute for investment in physical gold. The
G. Equity Derivatives: The value of the derivative is derived from the one or more
underlying security. Option and future are the most common equity derivatives.
H. Currency Derivative: Currency Derivatives are available on four currency pairs viz. US
Dollars (USD), Euro (EUR), Great Britain Pound (GBP) and Japanese Yen (JPY). A
future contract is to exchange one currency for another at a specified date in the future at a
NSE Bond Futures: An Interest Rate Futures contract is an agreement to buy or sell a debt
instrument at a specified future date at a price that is fixed today.The underlying security for
Interest Rate Futures is either Government Bond or T-Bill.
13
BOMBAY STOCK EXCHANGE(BSE)
BSE is the Asias first stock exchange. It is established in 1875,more than 5500 companies are
listed in the BSE. BSE provides a host of other services to capital market participants including
risk management, clearing, settlement, market data services and education.
BSE Timings
Pre-open Trading Session 09:00 09:15 Trading Session 09:15 15:30
Position Transfer Session 15:40 16:00 Closing Session 15:40 16:00
SENSEX
BSE's equity index - the S&P BSE SENSEX - is India's most widely tracked stock market
benchmark index. It is traded internationally on the EUREX as well as leading exchanges of the
BRCS nations (Brazil, Russia, China and South Africa).
Sensex is the measure of overall performance of the top 30 companies.
Products traded on BSE
a) Equity
b) Derivatives
c) Indices
d) Currency Derivative
e) IRD
Currently BSEs Interest Rate Derivative (IRD) Segment offers
91-day Government of India (GOI) Treasury Bill Futures
10 Year Government of India Futures
The movements in the stock market has a profound impact on the economy and the everyday
people. If there is a collapse in share prices, it leads to the widespread of economic disruption.
For Instance, the stock market crash of 1929 has a key impact which led to great depression of the
1930s.
14
Economic effects of stock market
1. Wealth Effect- If the people lost their money on shares, they will be more resistant to spend
money, this will contribute to fall in consumer spending. Often, this effect will not be given too
much importance. However, people who buy shares are prepared to lose their money, their
2. Investment- Falling of the share prices may hamper the firm ability to raise finance on
the stock market. Firms who are expanding wish to borrow money by issuing more shares,
which provides them a low cost way of borrowing more money. However, it becomes more
3. Bond Market- A fall in the stock market may lead to other investments more attractive. People
can move out of shares and can invest into government bonds or gold.
1. Effect on Pensions- People with the private pension or investment trust will be affected with
the fall in the fall in the share prices of the stock market indirectly, as it will reduce the value of
2. Business Investment- It could be the source of business investment i.e firms can offer new
15
1.2 OVERVIEW OF THE COMPANY
Founded in 1994, SMC Group is one of Indias leading financial services and investment
solutions providers and has been rated as Indias Best Equity, Derivatives & Currency
Broker and Broking house with the largest Distribution Network. Recently, it has been
awarded with the Best Equity Broking House Derivative Segment & Fastest Growing
Equity Broking House -Large Firm. A blend of extensive experience, diverse talent and
Over the years, SMC has expanded its operations domestically as well as internationally.
Jaipur, Hyderabad, Bangalore plus a growing network of branches & 2500+ registered sub-
brokers and authorized persons spread across500+ cities and towns in India.
They are amongst the first financial firms in India to expand operations in the lucrative gulf
market, by acquiring license for broking and clearing member with Dubai Gold and
VISION
Aspire to be a global organization having dominant position in financial and investment
MISSION
16
VALUES
17
BASED ON COMPETITORS
Mr. Mahesh C Gupta Vice chairman and Managing Director, SMC Group
Mr. D K Aggarwal Chairman & Managing Director - SMC Investments & Advisors Ltd;
Chairman & Managing Director - SMC Capitals Limited; Chairman
18
SMC Comtrade Limited ; Chairman-SMC Real Estate Advisors
Pvt. Ltd; Director-SMC Comex International DMCC
Mr. Ajay Garg Whole Time Director SMC Global Securities Limited
Mr. Anurag Bansal Whole Time Director SMC Global Securities Limited
Ms. Shweta Aggarwal Director- SMC Capitals Limited
Mr. Pravin Agarwal Whole Time Director - SMC Insurance Brokers Pvt. Ltd.
