Sourabh 11053 Section A

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REPORT

BY

Sourabh Rai (Roll No. 11053)

SDMIMD, Mysore.

Work Carried at

Success Incorporation

Jabalpur, Madhya Pradesh, India-482001

Submitted in partial fulfillment of the requirement of

Summer Internship Program

Under the Supervision Of

Mr. Kumar Rathore (Proprietor)

Success Incorporation

SDM INSTITUTE FOR MANAGEMENT DEVELOPMENT

Mysore, Karnataka, India

(May 2012)

MARKET STUDY TO EXPAND THE

CLIENT BASE OF SUCCESS

INCORPORATION THROUGH TRADING IN

COMMODITY MARKET


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CERTIFICATE BY THE ORGANIZATIONAL GUIDE

This is to certify that Mr. SOURABH RAI currently studying Post Graduate Diploma in

Management at SDM Institute for Management Development, Mysore has successfully

completed Summer Internship Project titled Market study to expand the client base ofSuccess incorporation through trading in commodity market related to Finance stream

of Management from 07-04-2012 to 07-06-2012.

Signature: Date:

Name: Place:

Designation:

Name of the Organization and Address:

Organizational Stamp


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CERTIFICATE BY THE FACULTY GUIDE

SDM INSTITUTE FOR MANAGEMENT DEVELOPEMNT, MYSORE

This is to certify that Roll No. 11053 Mr. SOURABH RAI of PGDM Batch 2011-13 hassatisfactorily completed Summer Internship Project titled Market study to expand the

client base of Success incorporation through trading in commodity market at M/S

Success Incorporation located at Jabalpur, Madhya Pradesh from 07-04-2012 to 07-06-

2012 to partially fulfill the requirements of the PGDM program under my guidance.

Signature: Date:

Name:

Designation:

SDM Institute for Management Development, Mysore

Institutional Stamp


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EXECUTIVE SUMMARYSummer Project Title: Market study to expand the client base of Success incorporation

through trading in commodity market

Project Guide: Mr. Kumar Rathore

Name of Student: Sourabh Rai

Roll No: 11053

Success Incorporation is a well diversified financial entity offering clients advice on

structuring a complete investment portfolio located at Jabalpur, Madhya Pradesh.

Our current clients fall under the category of a matured businessman who wants to earn

profit in limited period by taking some sort of risk by investing mainly in equity market. But

nowadays the problem lies when we see some sort of short term manipulations to increase the

market value of shares by increasing demand through short term investment(mainly by bigplayers) which attracts small investors and therefore these small investors fall in trap and lose

their money.

Therefore, we as a team of financial advisors took this problem as an opportunity and studied

it thoroughly to come up with a conclusion that mostly people invest in equities and due to

lack of information about the companies in which they had invested, they lose their money.

In terms of risk when we compare equity market with commodity market we find that former

is much more risky than the later.

Mr. Kumar Rathore, Proprietor of Success Incorporation took this opportunity and guided us

to work for the benefit of our clients in respect to benefit us. GDP of Madhya Pradesh mainlydepends on farming. Thus our firm wants to expand our client base by creating awareness

among the farmers as well as the grain merchants by training them to hedge the risk of price

fluctuation of the commodities produced by them by exchange based market instead of over

the counter (OTC) market. This will reduce the pressure from the farmers to sell their crops at

lower rates and will further benefit for the firm in order to have huge client base with higher

turnover.

Therefore, to tap this untapped market we invited young educated individuals who wanted to

do business from their native places from 20 Talukas, we trained them to do online trading

and use softwares to track the trend in the market and also based on these trends they can

forecast future price of commodities. But this was not an easy task to do; all of these

individuals must have individual computer systems with high speed broadband and an office

as well. But we did come up with an idea and asked them to buy an android mobile which

will cost less. Thus, to reduce the overall cost of the project these individuals share screen

through Team Viewer from our head office.

SIGNATURE OF STUDENT SIGNATURE OF GUIDE

Sourabh Rai Mr. Kumar Rathore

SDMIMD (11053) (M.D. Success Incorporation)


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ACKNOWLEDGMENT

I take the opportunity to express my deep gratitude to Mr. Kumar Rathore, Proprietor Success

Incorporation, for taking me as a summer trainee & extending me his full support & co-

operation towards the completion of this project.

