Commodity Markets defined Commodity: Any tangible item that can be bought and sold. SPOT MARKET-Mandis FUTURES MARKET-Exchanges

Inflation adjusted returns in the developed markets Returns greater than bonds and almost equivalent to stocks Risk is lower than investing in stocks U.K. U.S.

Major International Exchanges COMMEX Agricultural: corn, soybean, oats, wheat etc Metals :gold,silver Precious Metals and Energy Goldman Sachs Commodity Index Fertilizer.Dairy,etc Gold,Silver Base Metals,Plastics

Indian Scenario More than 100 years old market Regional exchanges - Bombay Cottons Exchange - India Pepper and Spice Trade Association - National Board of Trade etc. Year Landmark year - Organized Trading at National Level

Premier Exchanges Organized National level exchanges Professionally managed Demutualised setup

 More than 70 commodities listed in a short span of 2 years  Record Volume seen in many commodities

NCDEXMCX Promoters ICICI Bank,LIC, NABARD,NSE,PNB,CRISIL, Canara Bank,IFFCO Financial Technologies (India) Ltd., SBI, HDFC Bank, Union Bank of India, B O I, BOB, Canara Bank, Corp. Bank and more. Expiry 20 th of contract month for most of the commodities or as specified 15 th or 5 th of the contract month,as specified for the particular commodity Actively traded commodities Agro- commodities,Mild Steel ingots Gold,Silver,Crude Oil

Average volumes of commodities traded CommodityExchangeAvg.volume per day GoldMCX5,42,800 kgs SilverMCX10,55,730 kgs CrudeMCX5,03,700 bbl Refined Soya OilNCDEX21,000 MT Soybean, Guar seedNCDEX12,000 MT Mild Steel IngotsNCDEX6,100 MT Spices(jeera,turmeric,chilly,pepper)NCDEX1,800 MT Chana,Urad,WheatNCDEX30,000 MT Sugar MNCDEX10,500 MT Guar gumNCDEX1,37,000 MT Medium staple cottonNCDEX1,500 bales

The Potential-AGRO ECONOMY Constitutes 22% of GDP Provides food to 1Billion people Sustains 65% of the population : helps alleviate poverty Produces 51 major Crops Provides Raw Material to Industries Contributes to 1/6 th of the export earnings.

Participants Hedgers Producer User Importer Exporter Arbitragers Gain from price differentials Investors Individuals Actively Managed Funds

The Commodity Hedger Risks faced by Commodity Users and Producers Price Volatility Types of Hedges Corporates currently benefitting from the market

Risks faced by Commodity Users and Producers Commodity enterprises faces two types of Risks PRICE RISK QUANTITY RISK(eg from weather) HEDGING REDUCES PRICE RISK

Price Volatility - Prices of commodities volatile due to - Demand Supply mismatch - Erratic Monsoon - Import – Export restrictions - Spoilage during storage - Substitute demand etc. 12% Rise 13% Fall % Rise

Types of Hedges Long hedge Hedge against increase in cotton prices(e.g. Textile companies) Short hedge Hedge against decrease in prices(e.g.Steel,Rubber,Oil producers)

Commodity – Tool of Hedging Wheat Physical Stock /qtl Price down to 680/qtl Loss of Rs. 70/qtl 200 tons sold in 800/qtl Settlement at 680qtl Profit of Rs. 120qtl Profit of Rs 50 qtl

Corporates currently benefitting from the market

Portfolio Diversification Correlation Coefficient in the Indian Markets GOLDSILVERSTOCKSBONDS GOLD SILVER STOCKS BONDS1 Diversification reduces risk Downside risk is limited -Residual Value

Types of Arbitrage Calendar Spread Arbitrage Inter exchange Spread Arbitrage International Spread Arbitrage Spot Future Arbitrage Calendar Spread Arbitrage Inter exchange Spread Arbitrage International Spread Arbitrage Spot Future Arbitrage

Calendar Spread Arbitrage Exploiting the convergence of price between two contract. Example - Chana 20 Dec Chana 20 Jan Chana 20 Dec Chana 20 Jan Spread between the two contract months is 53 On expiry - Chana 20 Dec Chana 20 Jan Chana 20 Dec Chana 20 Jan Spread between the two contract months is 2