Mr Himanshu Gupta Director - Indunia Realtech Ltd., CFO SMC Comtrade Ltd.
19
Mr. Suman Kumar [E.V.P.(Corporate Affairs & Legal) & Company Secretary] and
Compliance Officer
Mr. Mohit Shyngle (Senior Vice-President)
CSR ACTIVITIES
The company has contributed towards Education, Health Facilities, Rural Area Projects and Slum
Area Development Projects. The company mainly focus on hunger, malnutrition, poverty,
education, women empowerment which has been described under schedule 7 of the companies
Act 2013 for the purpose of CSR Activity. The net profit of the company is Rs. 163231348 and
20
Geographical Spread- Smc Global Securities Ltd. covers 550+ branches
21
MARKET SHARE OF THE COMPANY
Market Share
5%
20%
Equity Broking
Currency Broking
Commodity Broking
75%
22
Chapter 2
Review of Literature
In the study, Apak, Akman, Cankaya and Sonmezer, (2012), it includes the major exporters and
importers to explain the price fluctuations in the gold prices. India, China, Turkey, Russia, USA,
Indonesia, Switzerland, UK and Euro zone countries are the top gold demanding countries. On
the other hand, China, Australia, USA, South Africa, Russia, Canada and Indonesia are the top
Gold producing countries according to World Gold Council. The change in USD, Swiss Franc,
Tully and Lucey, (2007), scrutinize the relationship between the gold price and the US Dollar.
Their study indicates that the datasets which is being used in the analysis for various economic
variables spanning from 1983 to 2001. The study also confirms that there are few macroeconomic
factors that may impact the gold prices, the exchange rate of domestic currency to US Dollar.
In another study ,Capie, Mills and Woods, (2004) used weekly data for last thirty days for the
spot gold price of gold to USD to analyze that up to what extent gold be acted as a hedge.This
study concluded that the relationship between Gold and USD is inelastic and negative. But, this
also can be shifted over time. The yellow metal is basically dependent on the political events and
uncertainties
23
Chapter 3
Research Methodology
Research Methodology is a way in which the researchers specify about how they will retrieve the
It is a way to systematically solve the research problem. Methodology includes the research
procedure by which the study is done. The elements of research methodology are research design,
sampling procedure and the data collection method and analysis procedure.
Research Design
Research Design is a framework of how the study has been done and how the data has been
collected. In this study we have use quantitative research design because here we have used the
24
Chapter 4
Project Methodology
Period of Study
The study covers a period of 6 months spanning from October 2016 to March 2017
4.1 Statistical Tools Used
Correlation Analysis
Regression Analysis
Mean
Standard Deviation
Skewness
Kurtosis
25
Chapter 5
GOLD
Symbol = Au
Atomic no = 79
Gold is a dense, soft, shiny and the most metafile and ductile pure metal with bright yellow color
and luster which is traditionally considered attractive and is maintained without oxidizing air and
water. Gold is serve as a symbol of wealth and is one of the coinage metal. Gold has store of
value throughout the history, the standards of gold provides a basis of monetary policy. Gold has
meant prestige, wealth and power, and it is linked to the variety of ideology for centuries. The
natural beauty and rarity of gold has made it equally important and precious to men and women.
Owning gold has been a safeguard against disaster. On the failure of paper money and men has
turned to gold as the source of monetary wealth there is no difference exist in todays era. There
has been fluctuation in every market and also there are downturns in sum, the gold holds is its own
expectation. For planning a future gold is good way to invest as the amount of gold is limited in
the world. The gold is homogeneous, fungible and indestructible, these attributes set it apart from
other commodity and tend to make it returns insensitive to business cycle fluctuations.