Sincere appreciation is extended to Prof. Malathi Sriram, the internal faculty guide of

SDMIMD, for providing me with timely feedback and guidance for efficient execution of the

Project.

I extend my heartfelt thanks to all the staff members and our representatives for their valuable

suggestions.

This opportunity was a great learning experience, which would not have been possible

without the support from the management of SDM-IMD and I am indebted to them.

Sourabh Rai

(11053)


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LIST OF ABBREVIATION NSE- National Stock Exchange BSE- Bombay Stock Exchange SEBI- Securities Exchange Board of India NSDL- National Securities Depository Ltd CDSL- Central Depository Services(India) Ltd NCDEX- National Commodities & derivatives exchange ltd NSCCL- National Securities Clearing Corporation Ltd FMC- Forward market commission NYSE- New York Stock Exchange OTC- Over the counter IPO-Initial Public Offer DP- Depository participant DRF- Demat Request Form RRF- Remat Request Form NAV- Net Asset Value EPS- Earning Per Share S&P- Standard & Poor CRISIL- Credit rating Information Services of India ltd CARE- Credit Analysis & Research Ltd ICRA- Investment Information & Credit Rating Agency of India ISC- Investor service cell IPF- Investor protection fund


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LIST OF TABLES

Table 1: Product dealt in commodity market

Table 2: List of exchanges and their respective traded commodities

LIST OF FIGURES

Figure 1: Contracts or agreements in commodity market

Figure 2: Structure of commodity market


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TABLE OF CONTENT

SDM Institute for Management Development ............................................................... 1

CERTIFICATE BY THE ORGANIZATIONAL GUIDE ........................................................ 2

CERTIFICATE BY THE FACULTY GUIDE .......................................................................... 3

EXECUTIVE SUMMARY ....................................................................................................... 4

ACKNOWLEDGMENT............................................................................................................ 5

LIST OF ABBREVIATION ...................................................................................................... 6

LIST OF TABLES ..................................................................................................................... 7

LIST OF FIGURES ................................................................................................................... 7

CHAPTER 1: INTRODUCTION ............................................................................................ 10

COMPANY PROFILE ................................................................................................ 10

Trading in Equities & Derivatives ............................................................................... 11

Online Trading ............................................................................................................. 11

Future Plans of Success Incorporation ......................................................................... 11

Company Overview ..................................................................................................... 11

CHAPTER 2: BACKGROUND OF THE PROBLEM ........................................................... 12

CHAPTER 3: CONCEPT OF COMMODITY MARKET ...................................................... 13

3.1 HISTORY OF COMMODITY MARKET ................................................................ 13

The Pre-independence Era ....................................................................................................... 13The Control Era........................................................................................................................ 13

3.2 CONTRACTS OR AGREEMENTS IN COMMODITY MARKET .................... 14

3.3 MEANING OF COMMODITY MARKET........................................................... 15

3.4 Different segments in Commodities market: ................................................................. 15

Over the Counter (OTC) market (Forwards): .............................................................. 15

The Exchange based market: ....................................................................................... 16

3.5 STRUCTURE OF COMMODITY MARKET ...................................................... 17

3.6 NEED OF COMMODITY MARKET ................................................................... 19

3.7 PRODUCTS DEALT IN COMMODITY MARKET ........................................... 20

3.8 DIVISION OF COMMODITIES MARKET......................................................... 21

3.9 Commodity Trading ............................................................................................... 30

3.10 MAJOR PLAYER IN COMMODITY MARKET .............................................. 30

3.11 WORKING OF COMMODITY MARKET ........................................................ 31

3.12 10 STEPS TO INVEST IN COMMODITY MARKET ...................................... 33

3.13 COMMODITY TRADING AS AN INVESTMENT VEHICLE ........................ 33

3.14 COMMODITY CONTRACT .............................................................................. 34


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CHAPTER 4: STATEMENT OF PROBLEM ........................................................................ 35

4.1 Management Expectations ..................................................................................... 35

4.2 Project Overview ................................................................................................... 35

4.3 Approach to problem ............................................................................................. 35

CHAPTER 5: RECOMMENDATION .................................................................................... 36

CHAPTER 6: CONCLUSION ................................................................................................ 37