International Spread Arbitrage Prices in India are derived from International prices. Exploiting the mismatch in parity Prices in India are derived from International prices. Exploiting the mismatch in parity NYMEX Crude INR46.23 Fair Value (Rs.)2790 MCX Crude (Rs.)2820 Difference30 NYMEX Crude INR46.23 Fair Value (Rs.)2790 MCX Crude (Rs.)2820 Difference30

Spot – Future arbitrage Steps in Arbitrage Process 1) Spot Purchase and spontaneous future sale 2) Goods warehoused within 4 to 5 days and payment to Supplier towards spot purchase 3) Goods certified in next 5 days 4) Goods dematerlization in next 2 days 5) Delivery on the expiry of Future Contract 6) Release of Client fund along with his profit. Steps in Arbitrage Process 1) Spot Purchase and spontaneous future sale 2) Goods warehoused within 4 to 5 days and payment to Supplier towards spot purchase 3) Goods certified in next 5 days 4) Goods dematerlization in next 2 days 5) Delivery on the expiry of Future Contract 6) Release of Client fund along with his profit.

Obligation of Client No taxation obligation (Sales Tax etc.) is being done on part of client. We have our sales tax registration at every state in name of Navratan Comdex Pvt Ltd. So whatever are the taxation formalities, we will complete on behalf of client. Obligation of Client No taxation obligation (Sales Tax etc.) is being done on part of client. We have our sales tax registration at every state in name of Navratan Comdex Pvt Ltd. So whatever are the taxation formalities, we will complete on behalf of client. Risk Parameter No risk is involved in spot future arbitrage since profit in the arbitrage sauda is locked at its initiation itself. There might be a slight diversion of Annualized Approximate Return due to uncontrolled upward move of commodity prices since we have to call MTM Loss Money for the time prices come down again. But the absolute amount of profit will not be changed anyhow. Risk Parameter No risk is involved in spot future arbitrage since profit in the arbitrage sauda is locked at its initiation itself. There might be a slight diversion of Annualized Approximate Return due to uncontrolled upward move of commodity prices since we have to call MTM Loss Money for the time prices come down again. But the absolute amount of profit will not be changed anyhow.

Formalities If a client wants to do arbitrage, client has to open a Trading Account and a Demat Account with us. Trading Account is required to initiate futures sauda and Demat Account is necessary to get demat goods in client account. Except this no other obligation is due on client part. Formalities If a client wants to do arbitrage, client has to open a Trading Account and a Demat Account with us. Trading Account is required to initiate futures sauda and Demat Account is necessary to get demat goods in client account. Except this no other obligation is due on client part. Investment Client has to pay his purchase cost of goods along with all expenses (warehousing charges, spot commission, our commission, we will incur on his behalf. The client will pay further, specified margin for the future sale sauda. Investment Client has to pay his purchase cost of goods along with all expenses (warehousing charges, spot commission, our commission, we will incur on his behalf. The client will pay further, specified margin for the future sale sauda.

Milestones achieved NCDEX unveils India's first agriculture index. NCDEX peak daily turnover of 4271cr. MCX clocks record volume in Crude Oil contracts. Peak Daily Volume of 9,26,500 Barrels MCX registered 602kgs of physical deliveries of GOLD february contract

Sample Contract Specification SpecificationsGOLDSUGAR Trading unit1 kg10MT Quotation/Base Value Rs/10gmsRs/100kg Market PriceRs 7760Rs 1800 Lot ValueRs Rs Total Margin *5%10% Delivery unit1 kg10 MT * Margin is changed from time to time depending upon volatility,time to expiry etc.

Client Registration Form (CRF) Individual / HUF Documents Required Photo with signature across. Name, Address, Tel. No. Birth Date & Occupation. Bank A/c details IT PAN No. or 49A / Form 60 Introducer’s Name & Signature Signature of Client Manager (Person in charge) Signature Non –Individual --Company/ Firms/ Trust Documents Required Certified true copy of Board Resolution Certified true copy of Audited Final A/cs for the latest year. Copy of IT Return, if possible Certified true copy of MOA/ AOA / Partnership Deed / Trust Deed Details of 2 key persons * Photo with signature across * Name, Address, Tel. No. * Birth Date & Designation * Copy of any one of the specified documents * Signature of key person.

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