1. Use in jewellery
2. Industrial application
3. Investment purpose
26
USES OF GOLD
= gold is money
= gold is insurance
= gold is an investment
GOLD INVESTMENT
It is the most popular investment. Gold is generally bought as a hedge instrument against crises
like economic, political and social (and includes investment market declines, currency failure,
inflation, war, social unrest. Through the use of future and derivative the gold is subject to
speculation. The certain factor suggests that the gold behave more like a currency than a
27
INVESTMENT VECHICLE
BARS
Buying bullion gold bars is the most traditional way in investing in gold. The gold bars are
available in different prices. They generally carry low premium that of gold bullion points. The
risk of forgery increases with the increase in bars sizes because of their less stringent parameters.
Gold bars cannot be easily weighted and measured against the known value.
COINS
Gold coins are the most common way of owning gold. The prices of coins are set according to
their respective weights, plus the premium which is based on demand and supply.
28
EXCHANGE TRADED PRODUCTS (ETPs)
The exchange traded product in gold include ETs, ETNs, and CEFs which are traded like share on
the major stock exchanges. The 1 gold ETs was launched in March 2003 on the Australian stock
exchange and it originally represent exactly 0.1 troy ounce (3.1) of gold. SED are gold shares is
the second largest traded fund (ETs) in the world (market capitalization, November 2010)
2. Value of dollar
3. Inflation prospects
5. Gold reserve
29
6. Supply
7. Speculation
8. Increase in the demand for exchange traded paper baged products
9. Growth in demand jewels
10. Monetary policy
11. U.S government borrowing
30
GOLD DEMAND- 5 YEARS
Table 2:
year on
year
Total Bar and coin Demand 1303.5 1715.7 1044.8 1066 1042 -2
India is largest importing nation of precious metal with the main consumption for jewellery.
Dollar is important to look upon when we are talking of gold prices. They have an inverse
correlations with each other i.e. the price of dollar is increase the price of gold is decrease and
vice-versa. The gold price increases at the time of recession and economic prosperity.
31
Table 3:
Top 15 reported official gold holdings (as at March 2017)
Tonnes % of reserves
3 IMF 2,814.0 -
6 China 1,842.6 2%
8 Switzerland 1,040.0 6%
9 Japan 765.2 2%
11 India 557.8 6%
14 Taiwan 423.6 4%
32
Tonnes
9,000.00
8,000.00
7,000.00
6,000.00
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00
50000
40000
30000
20000
10000
0
2016-2017 2015-2016 2014-2015 2013-2014 2012-2013
33
GOLD EXPORT (Value in US$)
Table5
Commodity 2016-2017 2015-2016 2014-2015 2013-2014 2012-2013
Gold 5275.45 4984.71 2844.25 3031.84 4366.10
Source* www.commerce.nic.in
5000
4000
3000
2000
1000
0
2016-2017 2015-2016 2014-2015 2013-2014 2012-2013
Gold
Trading Unit 1 Kg
Initial margin 5%
34
Gold Mini
Initial margin 5%
Gold Petal
is higher
Gold Guinea
Initial margin 4%
35
Chapter 6
Data Analysis
Interpretation
This shows that there is an inverse relationship between Gold and USD, Silver and USD and a
positive relationship between Gold and Silver due to macroeconomic factors such as political
events and uncertainties at that span of time i.e from October 2016- March 2017. By calculating
the correlation of Gold and USD of last 5 years we get the value of -10.812 (5 years weekly data).
Thus we can say that the correlation is more in 6 months data due to the increased demand in third
quarter.
CALCULATION OF CORRELATION AND REGRESSION
R R^2
36
REGRESSION ANALYSIS OF GOLD-USD
USD-Gold
69
67.5
67
66.5
66
65.5
65
64.5
26000.00 27000.00 28000.00 29000.00 30000.00 31000.00 32000.00
INTERPRETATION
X-Axis represents Gold Prices in INR.