Appendix-I ................................................................................................................... 38

Appendix-II .................................................................................................................. 39

Appendix-III ................................................................................................................ 40

Appendix-IV ................................................................................................................ 41

Appendix-V.................................................................................................................. 42

Appendix-VI ................................................................................................................ 43Appendix-VII ............................................................................................................... 44

Appendix-VIII.............................................................................................................. 45

Appendix-IX ................................................................................................................ 46

REFERENCE ........................................................................................................................... 47


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CHAPTER 1: INTRODUCTION

COMPANY PROFILE

Success Incorporation is a well diversified financial entity offering clients advice onstructuring a complete investment portfolio located at Jabalpur, Madhya Pradesh, started by

Mr. Kumar Rathore, Proprietor Success incorporation in 2006providing an array of financialproducts and services. Its retail and institutional clients have access to products such asequities, derivatives, commodities, currency derivatives, mutual funds, IPOs, insurance and

depository services.

Aim

It aims at maximizing returns of its investors depending upon the investment motive.

Mission

To work together with integrity and make our customers feel valued.

Vision

To create valuable relationships and provide the best financial services most

professionally.

Core Value

Respect our colleagues and the business itself.

Specialties

Our portfolio of services include: A robust trading platform for equities, derivatives,

commodities, access to a wide range of financial products and trading advisory services based

on technical, fundamental and market research.

Commitment

The Company is committed in providing service at par excellence.

Major Offerings

Success Incorporation currently offers the full stock brokerage services in line with the

overall strategy of the group.

Some of the major offerings include the following:


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Trading in Equities & Derivatives

Equity trading is offered to retail clients through multiple channels including online trading

in the BSE and the NSE, for cash & derivatives segments.

Online Trading

The company offers an online trading portal which is developed and maintained by Financial

Technologies (India) Ltd.

Future Plans of Success Incorporation

Success Incorporation plans to enhance its client base by entering into new segments. The

company is further planning to enhance its existing service portfolio by introducing investor

advisory, portfolio management services and merchant banking services in the near future.

Company Overview

Success Incorporation is a SEBI registered financial advisory firm which offers margin

funding facility to its clients.


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CHAPTER 2: BACKGROUND OF THE PROBLEM

80% population of Madhya Pradesh depends on agriculture for their livelihood, there is a

huge potential market that is waiting to be tapped, but due to lack of knowledge among the

farmers and agriculture related businessmen, there is lack of information about the situationin the global commodity market. They also lack information about investment options

available in the market.

Due to this information deficit they lose the value of their money due to the concept of Time

value of money, they even dont take the inflation rate into consideration.

From companys side the problem is small client base with low turnover. Therefore the sole

objective of the study is to know the potential market where we can enter and generate a

sustainable business.

Due to high risk involved in trading in equity market we need to create awareness among theinvestors to focus on low flexible and low risk commodities. Also we need to expand our

client base. Therefore we decided to train some representatives which would help us in

reaching to the potential investors. They would act as financial advisors for farmers and grain

merchants such as.

Instead of selling the commodities they can store them into warehouses and byproducing the receipt from the warehouses they can get loan from banks at a minimal

rate of 7% annually and make some low risk investments.

They can sell the commodities in the futures market at the price which gives themmaximum profit.


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CHAPTER 3: CONCEPT OF COMMODITY MARKET

A commodity market is a market where various commodities and derivatives products are

traded. Most commodity market across the world trade in agricultural products and other raw

materials (like wheat, barley, sugar, maize, cotton, cocoa, coffee, milk products, pork bellies,oil, metals, etc.) and contracts based on them. These contracts can include spot prices,

forwards, futures and options on futures. Other sophisticated products may include interest

rates, environmental instruments, swaps, or ocean freight contracts.

3.1 HISTORY OF COMMODITY MARKET

The Pre-independence EraThe history of organized futures trading in India can be traced to the setting up of Bombay

Cotton Trade Association in 1875.Futures trading in oilseeds was started with the setting up

of Gujarati Vyapari Mandali in 1900 which carried out futures trading in groundnut, castor

seed and cotton.

