Understanding Indian Commodity Market: An Overview of Operation, Regulation and Approach to Price Trend Analysis

-- 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.

The Book can be bought online directly from the link given below:

https://notionpress.com/read/understanding-indian-commodity-market

Copper Still a Good Asset to Invest

All commodities move in response to supply/demand fundamentals: real and perceived. To analyze any commodity you need to look at what makes up physical vs. investment demand for the metal (in terms of proportions) and what drives each holders.  Copper is interesting because physical and investment buyers both account for significant proportions of physical copper demand. It's hard to overstate the importance of copper prices, both to numerous industries as well as the global economy. In the U.S., demand for products made of copper, 60 percent of which is used to make wire, comes primarily from four sectors. One is construction. A second source of copper demand comes from utilities and companies that own and operate the vast transcontinental high-power lines that crisscross the nation and constitute the bulk power grid. A third source of copper demand is manufacturers of electronic products like smart phones and electronic industry. A fourth industry that buys large amounts of copper products is the car and truck industry. The average automobile, for example, contains nearly one mile of copper wiring, while the total weight of copper in cars ranges from 50 pounds for compacts to as much as 100 pounds for luxury and hybrid cars.

Demand Prospects

The Chinese demand has always been the mover and trend setter for the copper prices. The State Grid Corporation of China (SGCC), which provides power to 80 percent of the world’s second-largest economy aims to boost by 13 percent its annual investment to more than $60 billion. Given that Chinese utilities account for more than 40 percent of Chinese copper demand, that sort of big jump in capital investment should firm up prices.

China is not the only source of expected rising copper demand. The worldwide demand for the red metal has rose throughout 2013. The trends in global refined copper consumption are also progressing to an alarming state. Industrial production is not keeping up with copper consumption and recent indications have pointed to estimates in Chinese consumption to be very conservative. It now appears that in the next 25 years, the world will need to produce as much copper as has been produced in the history of humanity.

India also provides a very compelling case for copper demand and one only has to look as far as their power needs. According to the International Energy Agency, India's power production needs to rise by 15-20% annually and to meet that, India needs to invest $1.25 trillion by 2030 into energy infrastructure. From this new infrastructure, India's annual copper demand is expected to more than double.

There are three major regions that copper investors should focus on in terms of assessing copper demand: the BRIC countries, the U.S. and The Euro Zone.  A savvy copper investor will follow the economic developments in those regions for clues into what the future demand for copper looks like.

Supply Growth & Major Hindrances

Strikes, storms and scheduled maintenance of major copper processing facilities are flattening the growth in copper production. The rate at which global copper supplies are growing will peak this year and then begin to slow next year.

Chile -- Output at Codelco’s 300,000 ton per year Chuquicamata smelter was halted for most of December due to a strike.

Philippines -- Glencore’s Pasar smelter in the Philippines remains closed since Typhoon Haiyan slammed into the country on November 7, 2013.

Australia -- BHP Billiton plans a maintenance outage at its Olympic Dam smelter in March.

Indonesia -- Freeport-McMoRan has suspended copper concentrate exports from its huge Grasberg mine in Papua as it fights a sudden 25 per cent export duty that will grow to 60 per cent by 2016 on copper concentrate exports. That led Deutsche Bank to cut its 2014 copper sales estimates by 120 million pounds, assuming a full first-quarter of export disruptions.

Status on global Inventory

In addition to higher demand and production constraints, the global stocks of already-mined copper are tightening. A year ago, copper stocks were about 1.46 million tons. That rose to 1.81 million tons in April of last year and has been falling ever since. By December 2013 global copper stocks had declined to an estimated 1.27 million tons. Further, the metal’s on-warrant inventory has shrunk to its lowest level since 2008. Copper inventories in China, meanwhile, have dropped and stocks at Shanghai Futures Exchange warehouses have also dropped. From where we stand at Metal Miner, whether an uptick in Chinese demand will lift global copper markets remains unclear, but some perceive copper may have hit its floor.