The equation shows that the coefficient for gold in INR is 0.0003. The coefficient indicates
that for every additional Rupee in Gold you can expect USD to decreaseby an average of
0.0003 Rupees.
The blue fitted line graphically shows the same information. If you move left or right along
the x-axis by an amount that represents thousand rupees change in Gold price, the fitted
If the fitted line was flat (a slope coefficient of zero), the expected value for USD would
not change no matter how far up and down the line you go.
37
REGRESSION ANALYSIS OF SILVER-USD
Silver-USD
69
68.5
y = -0.0002x + 74.276
68 R = 0.0684
67.5
67
66.5
66
65.5
65
64.5
38000.00 39000.00 40000.00 41000.00 42000.00 43000.00 44000.00 45000.00 46000.00 47000.00
INTERPRETATION
X-Axis represents Silver Prices in INR.
The equation shows that the coefficient for Silver in INR is 0.0002. The coefficient
indicates that for every additional Rupee in Silver you can expect USD to decrease by an
The blue fitted line graphically shows the same information. If you move left or right along
the x-axis by an amount that represents thousand rupees change in Silver price, the fitted
If the fitted line was flat (a slope coefficient of zero), the expected value for USD would
not change no matter how far up and down the line you go.
38
REGRESSION ANALYSIS OF SILVER-GOLD
GOLD-SILVER
32000.00
y = 0.6409x + 1810.6
R = 0.8
31000.00
30000.00
29000.00
28000.00
27000.00
26000.00
38000.00 39000.00 40000.00 41000.00 42000.00 43000.00 44000.00 45000.00 46000.00 47000.00
INTERPRETATION
X-Axis represents Silver Prices in INR.
The equation shows that the coefficient for Silver in INR is 0.640. The coefficient indicates
that for every additional Rupee in Silver you can expect Gold to increase by an average of
0.640 Rupees.
The blue fitted line graphically shows the same information. If you move left or right along
the x-axis by an amount that represents thousand rupees change in Silver price, the fitted
If the fitted line was flat (a slope coefficient of zero), the expected value for Gold would
not change no matter how far up and down the line you go.
39
Calculation of mean, SD, skewness and kurtosis on Gold Data
Mean 28940.59
SD 1029.922
Range 27910.67 29970.51
Skewness 0.031449
Kurtosis -0.28806
GOLD
32000.00
31000.00
30000.00
29000.00
GOLD
28000.00
27000.00
26000.00
0 20 40 60 80 100 120 140
From the following table the mean value of the 6 months gold price came out to be
mean+-SD and it comes out to be 27910.67-29970.51 and nearly the difference between
the highest and the lowest value comes out to be 2059.84 which shows high deviation in
the data and this is because of the high prevailing prices of gold in the third quarter because
of rise in demand for gold due to the Indian festival DHAN TERAS.
Value of skewness is positive which indicates the graph will be positively skewed and more
Value of kurtosis is negative which shows the flatness of the graph and simply describes
40
6.2 IMPACT OF GST ON GOLD
D Excise(1%) 2900 0
F VAT(1.2%) 3515 0
H GST(3%) 0 8700
41
Interpretation
Reserve Bank of India holds a gold reserve of 557.77 tones, out of which 265.49 is held in the
safe custody with Bank of England and Bank of Settlement (BIS). Gold, Gold Jewellery will be
taxed 3% against the current effective price of 2%. The higher tax would make Jewellery
buying costlier, thus the move to levy the higher tax will benefit more to larger player in the
organized structure. The reason why jewelers are not restocking the gold because number of
jewelers have illegal stocks which they had to liquidate before the GST rolls out. It is said that
excise of 1 per cent paid on the stock is non-cenvatable. This is the reason why gold is available
The gold demand in India is 674 tones in 2016. Even if the GST rates fixed at a lower rate, the
gold demand in India will be range from 650- 750 tones.The current tax on gold is around 12 %
which includes customs duty, excise duty and VAT. The council is of the opinion that the GST
rate should be below that as it will bring about a behavioral change among the consumers.