Before World War II broke out in 1939, several futures markets in oilseed were functioning

in Gujarat and Punjab. Futures trading in Raw Jute and Jute began in Calcutta with the

establishment of The Calcutta Hessian Exchange Ltd in 1919. Later, East Indian JuteAssociation Ltd. was set up in 1927 for organizing futures trading in Raw Jute. These two

associations amalgamated in 1945 to form the present East India Jute & Hessian Ltd. to

conduct organized trading in both Raw Jute and Jute goods.

In case of wheat, futures markets were in existence at several centers at Punjab and U.P., the

most notable amongst them was the Chamber of Commerce at Hapur, which was established

in 1913.Other markets were located at Amritsar, Moga, Ludhiana, Jalandhar, Fazilka, Dhuri, Barnala

and Bhatinda in Punjab and Muzaffarnagar, Chandausi, Meerut, Saharanpur, Hathras,Ghaziabad and Bareilly in U. P. established in the country to trade in such diverse

commodities as pepper, turmeric, potato, sugar and gur (jaggery).

The Control Era

After independence, the Constitution of India brought the subject of Stock Exchanges and

Futures Markets in the Union List. As a result, the responsibility for regulation of

commodity futures markets devolved on the Govt. of India. A Bill on forward contracts wasreferred to an expert committee headed by Prof. A.D. Shroff and Select Committees of two


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successive Parliaments and finally in December 1952, Forward Contracts (Regulation) Act,

1952 was enacted. The Forward Contracts (Regulation) Rules were notified by the Central

government in 1954.

The commodities were divided in to three categories with reference to the extent of

regulation, viz.a. The commodities in which futures trading can be organized under the auspices of a

recognized association.b. The commodities in which futures trading is prohibited.c. The commodities which have neither been regulated for being traded under a recognized

association nor prohibited, are referred to as Free Commodities and the associations

organized in such free commodities are required to obtain the certificate of registration from

the Forward Markets Commission.

3.2 CONTRACTS OR AGREEMENTS IN COMMODITY MARKET


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The Exchange based market:Derivative trading takes place through exchange-based markets with standardized contracts,

settlements etc.

Trading is done on the basis of:- Futures Derivatives

- Warehouse Receipts

Commodities market main purpose is to protect the farmers from forced selling and to

provide them credit so that they dont have to sell their produce to pay off their debts. But

now the market is growing and the purpose of existing is also diversifying.

Now, banks, financial institutions even FIIs and FDIs are being invited as participants so

that the market could get matured and get its sources easily.

The market will be a big thing in near future as it is most promising sector after stock market.

The participants in this market will increase and commodities will be hot favorite investment

in customer portfolio.


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3.5 STRUCTURE OF COMMODITY MARKET


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CommoditiesEcosystem

MCX

Consumers

(Retail/Institutional)

Hedger (Exporters / MillersIndustry)

Producers

(Farmers/co-Operatives/Institutional)

Traders (speculators)arbitrageurs/client

Quality CertificationAgencies

Transporters/ Support

agencies

Clearing Bank

Warehouses


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3.6 NEED OF COMMODITY MARKET To meet the changing needs of globalization, liberalization and commercialization of

agricultural commodities

To have an integrated and strengthen agricultural marketing system, healthyenvironment, smooth channels for the transfer of produce.

To have physical infrastructure to support marketing activities, easy cash support tothe widely scattered community of producers a sense of market orientation among the

farmers.

To help small and marginal farmers from distress sales which are 50% of themarketable surplus out of 54% of the marketable surplus contributed by their

holdings?

To prevent farmers who are forced to sell their produce to square off their debts soonafter harvesting.

To avoid the imbalance between financing production and post-harvest operations, asalso poor linkages between credit and marketing.

To provide cheap credit to farmers easily so that they can be saved from informalsector this includes the commission agents, who provide credit at a higher rate.


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3.7 PRODUCTS DEALT IN COMMODITY MARKET


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3.8 DIVISION OF COMMODITIES MARKETCommodity market is divided into:

I-COMMODITY FUTURES

II-WAREHOUSE RECEIPTS

COMMODITY FUTURES

After equity trading, commodity trading is going to be the next big thing for investors. In

India people have a love for Gold and silver, trading is also going to pick up in Gold and

Silver. Globally, the commodity trade market is about three times the size of equities trade

market. In India, presently, the commodities market is still in a nascent stage and is gradually

picking up taking a cue from global markets.
http://www.stockmarketmessages.com/commodity.htm#20


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COMMODITY EXCHANGE

Commodities exchanges usually trade futures contracts on commodities, such as trading

contracts to receive a particular commodity in physical form. Speculators and investors alsobuy and sell the futures contracts at commodity exchanges to make a profit and provide

liquidity to the system.

