VOLATILITY OF COMMODITY TRADING MARKET IN INDIA

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1 VOLATILITY OF COMMODITY TRADING MARKET IN INDIA ABSTRACT AVINASH JHA DEPT. OF ECONOMICS COLLEGE OF MANAGEMENT AGRA (U.P.) For the present study, one agricultural commodity has been selected due to higher volume. Earlier this commodity was banned by Forwards Market Commission in March 2012 for future trading due to sharp rise in prices but now future contracts of Guarseed has relaunched for trading from May 2013 onwards. INTRODUCTION RESEARCH METHODOLOGY Research Methodology is the process which is used to collect data from various sources for making decisions. There are mainly four major National Level Exchanges in India namely NMCE, NBOT, NCDEX and MCX but NCDEX is selected for the study because volume of selected commodity is traded greater than traded on other exchanges. The research design for this study is analytical in nature based on available secondary data. Secondary data is collected from other researches, periodicals, magazines, news papers, journals and Internet by the researcher. Secondary data on daily futures prices and volume of trade on exchanges is collected from the official web site of NCDEX for the period from

2 14 May 2013 to 19July Observations of volume and future price of the commodity is taken for July 2013 contract as FMC allowed future trading in Guarseed from May 2013 onwards. PROBLEM STATEMENT For the present study, one agricultural commodity Guarseed has been selected due to higher volume.earlier this commodity was banned by Forwards Market Commission in March 2012 for future trading due to sharp rise in prices but now future contracts of Guarseed has relaunched for trading from May 2013 onwards. TOOLS & TECHNIQUES Concurrent deviation method and correlation coefficient are used for analyzing the collected data. DATA ANALYSIS & INTERPRETATION Following table shows the data of volume, future close prices and spot prices of Guarseed for July future contract. Time period has been taken from 14 May 2013 to 19 July 2013 for two months for analyzing the correlation between future prices and volume, future and spot prices as well as impact of Guarseed future prices on traded volume by applying concurrent deviation method and correlation coefficient respectively. Table No.1 : Future Closing prices and volume of Guarseed for July 2013 Contract

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9 CONCLUSION On the basis of above study, we conclude that price fluctuations do not have any impact on traded volume. Future prices are dependent upon current demand and supply of Guarseed in various mandis. According to market conditions, spot and future prices of agricultural commodities varies. It has also been shown in the results that spot and future prices of selected agricultural commodity moves in the same direction considering the physical stocks. REFERENCES Bhattacharyya, Himadri (2007), Commodity Derivatives Market in India, Economic and Political Weekly, XL II (13),P.No Bose Sushmita (2008) Commodities Futures Market in India-A study of Trends in the National Multi Commodity Indices, ICRA Bulletin, Money & Finance, P.No Business News Papers & Magazines

10 Chatrath, A S Ramchander and F Song (1996) The Role of Futures Trading Activity in Exchange Rate Volatility Journal of Futures Markets, Vol 16, P.No Chong, J and J.Miore, (2010), "Conditional correlation and volatility in commodity futures and traditional asset markets". Journal of Alternative Investments Vol.12, P.No Daskalaki C. and G. Skiadopoulos, (2011), "Should investors include commodities in their portfolios after all? New evidence", Journal of Banking and Finance, Volume 35, Issue 10, P.No Gurbandini Kaur, Rao D.N(2010), Do the spot prices influence the pricing of future contracts? An empirical study of price volatility of future contracts of select agricultural commodities traded on NCDEX, Journal of Management Research, Vol. 10, No. 2, P.No Hull, John C., Options, Futures and other Derivative Securities, 2nd Edition. Prentice- Hall. Englewood Cliffs, New Jersey,1993. Iyer V., Pillai.A.(2010), Price Discovery and Convergence in Indian Commodities Market, Indian Growth and Development Review, Vol.3 No.1, P.No Kevin S., Commodity and Financial Derivatives, PHI Learning Private Limited, New Delhi,2010. NCFM, Commodities market Module-Workbook, National Stock Exchange of India Ltd., Mumbai, India,2004. Report of the Expert Committee : To Study the Impact of Futures Trading on Agriculture Commodity Prices, submitted to Ministry of Consumer Affairs, Food & Public Distribution Government of Indiaby Abhijit Sen, 2008.