Despite of the gold showing 15% growth in Q1. It is assumed that it will remain to grow in the
second quarter due to good Akshay Trithiya sales. Kerala has recommended 5% GST on gold.
The rate has not yet been decided for the exchange of old gold to new gold. If there will be a low
GST rate then it will bring down the prices and if it is high then industry may take more time to
adjust it.
42
Chapter 7
Fundamental Facts
Subprime crises are the crises which was started in 2008 and had affected the mortgage industry
because of the borrowers being approved for the loan which they cant afford. Thus, a rise in
foreclosures led to the collapse of many lending institutions. These crises affected the global credit
market leading to higher interest rates as well as decreased the availability of credit. The Gold
prices started rose in 2009, but this stage of gold to rise was started in 2008. At the time Gold was
being sold as the investors sought to fund so as to shore up their losses from the other markets.
The above chart shows that the gold fell at $681 on 24. October 2008 and settle on $729.10 At
December 2008, the monetary policy meeting was held to stabilize the market as well as the
economy. First it voted to reduce the Federal funds target from 0%-0.25%, Second, they decided
to buy $600 billion in agency debt and agency mortgage backed securities.
In this, Gold was traded above $1000 level whereas Comex Gold Futures settles at $1096.20 an
ounce on 31 December, 2009 a 24% rise from December 2008, where the price was $884.30
43
6.2 IMPACT OF US NON- FARM EMPLOYMENT PAYROLL ON GOLD
Non farm payroll is connected to the people who are engaged in the activity other than farming. It
measures the change in the number of people employed in the previous month compared to the
current month. Higher payrolls leads to negative impact on precious metals (Gold and Silver)
while positive impact on base metals. On the other hand, lower payrolls leads to positive impact
on precious metals and a negative impact to base metals. affects the US dollar, the Foreign
exchange market, the bond market, and the stock market. The nonfarm payroll statistic is released
monthly, on the first Friday of the month, by the U.S.Bureau of Labor Statistics as part of the
Employment Situation Report on the state of the labour market.Nonfarm payrolls are also closely
watched by the Fed, as it is an indicator of how quick the economy is growing There is no clear
long-term relationship between the gold price and job gains. Employment statistics move the
price of gold in the short-term. Good news from the labor market is negative for the shiny metal.
In such a case, the price of gold tends to fall on the day when the Nonfarm Payroll Report comes
out.Spot gold had dropped 0.2 per cent to $1,262.95 per ounce by 0054 GMT. It has fallen0.3 per
cent for the week and could register its first weekly decline in four weeks. U.S. gold futures fell
U.S central bank increase their quarter short term rates by 1- 1.25%. These interest rate hikes
will boost up the dollar and will also boost up the bond yields up which will lead put pressure on
gold price. Thus this interest rate hike would make it less attractive to hold non- yielding bullion,
44
Chapter 8
Technical Analysis
TECHNICAL ANALYSIS
STOCHASTIC OSCILLATOR
The stochastic oscillator is a momentum indicator that compares the closing price of a security to
the range of its prices over a certain period of time. The sensitivity of the oscillator to market
Blue line= K%
Red line= R%
If blue line cuts the red line from below it indicates the upward trend in the price. But if the red
line cuts the blue line towards down it will be showing the downward trend in the price in the near
future.
45
RSI (RELATIVE STRENGTH INDEX)
The relative strength index (RSI) is a technical indicator used to analyze the financial markets.
It is used to figure out the current and historical strength or weakness of a stock or the closing
The RSI is classified as a momentum oscillator because it is used to measure the velocity and
magnitude of directional price movements where, Momentum is the rate at which the price rise or
fall.
The RSI is mostly used on a 14-day timeframe, with the measurement scale of range 0 to 100, with
high and low levels marked at 70 and 30 respectively. Shorter or longer timeframes are used for
alternately shorter or longer predictions according to a persons need. Extreme high and low
levels80 and 20, or 90 and 10occur less frequently indicating the stronger momentum.
