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 A Project Report on
Commodity Market Trading

Submitted By:
Satpal Singh
Roll No: - B-26
Reg No: - 10906078
Batch No:- 2010-2012

Under The Guidance of:-

Miss Aarti Anand (Faculty, Financial management)

Lovely Professional University

Phagwara, Punjab
S No Index Page No
1. Introduction
2. Commodity
3. Commodity Market
4. Structure of Commodity Market
5. Different Types of Commodity Traded
6. Turnover of Commodity Exchange
7. Market Share of Commodity Exchange in India
8. Different Segments in Commodities Market
9. Leading Commodity Markets of World
10. Regulators

INTRODUCTION:-
 The vast geographical extent of India and her huge population is aptly complemented by
the size of her market. The broadest classification of the Indian Market can be made in terms of
the commodity market and the bond market.
The commodity market in India comprises of all palpable markets that we come across in
our daily lives. Such markets are social institutions that facilitate exchange of goods for money.
The cost of goods is estimated in terms of domestic currency. India Commodity Market can be
subdivided into the following two categories:
• Wholesale Market
• Retail Market
The traditional wholesale market in India dealt with whole sellers who bought goods
from the farmers and manufacturers and then sold them to the retailers after making a profit in
the process. It was the retailers who finally sold the goods to the consumers. With the passage of
time the importance of whole sellers began to fade out for the following reasons:
1. The whole sellers in most situations, acted as mere parasites that did not add any value to
the product but raised its price which was eventually faced by the consumers.

2. The improvement in transport facilities made the retailers directly interact with the
producers and hence the need for whole sellers was not felt.

In recent years, the extent of the retail market (both organized and unorganized) has evolved in
leaps and bounds. In fact, the success stories of the commodity market of India in recent years
has mainly centered on the growth generated by the Retail Sector. Almost every commodity
under the sun both agricultural and industrial is now being provided at well distributed retail
outlets throughout the country.
Moreover, the retail outlets belong to both the organized as well as the unorganized sector. The
unorganized retail outlets of the yesteryears consist of small shop owners who are price takers
where consumers face a highly competitive price structure. The organized sector on the other
hand is owned by various business houses like Pantaloons, Reliance, Tata and others. Such
markets are usually selling a wide range of articles agricultural and manufactured, edible and
inedible, perishable and durable. Modern marketing strategies and other techniques of sales
promotion enable such markets to draw customers from every section of the society. However
the growth of such markets has still centered on the urban areas primarily due to infrastructural
limitations.
 Considering the present growth rate, the total valuation of the Indian
Retail Market is estimated to cross Rs. 10,000 billion by the year 2010. Demand for
commodities is likely to become four times by 2010 than what it presently is.

COMMODITY:-

A commodity may be defined as an article, a product or material that is bought and sold.
It can be classified as every kind of movable property, except Actionable Claims, Money &
Securities. Commodities actually offer immense potential to become a separate asset class for
market-savvy investors, arbitrageurs and speculators. Retail investors, who claim to understand
the equity markets, may find commodities an unfathomable market. But commodities are easy to
understand as far as fundamentals of demand and supply are concerned. Retail investors should
understand the risks and advantages of trading in commodities futures before taking a leap.
Historically, pricing in commodities futures has been less volatile compared with equity and
bonds, thus providing an efficient portfolio diversification option.
In fact, the size of the commodities markets in India is also quite significant. Of the
country's GDP of Rs 13, 20,730 crore (Rs 13,207.3 billion), commodities related (and
dependent) industries constitute about 58 per cent.
Currently, the various commodities across the country clock an annual turnover of Rs 1, 40,000
crore (Rs 1,400 billion). With the introduction of futures trading, the size of the commodities
market grows many folds here on.

COMMODITY MARKET:-

Commodity market is an important constituent of the financial markets of any country. It is the
market where a wide range of products, viz., precious metals, base metals, crude oil, energy and
soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active
and liquid commodity market. This would help investors hedge their commodity risk, take
speculative positions in commodities and exploit arbitrage opportunities in the market.
 Turnover in Financial Markets and commodity Markets
Rs in crore
S 2004-
No Market Segments 2002-2003 2003-2004 2005(E)
1 Government Security Market 1,544,376 2,518,322 2,827,872
2 Forex Market 658,035 2,318,531 3,867,936
3 Total Stock Market Turnover(I+II) 1,374,405 3,745,507 4,160,702
I National Stock Exchange(a+b) 1,057,854 3,230,002 3,641,672
a) Cash 617,989 1,099,534 1,147,027
b) Derivatives 439,865 2,130,468 2,494,645
II Bombay Stock Exchange (a+b) 316,551 515,505 519,030
a) Cash 314,073 503,053 499,503
b) Derivatives 2,478 12,452 19,527
4 Commodities Market NA 130,215 500,000
Source: Sebi bulletin

STRUCTURE OF COMMODITY MARKET:-

Ministry of
consumer
 FMC (Forwards
Market
Commission)

Commodity
Exchange

National Regional Exchange

Exchange

NCDEX MCX NMCE NBOT 20 Other Regional

Exchange

Quality Certificate Agencies

Warehouses Hedger (Exporters/Millers Industry)
 Clearing Bank Producers
Commodities Ecosystem (Farmers/ Cooperatives/ Institution
MCX

Transporters/ support agencies Traders (speculators) arbitrageurs/ client

Consumers (Retail/ Institutional)

DIFFERENT TYPES OF COMMODITIES TRADED:-

World-over one will find that a market exits for almost all the commodities
known to us. These commodities can be broadly classified into the following:

METAL Aluminum, Copper, Lead, Nickel, Sponge Iron, Steel

Long (Bhavnagar), Steel Long (Govindgarh), Steel Flat,
Tin, Zinc

BULLION Gold, Gold HNI, Gold M, i-gold, Silver, Silver HNI,

 Silver M

FIBER Cotton L Staple, Cotton M Staple, Cotton S Staple, Cotton

Yarn, Kapas

ENERGY Brent Crude Oil, Crude Oil, Furnace Oil, Natural Gas, M.
E. Sour Crude Oil

SPICES Cardamom, Jeera, Pepper, Red Chilli

PLANTATIONS Arecanut, Cashew Kernel, Coffee (Robusta), Rubber

PULSES Chana, Masur, Yellow Peas

PETROCHEMICALS HDPE, Polypropylene(PP), PVC

OIL & OIL SEEDS Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil,
Cotton Seed, Crude Palm Oil, Groundnut Oil, Kapasia
Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard Seed
(Sirsa), RBD Palmolein, Refined Soy Oil, Refined
Sunflower Oil, Rice Bran DOC, Rice Bran Refined Oil,
Sesame Seed, Soymeal, Soy Bean, Soy Seeds

CEREALS Maize
OTHERS Guargum, Guar Seed, Gurchaku, Mentha Oil, Potato
(Agra), Potato (Tarkeshwar), Sugar M-30, Sugar S-30

TURNOVER OF INDIAN COMMODITY EXCHANGES:-

Indian Commodity Futures Market (Rs Crores)

Exchange 2004 2005 2006 2007

Multi Commodity 165147 961,633 1,621,803 2,505,206
Exchange(MCX)
NCDEX 266,338 1,066,686 944,066 733,479
NMCE(Ahmadabad) 13,988 18,385 101,731 24,072
NBOT(Indore) 58,463 53,683 57,149 74,582
Others 67,823 54,735 14,591 37,997
All Exchanges 571,759 2,155,122 2,739,340 3,375,336