Commdity trading and exchange in India

Abstract

India is one the biggest produces and consumers of commodities.There is an inherent price risk in these commodities as most of them have seasonal production, but consumption is spread through out the year.The project looks at the regulations of the commodity derivatives market and suggests the regulations changes that would help to liberalize the markets .Further , we analyze the impact of futures trading on spot prices and how best could futures market be used to stabilize spot market .We move on to set up the hedging strategy for spot using futures and then look at historical movement of spot and future prices for wheat , oil and gold and understand the correlation between them. we also look at changes in Convenience yield and suggest trading strategies for investing in commodity derivatives to enhance investor confidence and present a methodology to build a minimum variance portfolio. We end with a study of retail business suggesting ways and means to use commodity trading to hedge all cost risks.