46
MOVING AVERAGE MA
A widely used indicator in technical analysis because it helps to smooth out the price action by
filtering out the noise from uneven price fluctuations. A moving average (MA) is a trend-
47
TREND ANALYSIS
Source*investing.com
INTERPRETATION
Moving Average: The moving average line is showing the downward trend as the line is above
the candles and is moving downwards. This shows the downward prediction in the gold trend.
Stochastic: Blue line shows the K% whereas red line shows the R%. Since both the lines are
moving downwards this also shows the downward trend but until the blue line cuts the red line and
moves upward. Also this trend is showing the over selling situation as this is below the 20. We
will be making strategies at this point and will buy once the line again cuts the 20 level from below
RSI: Although RSI trend line is also showing the downward trend but there is no over selling or
By these three we can only predict the downward trend in this commodity.
48
PATTERNS
CONSOLIDATION
Consolidation is used in technical analysis to describe the movement of a stock's price within a
defined range of price. Consolidation is generally regarded as a period where decision cannot be
taken, which starts and ends when the price of the asset moves above or below the prices in the
definite pattern. Consolidation pattern is also defined as a set of financial statements that
49
DOUBLE BOTTOM
A double bottom is a charting pattern which used in technical analysis. It is used to describe the
drop of a stock or index, another drop to the similar level as the previous drop, and finally the
other bound. The double bottom looks like the alphabet "W". The lower touch is marked as the
support level.
Source*tradingview.com
Target Amount= Price at Resistance Price at support
For instance: In the above figure we can calculate the target amount and stop loss as:
With this we can say that we can get a maximum profit of the target amount i.e. Rs.589.7 and will
sell the stock when the price will reach Rs. 80948.7 i.e. we will not bear the loss more than stop
loss.
50
Rectangle
Source*tradingview.com
Interpretation
Where, target amount = upper range of rectangle lower range of rectangle
Stop loss= target amount/2
It can indicate both bearish and bullish trend depending on the breakout of the pattern. In this figure
it is showing the bearish trend as the break out is when the prices are following the downturn.
For instance: upper range of rectangle is indicating the price i.e. $1697.74 and
The lower range is $1632.78.
Target amount = 1697.74 1632.78 = 64.96
Stop loss = 32.48
Here we will not bear the loss of more than $ 32.48 and will set the target up so that we can earn
the profit of $ 64.96.
51
STRATEGIES
Source*investing.com
Since the blue line i.e. slow line is intersecting the red line i.e. fast line from below therefore we
have created the buy strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
52
Sell strategy using MACD
Source*investing.com
Since the red line i.e. fast line is cutting the blue line i.e. slow line and is moving up therefore we
have created the sell strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
53
Buy strategy using MACD
Source*investing.com
Since the blue line i.e. slow line is intersecting the red line i.e. fast line from below therefore we
have created the buy strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
54
Sell strategy using MACD
Source*investing.com
Since the red line i.e. fast line is cutting the blue line i.e. slow line and is moving up therefore we
have created the sell strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
55
Buy strategy using MACD
Source*investing.com
Since the blue line i.e. slow line is intersecting the red line i.e. fast line from below therefore we
have created the buy strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
56
Sell strategy using MACD
Source*investing.com
Since the red line i.e. fast line is cutting the blue line i.e. slow line and is moving up therefore we
have created the sell strategy at this point.
Where, Blue line is slow line as it is showing the trend for 20 days
And red line is representing the fast line as it is showing the trend for 9 days.
57
Chapter 9
FINDINGS
Present project has been undertaken to find out the relationship between Gold and Dollar, Silver
and Gold. It has been found out by calculating the previous prices of Gold and Dollar.
Correlation
When the values of the correlation change in the opposite direction, there is a negative correlation.
Both the prices are moving in an opposite direction i.e. when gold price is decreasing USD is
increasing and vice versa. There is a negative correlation between Gold and USD prices.
When the values of the correlation change in the same direction, there is a positive correlation.