The Indian commodity market offers a variety of products like rice, wheat, coal, petroleum,

kerosene, gasoline; metals like copper, gold, silver, aluminum and many more. There are

some commodities such as sugar, cocoa, and coffee which are perishable, so cannot be

stocked for long time. These days, a wide range of agricultural products, energy products,

perishable commodities and metals can be sold under standardized contracts on futures

exchanges prevailing across the globe. Commodities have gained importance with the

development of commodity futures indexes along with the mobilization of more resources in

the commodity market.

India has around 25 recognized commodity future exchanges including three national-level

commodity exchanges. They are:

1. National Commodity & Derivatives Exchange Limited (NCDEX)2. Multi Commodity Exchange of India Limited (MCX)3. National Multi-Commodity Exchange of India Limited (NMCE). All these exchanges

are under the control of the Forward Market Commission (FMC) of Government of

India.

National Commodity & Derivatives Exchange Limited (NCDEX) located in Mumbai is a

public limited company incorporated on April 23, 2003 under the Companies Act, 1956 and

commenced its operations on December 15, 2003.This is the only commodity exchange in the

country promoted by national level institutions like ICICI Bank Limited, Life Insurance

Corporation of India (LIC), National Bank for Agriculture and Rural Development

(NABARD) and National Stock Exchange of India Limited (NSE India). It is a professionally

managed online multi-commodity exchange. It is a technology driven demutualised on-line

commodity exchange with an independent Board of Directors and professional management.

Multi Commodity Exchange of India Limited (MCX) in Mumbai is also an independent and

demutualised exchange recognized by the Government of India. This commodity exchange

which started operations in November 2003 has above 40 commodities on its platform and

has a market share of around 80% in the Indian commodity market. Key shareholders of

MCX are Financial Technologies (India) Ltd., State Bank of India, Union Bank of India,

Corporation Bank, Bank of India and Canara Bank. This commodity exchange facilitates

online trading, clearing and settlement operations for commodity futures market across the

country.

National Multi Commodity Exchange of India Limited (NMCE) is the first demutualized,


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List of exchanges and their respective traded commodities is given below -

1. Om & Oil Exchange Ltd.

Bhatinda.

Gur

2. The Bombay Commodity

Exchange Ltd Mumbai

Groundnut Oil, Sunflower Oil, Cotton Seed, Safflower,

Groundnut, Castor oil-Int'l, Castor seed, Cottonseed oil,

Sesa mum oil, Sesa mum Oil Cake, Safflower, Oil Cake,

Rice Bran, Rice Bran Oil, Rice Bran Oil Cake, Safflower

Oil, Crude Palm Oil

3. The Rajkot Seeds oil & Bullion

Merchants` Association Ltd

Groundnut Oil, Castor seed

4. The Meerut Agro Commodities

Exchange Co. Ltd., Meerut

Gur

5. The Spices and OilseedsExchange Ltd

Turmeric

6. Ahmadabad Commodity

Exchange Ltd.

Cotton Seed

Castor seed

7. Vijay Beopar Chamber Ltd,

Muzaffarnagar

Gur

Mustard Seed

8. India Pepper & Spice Trade

Association Kochi

Pepper Domestic-MG1

Pepper Domestic-500g/l

Black Pepper Int'l-MLS ASTA

Black Pepper Int'l-VB ASTA

Black pepper Int'l FAQ

Pepper 550 G/L

Rubber RSS4


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9. Rajdhani Oils and Oil seeds

Exchange Ltd Delhi

Gur

Rapeseed/Mustard seed

10. National Board of TradeIndore.

Rapeseed/Mustard seedRapeseed/Mustard seed Oil

Rapeseed/Mustard seed oil-Cake

Soy bean

Soy Meal

Soy Oil

Crude Palm Oil

11. The Chamber Of Commerce,

Hapur

Gur


12. The East India Cotton

Association Mumbai

Indian Cotton

13. The Central India Commercial

Exchange Ltd, Gwalior

Gur


14. The East India Jute & Hessian

Exchange Ltd,

Hessian

Sacking

15. First Commodity Exchange of

India Ltd, Kochi

Copra

Coconut oil

Copra cake

16. Bikaner Commodity ExchangeLtd Bikaner

Rapeseed/Mustard seedRapeseed/Mustard seed Oil

Rapeseed/Mustard seed oil-Cake

Guar seed

Gram

Guar Gum

17. E-sugar India Limited Sugar GradeM

Sugar Grade - S

18. National Multi Commodity Gur


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Exchange of India Limited.

