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-- ISBN: 9788175110502 by Dr. Hanish Kumar Sinha (Price: Rs. 650.00)
Understanding Indian Commodity Market: An Overview of Operation, Regulation and Approach to Price Trend Analysis is a unique imitative which brings forth the complexities of functioning of Indian Commodity Market in a simple easy to grasp text. The chapters give a deep insight into the different realms of commodities market from the investor as well as the regulator point of view. The author has taken utmost care to list out the minutest details which would enhance the understanding of the individual about the Indian Commodity Market. This book aims at making the individual/ corporate a better investor.
The trading of commodities consists of direct physical trading and derivatives trading. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market. The first chapter enlists the various Commodity Exchanges dealing in derivative market in India & World. It highlights the similarities and the difference between the financial derivative and the commodity derivative. The introductory chapter gives special mention to the different domestic and global commodity exchanges functioning actively. Apart from the adequate attention has also been made to highlight the importance of warehousing in commodity derivative market. The second chapter deals with the major commodity exchanges active in the Indian commodity space. It highlights the operation of various commodities exchanges along with the detailed list of commodities traded in them. The trading of commodities consists of direct physical trading and derivatives trading. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market. The third chapter deals with the various facets of quality testing and maintenance of Commodity in Indian market. It highlights the role of various agencies involved in the quality aspect of the commodities as most of the items are perishable in nature. This chapter gives special mention to the different domestic and global commodity quality standards applied actively in the commodity market space. Apart from the adequate attention has also been made to highlight the importance and functions of various agencies involved in assuring the quality of in commodity market.
The fourth chapter deals with the regulatory aspects of the commodity trading practiced in India. The apex authority controlling the commodity trade is the Forward Markets Commission which was constituted by the FCRA. With the passing of years several amendments were proposed to ensure smooth and efficient regulation of the commodity exchanges and trading practices. The chapter highlights the different basic rules and guidelines in accordance to which the trading is done. The use of commodity-linked financial risk management instruments by commodity producers, traders and consumers, including processors, reflects the desire to obtain protection from uncertain adverse price movements and, in certain cases, to procure short-term finance. The higher and the more unpredictable the price volatility of a commodity, the greater is the possibility of incurring losses or realizing gains on future sales or purchases of a commodity. The greater the share in an enterprise's earnings or in its production costs that a specific internationally traded commodity or commodities represent, the greater that enterprise's exposure to price risks. Instruments for managing commodity price risks are varied; they include stabilization programmes and funds (at the national or company level), marketing strategies involving the timing of sales and purchases, long-term contracts with fixed prices, forward contracts, the use of futures or options to hedge prices through commodity exchanges, and over-the counter (OTC) markets and the use of swaps and commodity-linked bonds. It is observed that credit and market risk commanded the lion’s share of risk managers’ time while operational risk was still being largely overlooked. It might also be notice that risk managers spent most of their time monitoring risk, less time measuring it, and an even smaller amount of time actively managing it.
In the fifth chapter an attempt has been made to study the various types of risk involved in the commodity trading and design suitable mitigation methods using various trading instruments available at the disposal of the investor.
The various factors affecting the price of the commodity is dealt in detail in sixth chapter. Prices of commodities are very influential to demand and supply of commodities with one’s own country and competing countries. The duration & time difference of cropping seasons, carry over stock, quantum of export and imports, internal consumption pattern, surplus for exports, prices of the substitute commodities play their role in price determination. Government interventions in export- import policies, allowing duty free imports, export subsidies, export bans, market interventions like Minimum Support Price (MSP) also has very critical role to play in terms of pricing of agricultural and certain industrial commodities. Commodity market participants want to take advantage of such price fluctuations depends upon their risk taking ability and anticipation of the price movements. Commodity market participants are classified under the following three broad categories - hedgers, speculators, and arbitragers Commodity market participants provide the liquidity and volume to the market which helps to derive representative price. Commodity derivative markets differ from financial markets in terms of physical Settlement, Warehousing and quality of underlying assets because of the very difference of the nature of asset. Commodities are bulky in nature, requires safe storage space, it deteriorate with time and needs to settle by actual physical delivery.
The seventh chapter deals with the different tools required for the technical analysis. The major tools to be mentioned are charts and indicators. Important combination of chart patterns has been explained in detail in this section. One must be vigilant enough to spot the patterns in the dynamic market to be able to forecast the prices with increased accuracy. The major indicators (leading and lagging) are expected in the later stages of the section which normally guides the analyst to identify the prices trend in the market. The chapter highlights the different charting patterns which are identified in the dynamic price chart by analyst to forecast the price of a particular commodity or script or index.
Apart from the above chapters, the book also has the section of Glossary of Important Term and references which could be of great help to the readers.