Price Outlook

The current prices of copper are driven by excellent fundamentals. Strong demand growth driven by China and global infrastructure/urbanization - underpinned by a wide range of uses. China has little domestic resource and is unable to use its industrial advantages to create supply (unlike aluminum, zinc, coal, iron-ore). Copper industry has failed to deliver sufficient supply growth despite record high prices – prices have had to raise high enough to generate enough scrap to balance the market. Copper demand in China has at least 80% growth left to reach developed world averages and can single handedly support double-digit growth for many years. The other major factor supporting the price is shift in the standard of living in the emerging markets. China is the top consumer of copper in the world, and a major consumer of all commodities. Another reason is the current fundamental which is driving copper growth demand, a trend that extends beyond China and into the emerging markets. Despite the recession, globally right now we are witnessing an unprecedented growth of moving people from rural to urban dwellings. Humans that live in rural settings existence require virtually no copper, but in an urban setting AC’s, electricity, cars etc. – all require copper. Now in countries such as China and India, that have huge populations, this movement means a lot of copper is required.

Understanding Indian Commodity Market -- ISBN: 9788175110502 (by Dr. Hanish Kumar Sinha)

Understanding Indian Commodity Market is a unique imitative which 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 glossary of important term & acronyms has been given at the end of the book which has been put together to ease the process of understanding. All the chapters as Indian Commodity Exchanges, Regulatory Institutions in Commodities Futures, Forward Markets Commission, Risk Management in Commodities Market, Price Analysis of Commodities – A Fundamental Approach and Price Analysis of Commodities - A Technical Approach, has been designed meticulous to bring out every possible detail on the particular topic to the readers. These sections, along with the list of References make this book, a unique publication and a most comprehensive reference Book in the commodity space.

The Book would be useful to all commodity participants, especially those connected to the agriculture sector, as well as to the general reader interested in gaining insights into the functioning of the commodity market. The Book has special interest and relevance to policy makers, agricultural researchers and students, economic analysts, commodity and finance professionals, commodity processors, manufacturers, importers and exporters, logistics providers, risk managers and all those engaged along the entire value chain.

- See more at: https://notionpress.com/read/understanding-indian-commodity-market#sthash.SbteurIY.dpuf

Barley Price Surge Inevitable Amidst Strong Fundamental Support

Prices have been rising since January 2006 due to high exports. Hanish Kumar Sinha, head, trade and commodity intelligence group, National Collateral Management Services, says world barley stocks are likely to end 2012-13 at a five-year low of 22.5 MT, with a sharp 14% drop in inventory in major exporting countries to 12.5 MT, the lowest in 17 years. In 2013, barley prices rose 1.72% on the NCDEX and were at Rs 1,659 a quintal on December 31 as against Rs 1,573 a quintal on January 1.

India's production in 2012-13 is estimated at 1.74 MT, marginally higher than the 1.62 MT in the preceding year, owing to good rains in the kharif season and improving yields due to high MSP.

Over 91.71% production was contributed by Rajasthan (48.75%), Uttar Pradesh (24.96%), Haryana (9.45%) and Madhya Pradesh (8.54%). "The domestic consumption is estimated at 1.5-1.75 MT. India is the 14th -largest consumer, with the leaders being European Union (37.91%) and China (9.57%)," says Sinha.

Barley is sown in October-December and is dependent upon a good monsoon. According to market experts, this year, good rainfall in major producing regions will provide the required soil moisture. The upcoming season is likely to see production of 1.7-1.8 MT.

Sinha of National Collateral says barley is expected to continue trading on the higher side due to lower production in the European Union. However, spot prices are expected to rise on the back of high export demand and get support at Rs 1,172 per quintal. It has a good possibility of testing Rs 1,740 in 2014 on the higher side.

http://businesstoday.intoday.in/story/farm-commodities-that-can-give-good-returns-in-2014./1/202725.html

Published In: BUSINESS TODAY