1. Price Discovery in Futures and Spot Commodity Markets in India National Workshop on Commodity Research, 10th October, 2007, India International Centre, New Delhi. Pratap Ch. Biswal & Raghavendra Badaskar T. A. Pai Management Institute, Manipal

2. Background of this Study The Indian commodity futures markets recorded a 373% growth during 2005-06 Still there are quite apprehensions about commodity futures market in India, particularly from politicians The Finance Minister P Chidambaram expressed strong conviction about the forwards/futures market and urged all political parties to support Forward Contracts (Regulation) Amendment Bill 2006. CPM and JD (U) opposed the bill, the CPM wanted essential commodities to be banned from futures trading. JD (U) suggested that the commodities exchange Act should be repealed

3. Derivation of the Objective There has been widespread interest in the relationship between commodity futures market and spot trading Objective is to examine the role of commodity futures market in performing the function of price discovery in India. The price discovery function depends on whether new information is reflected first on futures or spot prices. The significance of price discovery depends upon a close relationship between futures and spot price.

4. Methodology The price linkage between futures market and spot market would be investigated using cointegration (Johansen, 1991) analysis and Error Correction. Cointegration analysis measures the extent to which two markets have achieved a long run equilibrium. Error Correction dynamics characterize the price discovery process, whereby markets attempt to find equilibrium.

5. Data Exchanges: MCX and NCDEX Market Base Study: Indices would be used Data: Spot and Futures Indices: 4 from MCX and 1 from NCDEX

6. Suggestions Please!!! Thank you!!!