Both the prices are moving in an same direction i.e. when gold price is increasing silver prices
also increasing and vice versa. There is a negative correlation between Gold and Silver prices.
Regression
This indicates that Gold is 80% dependent on silver prices. So, there is a relationship between
58
Regression 0.1269 gold- usd
This indicates that there is less dependency of Gold on dollar prices. So, there is negative, inelastic
Standard Deviation(1029.922)
It has been find out that in the span of October 2016- March 2017 there is a high volatility in the
movement of Gold prices due to event took place such as AKSHAYTRITIYA. Therefore, the
RECOMMENDATIONS
There are five ways of investment in Gold i.e. Jewellery, Investment in terms of bars and coins,
Technology, ETFs and Through central banks and other institutions. Investors can divide their
investment in gold in different segments which means Investors should invest in Gold in partial
terms.
Investors not to buy Gold in bulk quantity, it is recommended to buy in small quantities as this
will not trouble the investors when the prices go down. Also, all the investment should not be made
at a single price and should be invested a little amount at one time. The investors should first
analyze the trend of the Gold and then place an order. It is also recommended to avoid investing
risky.
59
CONCLUSION
Gold is considered to be the saving instrument in India and it is used very often to hedge against
the inflation, Geopolitical and economic conditions and it is expected that the gold is considered
to be an alternative asset for holding the idle money for speculative purposes.
But the another aspect to the study is that there is a risk involved in investing in Gold. It is better
Therefore, I conclude that we should invest in gold by analyzing the past trends and checking the
technical aspects as well as the fundamental aspects. From the study I conclude that the investor
The findings/fundamental facts may be useful for the investors, but their investment
decisions mainly depend on their level of expectation and will be based on the future
60
BIBLIOGRAPHY
WEBSITES
1. www.investing.com
2. www.mcxindia.com
3. www.nseindia.com
4. www.bseindia.com
5. www.ncdex.com
6. in.reuters.com
7. www.bloomberg.com
8. www.economictimes.indiatimes.com
9. commerce.nic.in
10. www.tradingview.com
11.www.google.com
12. www.gold.org
REFERENCES
Patel Gaurav, (July 3,2016), Commodity Market: With Special Reference to Gold and
Silver, retrieved june 5,2017 , from https://scholar.google.co.in/scholar.
Prakash p. and Sundar Rajan S., (August 1st 2014), An Emperical Analysis on the
Relationship between Gold and Silver with Special Reference to the National Level
commodity exchanges, India, retrieved june 10th 2010, from
https://scholar.google.co.in/scholar.
61
Annexure
NIFTY 51 RETURNS
S.No. 2014-2015 2015-2016 2016-2017 3 Year
Automobile
1 Bajaj Auto -3.215588405 19.30724983 16.60467 34.64437
2 Bosch 133.3871938 -18.23998332 9.46258 1.088737
3 Eicher Motor 166.8481087 20.57090234 0.33403 329.2124
4 Hero Motocop 16.04536663 11.58799909 13.978 29.40258
5 Mahindra & Mahindra 21.11756908 1.927933996 6.29388 0.312226
6 Maruti Suzuki 87.51616584 0.512529244 61.87337 206.9202