Groundnut Oil

Sunflower Oil


Rapeseed/Mustard seed Oil

Rapeseed/Mustard seed oil-CakeSoy bean

Soy Oil

Copra

Cotton Seed

Safflower

Groundnut

Sugar

Sacking

Coffee-Robusta Cherry AB

Coconut oilCastor seed

Castor-oil

Groundnut oil Cake

Cottonseed oil

Sesa mum (Til or Jiljili)

Sesa mum oil

Sesa mum Oil Cake

Safflower Oil Cake

Rice Bran Oil

Safflower OilSunflower Oil Cake

Sunflower Seed

Pepper

Crude Palm Oil

Guar seed

Castor Oil Cake

Cottonseed - Oilcake

Aluminum Ingots

Nickel

Vanaspati

Soybean Oilcake

Rubber

Copper

Zinc

Lead

Tin

Linseed

Linseed Oil

Linseed Oilcake

Coconut Oilcake

Gram


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Guar Gum

Castorseed-5

Silver-M

Steel - Flat

Steel - Long

Yellow PeasLong Staple Cotton

Medium Staple Cotton

Castor seed - Disa

Mustard Seed

Guar seed Bandhani

Gold - HNI

Silver - HNI

Red Chilly

Maize

Guar Gum BandhaniCASHEW KERNEL W320

Basmati Rice

Jeera

Mustard Seed Jaipur

Crude Oil

Sarbati Rice

Sesame Seed ( Natural 99.1)

Cotton Long Kadi

Cotton Med Abohar

Cotton Short StapleSteel Long Bhavnagar

Mentha Oil

21. National Commodity &

Derivatives Exchange Ltd.

S06 L S Cotton Ahmadabad

J34 M S Cotton Bhatinda

Crude Palm oil - Kandla

RBD P'Olein - Kakinada

EXP R/M oil - Jaipur

Rape/Mustard seed - Jaipur

Ref Soya oil - Indore

Soy bean - IndorePure Gold - Mumbai

Pure Silver - New Delhi

Pure Gold - Mumbai - 1 Kg

Pure Silver - New Delhi - 30 Kg (Mega)

Rubber - Kottayam

Pepper - Kochi

Gram(Chana) - New Delhi

Guar seed - Jodhpur

Jute (B twill-665 gms) - Kolkata

Turmeric - NizamabadCastor seed - Disa


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Raw Jute - Kolkata

Guar Gum - Jodhpur

Sugar M Grade - Muzaffarnagar

Urad - Mumbai

Sugar S Grade - Vashi

Yellow Peas - MumbaiWheat - New Delhi SMQ

Soy Meal - Indore

SONA995MUM

CHANDIDEL

Cotton Kadi

Cotton Abohar

Gur-chaku - Muzaffarnagar

Yellow Red Maize - Nizamabad

Grade A Raw Rice Delhi

Grade A Parboiled Rice DelhiCommon Raw Rice Delhi

Common Parboiled Rice Delhi

Mulberry Raw Silk

Mulberry Green Cocoons

Jeera Unjha

Chili (Pala) Guntur

Mild Steel Ingots - Ghaziabad

Cashews W-320-Kollam

Whitish Sesame Seed - Rajkot

Cotton Seed Oilcake - AkolaLemon Tur - Mumbai

Maharashtra Lal Tur - Akola

Arabica Coffee - Hassan

Robusta Coffee - Kushalnagar

22. Haryana Commodities Ltd,

Hissar


Rapeseed/Mustard seed Oil

23. The Bullion AssociationLimited

24. E-Commodities Ltd


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3.9 Commodity Trading

Commodity markets are quite like equity markets. The commodity market also has twoconstituents i.e. Spot market- The commodities are bought and sold for immediate delivery.

