Commodity Future Market in india

Are commodity derivatives new in India

India has always been a country of market imperfections and prices fluctuations. Though India has an agricultural economy, it never had a national common market for agricultural products. There were lways shortages and surpluses – with wide discrepancy in the prices at various levels. 

There was lways price heterogeneity because of information asymmetry in the markets. In rural India, mandis were the traditional market places for food and agri-commodities. In different parts of India, mandis developed as wholesale trading hubs for vegetables, grains, pulses, spices, condiments, fruits, timber, gems, diamonds and livestock.

Commodity future calls in Market reviews and complaints

Is speculation good for commodity futures markets

The Forwards Market Commission and many analysts claim that speculators are different from gamblers since they do not create risk, but merely accept the risk which already exists in a futures market. 

According to them, speculators try to assimilate all the possible price-sensitive information, on the basis of which they can expect to make profit. Therefore, it is claimed that the speculators contribute in improving the efficiency of price discovery function of the futures market.

MCX Trading As an Investment Vehicle

There are many inherent advantages of commodity futures as an investment vehicle over other investment alternatives such as savings accounts stocks bonds options real estate and collectibles.

The primary attraction, of course, is the potential for large profits in a short period of time. The reason that futures trading can be so profitable isleverage.

MCX Comdex Structure

Need for the study of MCX Comdex

Theoretically, the Spot and the Futures prices of the assets are related and that a perfect correlation is expected, such that neither market leads the other, but is not so in real life due to the presence of imperfect information dissemination. An attempt is made to study the temporal relationship between the Spot and the Futures prices of the Commodity Market by analyzing the data of the Comdex.

Sanjay Sehgal, Namita Rajput, Rajeev Kumar Dua (2012) studied the price discovery relationship for Agricultural Commodities in Indian markets. They found an efficient price discovery process in place. They recommended the strengthening of the market regulatory framework. An emphasis on the autonomy of Forwards Market Commission (FMC) was made. Their study also revealed the need for well developed warehousing and market linkages.