7 Tata Motors 38.01580334 -29.73464195 20.49922 0.168569
8 Tata Motors (DVR) 63.80928854 -13.02970894 -2.150165 0.394022
Energy
9 Gail 0.82424887 -8.356904088 6.214689 -0.02659
10 ONGC -5 -35.28963415 -13.75291 -42.3676
11 NTPC 901.6556291 -12.25740552 28.98213 37.41722
12 BPCL 76.47058824 11.60493827 -27.88889 41.39434
13 Indian Oil Corporation 31.42857143 6.288032454 -2.025316 38.21429
14 Reliance Industries -11.75213675 26.68202206 27.04524 41.02564
15 Tata Power -9.294117647 -16.03896104 45.3125 9.411765
16 Power Grid 38.33333333 -4.137931034 40.91559 87.61905
Banking
17 Yes Bank 9706.486% 6.043518235 0.788047 2.736562
18 State Bank of India -0.860744642 -0.272608126 0.510425 -0.847
19 Indusland Bank 0.765467769 0.092099323 0.472871 1.839793
20 Kotak Mohindra Bank 0.681390436 -0.481705692 0.281422 0.116702
21 HDFC Bank 36.57852564 4.737459666 34.67301 92.64824
22 Bank of Baroda -77.00% -0.12 0.12 -0.7652
62
23 Axis Bank -61.10% -28.20% 8.90% -66.5781
24 HDFC Ltd
25 ICICI -74.2228 -26.7678 16.177 -77.3806
26 Indiabulls Finance 134.8558198 16.49041047 59.71688 336.9606
Metals
27 Coal India 25.35405665 -19.55083582 0.222603 1.088083
28 Hindalco -9.154929577 -31.82170775 122.9143 37.35916
29 Tata Steel -20.01262626 0.851735016 51.9597 21.89394
Cement
30 ACC 12.50% -12.86% 2.28% 10.54%
31 Ambuja Cements 2.70% 3.84% 0.55% 8.48%
32 Grasim Industries -16.42% -11.83% -72.77% -5.98%
33 Ultra Tech Cement -7.84% -15.87% 24.38% -10.17%
Cigrettes
34 ITC 48.06095447 8.695920128 23.61815 95.91204
Pharmaceuticals
35 Cipla 86.11546499 -28.14232578 15.82186 54.89812
36 Dr.Reddy's Lab 35.17047656 -14.28410054 -12.84186 1.989539
37 Lupin 113.7050436 -26.33217131 -2.080087 36.07968
38 Sun Pharma 78.06956522 -19.91405411 183.8185 -99.82
39 Aurobindo 140 -38.69135802 -7.734354 32.65226
Information Technologies
40 HCL -0.308823011 -0.134718606 6.62% -0.38331
41 Infosys -0.330602453 -0.439591527 -0.151976 -0.69153
42 TCS 0.173312813 -0.008790042 -0.009006 0.117196
43 Tech Mahindra -0.653925421 -0.249328276 -0.008529 -0.74766
44 Wipro 0.120844844 -0.108891346 -0.082629 -0.08083
Telecom
45 Bharti Airtel 23.67924528 -10.80600051 -0.042833 4.276804
46 Bharti Infratel -100 -1.279400362 -14.43949 -38.573
Consumer Goods
47 Asian Paints 48.06095447 8.695920128 23.61815 95.91204
48 HUL 4.859114434 -0.463625436 44.25729 50.5656
63
Construction
49 Laursen & Turbo 35.03534957 -29.28529924 29.86799 23.64493
Shipping
51 Adani Ports 64.41717791 -19.63011032 37.10133 81.16831
PORTFOLIO CREATION
RETURN COMPANY NAME ACTUAL RETURN CALCULATED RETURN
POSITIVE Indiabulls Finance 336.9606399 129.408926
Eicher Motor 329.2124465 126.4332509
Maruti Suzuki 206.9202485 79.46722541
ITC 95.91203577 36.83478742
Asian Paints 95.91203577 36.83478742
NEUTRAL Tata Power 9.411764706 3.614565673
Bharti Airtel 4.276804036 1.642496338
Yes Bank 2.736562387 1.050970225
NEGATIVE Axis Bank -66.57814096 -25.5691754
ICICI -77.3806 -29.7178339
937.3837966
64
1% 0%
-6%
Portfolio Returns POSITIVE Indiabulls Finance
0% -5% POSITIVE Eicher Motor
28% POSITIVE Maruti Suzuki
8%
POSITIVE ITC
POSITIVE Asian Paints
8%
NEUTRAL Tata Power
NEUTRAL Bharti Airtel
NEUTRAL Yes Bank
17% NEGATIVE Axis Bank
27%
NEGATIVE ICICI
65
66