Derivative market-Various financial instruments having commodities as underlying are

traded on the exchanges.

3.10 MAJOR PLAYER IN COMMODITY MARKET

The player in future commodity market fall into three categories-

Hedger Speculator Arbitrage

Hedger:

A Hedger can be Farmers, manufacturers, importers and exporter. A hedger buys or sells in

the futures market to secure the future price of a commodity intended to be sold at a later date

in the cash market. This helps protect against price risks.

The holders of the long position in futures contracts (buyers of the commodity), are trying to

secure as low a price as possible. The short holders of the contract (sellers of the commodity)

will want to secure as high a price as possible. The commodity contract, however, provides a

definite price certainty for both parties, which reduces the risks associated with price

volatility. By means of futures contracts, Hedging can also be used as a means to lock in an

acceptable price margin between the cost of the raw material and the retail cost of the final

product sold.

Speculators:

Other commodity market participants, however, do not aim to minimize risk but rather to

benefit from the inherently risky nature of the commodity market. These are the speculators,

and they aim to profit from the very price change that hedgers are protecting themselves

against. A hedger would want to minimize their risk no matter what they're investing in,

while speculators want to increase their risk and therefore maximize their profits. In the

commodity market, a speculator buying a contract low in order to sell high in the future


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Trading:At this stage the following is the system implemented:

Order receiving Execution-Matching Reporting Surveillance Price limits

Clearing: This stage has following system in place:

Matching Registration Clearing Clearing limits Notation Margining Price limits Position limits Clearing house

Settlement: This stage has following system followed as follows:

Marking to market Receipts and payments Reporting Delivery upon expiration or maturity

The future trading in commodities has emerged as a major investment option in India.

Commodity market performances are equal to that of the stock market and analysts predict

that the commodities market will overtake the capital market in trade volumes sooner than

later. But since commodities futures market is a relatively new entrant in India, not many

investors know how to tap and benefit from trading in various commodities.


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3.12 10 STEPS TO INVEST IN COMMODITY MARKET:

Step 1:Locate a brokerage house with a reputation for service.

Step 2:Fill a demat account opening form with a registered brokerage house and a member

with the national commodity exchanges. You could require PAN card, address proof and

passport size photos.

Step 3:Be clear of the rules and regulations especially transaction costs.

Step 4:Choose the right brokerage plan that optimizes your costs, brokerage fees ranging

from 0.03% to 0.08% on contract value.

Step 5:Be clear of the service deliverables from your broker.

Step 6:Insist on regular reports and special knowledge / training opportunities.

Step 7: Set aside funds for commodity investing, but remember not at the cost of

other traditional investing avenues.

Step 8: Focus on a few commodities, gather requisite knowledge and pay up the

initial amount for margin money, account opening charges and annual maintenance charges.

Step 9:Clear any or all doubts now, set stop loss and book profit levels.

Step 10: Get ready for investing and track your success and losses all the time.

3.13 COMMODITY TRADING AS AN INVESTMENT VEHICLEThe commodities market is one of the fastest-growing areas in the investment world. And it

offers some major advantages over stocks that you might not have considered before.

Recently, commodity market is booming irrespective of global meltdown and recession.When equity market is underperforming, this commodity market has given tremendous

returns in gold, silver, zinc and in other metals and agro products; hence people have

withdrawn their funds from equity market and shifted their investment in commodity market.

Commodity investing was initially received well only by a few sectors. Such investments

were first restricted to the trade and exchange of commodities meant for regular and day to

day use. However, the awareness in the subsequent stages has enabled speedy movements,

transfer and transactions of goods and services.


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3.14 COMMODITY CONTRACTLet's say, for example, that you decide to subscribe to satellite TV. As the buyer, you enter

into an agreement with the company to receive a specific number of channels at a certain

price every month for the next year. This contract made with the satellite company is similarto a futures contract, in that you have agreed to receive a product or commodity at a later

date, with the price and terms for delivery already set. You have secured your cost for now

and the next year, even if the price of satellite rises during that time. By entering into this

agreement, you have reduced your risk of higher prices. That's how the futures market works.

Except instead of a satellite TV provider, a producer of wheat may be trying to secure a

selling price for next season's crop, while a bread maker may be trying to secure a buying

price to determine how much bread can be made and at what profit. So the farmer and the

bread maker may enter into a futures contract requiring the delivery of 5,000 bushels of grain

to the buyer in June at a price of $4 per bushel. By entering into this futures contract, the

farmer and the bread maker secure a price that both parties believe will be a fair price in June.It is this contract that can then be bought and sold in the commodity market. A futures

contract is an agreement between two parties: a short position, the party who agrees to deliver

a commodity, and a long position, the party who agrees to receive a commodity. In the above

scenario, the farmer would be the holder of the short position (agreeing to sell) while the

bread maker would be the holder of the long (agreeing to buy).


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CHAPTER 4: STATEMENT OF PROBLEM

Due to severe competition, it is very necessary to have some regular clients in order to have a

handsome turnover. Thus the problem is to see beyond existing clients and search for some

other clients to have a smooth business.

4.1 Management Expectations

To have regular clients To promote business in new markets To have new clients as well as representatives

4.2 Project OverviewResearch Objective:

1. To advice current clients.2. To analyze past data for better understanding of working.3. To identify the new clients for expansion of client base.4. To create a model to keep track of existing clients with adding new clients regularly.

Steps Involved:

1. Financial advice to existing clients.2. Make suggestions and recommendation to representatives.3. Train the representatives4. Update clients and representatives.

4.3 Approach to problemThe basic approach was to have some new clients which would give a regular and a

handsome turnover. Thus our target clients were the farmers and the grain merchants in small

villages and Talukas. Therefore we trained representatives from 20 Talukas and provided

with software to make some predictions and advice new clients and make new clients.


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CHAPTER 5: RECOMMENDATION

Improve the brand awareness of Success Incorporation by increasing advertisements and

promotional activities like performing training programs for clients and prospects. This will

improve the brand of Success Incorporation which will help to attract more clients.

Introduce some programs which will help to attract more of farmers and traders. Most of the

investors are businessmen, and very few of the farmers invest in these markets. Thus there is

still a huge number of client bases in Madhya Pradesh which can be attracted towards these

markets by educating them about these markets.

The investors do not have much knowledge about the commodities market and the various

concepts like hedging and arbitration present in these markets. The first priority should be to

educate the investors about the market and the various techniques to invest in these markets

which will enable the investors to extract better return from these markets.

The investors mainly follow the television and the newspapers to update themselves about the

market. So it will be beneficial for Success Incorporation if they come out with weekly article

in the leading newspapers regarding market research and present market condition.

Providing the clients better guidance to diversify their portfolio to minimize the risk

involved.

The service of the company can be improved keeping in mind the suggestions provided by

the investors.

More franchisees & branchs must be opened at key locations, so as to attract more

investors. Once in Every month, the client must be invited for feedback and suggestions.


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Appendix-I

Ami Broker software used to see the trend and forecast future movements in commodities


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Appendix-II



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Appendix-III



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Appendix-VII



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Appendix-VIII

Ami Broker software used to see the trend of nifty


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Appendix-IX

Ami Broker software used to see the trend of nifty


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REFERENCE

Multi commodity index websitewww.mcxindia.com National commodity and derivatives exchange limited website

www.ncdex.com

For news and updates about the marketwww.businessstandard.com History and growth of commodity marketwww.wikipedia.com National stock exchangewww.nseindia.com Bombay stock exchangewww.bse.com Stock exchange board of Indiawww.sebi.com
http://www.mcxindia.com/http://www.mcxindia.com/http://www.mcxindia.com/http://www.ncdex.com/http://www.ncdex.com/http://www.businessstandard.com/http://www.businessstandard.com/http://www.businessstandard.com/http://www.wikipedia.com/http://www.wikipedia.com/http://www.wikipedia.com/http://www.nseindia.com/http://www.nseindia.com/http://www.nseindia.com/http://www.bse.com/http://www.bse.com/http://www.bse.com/http://www.sebi.com/http://www.sebi.com/http://www.sebi.com/http://www.sebi.com/http://www.bse.com/http://www.nseindia.com/http://www.wikipedia.com/http://www.businessstandard.com/http://www.ncdex.com/http://www.mcxindia.com/

Sourabh 11053 Section A

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