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A Study On Identification of Investment Opportunities in Commodity Futures Market in India Infoline LTD
A Study On Identification of Investment Opportunities in Commodity Futures Market in India Infoline LTD
R.SIVASANKARAN (REG.NO:1000109071)
Under the guidance of
Mr.G.PRITHIVIRAJ
Faculty member
BONAFIDE CERTIFICATE
Certified that this project report A STUDY ON IDENTIFICATION OF INVESTMENT OPPORTUNITIES IN COMMODITY FUTURES MARKET IN INDIA INFOLINE LTD, CHENNAI is the bonafide work of R.SIVASANKARAN and1000109071 who carried out the project work under my supervision during the academic year 2010 -2012
INTERNAL EXAMINER
EXTERNAL EXAMINER
DECLARATION
I affirm that the project work titled A STUDY ON IDENTIFICATION OF INVESTMENT OPPORTUNITIES IN COMMODITY FUTURES MARKET IN INDIA INFOLINE LTD being submitted in partial fulfilment for the award of MBA is the original work carried out by me. It has not formed the part of any other project work submitted for award of any degree or diploma, either in this or any other University.
(Signature of the Candidate) R.SIVASANKARAN (1000109071) I certify that the declaration made above by the candidate is true
ACKNOWLEDGEMENT
I am extremely thankful to the Management of Hindustan University for providing me the opportunity to undergo Master of Business Administration course during the academic year 2010-2012. I would like to express my sincere gratitude to our Chancellor Dr. Elizabeth Verghese, Our Vice-Chancellor Dr. Sarukesi and our Director Academics Mr.Joseph Stanley for their inspiration and support. I am thankful to Mr. P. Ramnath, Director, School of Management, and Prof. M.L.Gopichander, Head of the Department, School of Management, for their support in doing my project. They have been a source of encouragement and guidance in my endeavors. I express my gratitude to my project guide Mr.G.Prithiviraj Teaching research associate School of Management, for her consistent encouragement and valuable suggestion in completing this project, without her the completion of this project would have been practically impossible. I take this opportunity to thank Mr.Swaminathan, Executive Director. And Mr.Ganesh, and Mr. Praveen, Finance manager in India Info line Ltd, Perungudi, Chennai for allowing me to do the project work in the esteemed organization and for extending their full co-operation. Last but not least I would like to thank our beloved parents and all our friends for their co- operation in helping me to complete the project work
TABLE OF CONTENTS
S. No
PAGE NO
Introduction Need and Scope of the study Statement of the problem Objectives of the study Research Methodology CHAPTER II
2.1 2.2
3.1 3.2
4.1
5.5
REFERENCES
ABSTRACT
A Study on investors awareness about Commodity Futures market with reference to INDIA INFOLINE Ltd, Chennai. The project is carried out to find out the awareness level of the investors in commodity futures market with reference to Chennai and to identify the factors influencing the investor to invest. It also helped the researcher to identify the investors objective of investment and the preference of the commodities. This project follows Descriptive type of Research Method and Systematic Random Sampling are used this project The major findings that influences the respondents to investment is their own interest. respondents preference in commodities for bullions. It is also found that the period of investment and level of investment is directly proportionate to each other Based on the above said findings the company recommended by educating and making the people aware of commodity future market will attract the most number of people to invest in commodities futures market.
LIST OF TABLES
TABLE NO. 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.1.6 4.1.7 4.1.8 4.1.9 4.1.10
PARTICULARS Table showing the annual income of the respondents Table showing the type of investor Table showing the level of awareness about commodity futures amoung the respondents Table showing the details about inducing factors Table showing the level of investment of the respondents Table showing the reason for not investing in commodity futures Table showing the customer preference in commodities Table showing the intruments invested Table showing the weighted average score and ranking of the reason for investing in commodity futures respective to the type of investor Table showing the overall all weighted average score for the reason for investing in commodity futures market
PAGE NO.
4.1.11 4.1.12
Table showing the income level of the people and their objective of investments Table showing the overall all weighted average score for the objective of investment
Table showing the precautions during uptrend and downtrend of the market Table showing the bivariate frequency Table showing the analysis of variance between type of investor and expected returns Table showing the analysis of variance between level of investment and expected returns
LIST OF CHARTS
CHART NO.
PARTICULARS
PAGE
NO. 4.1.1 4.1.2 4.1.3 4.1.4 4.1.5 4.1.6 4.1.7 4.1.8 4.1.9 Chart showing the annual income of the respondents Chart showing the type of investor Chart showing the level of awareness about commodity futures amoung the respondents Chart showing the details about inducing factors Chart showing the level of investment of the respondents Chart showing the reason for not investing in commodity futures Chart showing the customer preference in commodities Chart showing the intruments invested Chart showing the type of investor and the reason for investing in commodity futures Chart showing the overall all weighted average score for the reason for investing in commodity futures market 4.1.11 4.1.12 4.1.13 Chart showing the income level of the people and their objective of investments overall all weighted average score for the objective of investment Chart showing the venn diagram of precautions taken during uptrend and downtrend of the market
4.1.10
soft commodities like palm oil, coffee etc. are traded. It is important to develop a vibrant, active and liquid commodity market. This would help investors hedge their commodity risk, take speculative positions in commodities and exploit arbitrage opportunities in the market.
Futures trading perform two important functions of price discovery and price risk management with reference to the given commodity. It is useful to all segments of the economy. It is useful to the producer because he can get an idea of the price likely to prevail at a future point of time and therefore can decide between various competing commodities, the best that suits him. It enables the consumer, in that he gets an idea of the price at which the commodity would be available at a future point of time. He can do proper costing and also cover his purchases by making forward contracts. Futures trading are very useful to the exporters as it provides an advance indication of the price likely to prevail and thereby help the exporter in quoting a realistic price and thereby secure export contract in a competitive market. Having entered into an export contract, it enables him to hedge his risk by operating in futures market.
Forward/futures trading involves a passage of time between entering into a contract and its performance making thereby the contracts susceptible to risks, uncertainties, etc. Hence there is a need for the regulatory functions to be exercised by an exchange that is the Forward Markets Commission (FMC).
Hedgers
Many participants in the commodity futures market are hedgers. They use the futures market to reduce a particular risk that they face. This risk might relate to the price of any commodity that the person deals in. The classic hedging example is that of wheat farmer who wants to hedge the risk of fluctuations in the price of wheat around the time that his crop is ready for harvesting. By selling his crop forward, he obtains a hedge by locking in to a predetermined price. Hedging does not necessarily improve the financial outcome; indeed, it could make the outcome worse. What it does however is, that it makes the outcome more certain. Hedgers could
be government institutions, private corporations like financial institutions, trading companies and even other participants in the value chain, for instance farmers, extractors, ginners, processors etc., who are influenced by the commodity prices. There are basically two kinds of hedges that can be taken. A company that wants to sell an asset at a particular time in the future can hedge by taking short futures position. This is called a short hedge. A short hedge is a hedge that requires a short position in futures contracts. As we said, a short hedge is appropriate when the hedger already owns the asset, or is likely to own the asset and expects to sell it at some time in the future. Similarly, a company that knows that it is due to buy an asset in the future can hedge by taking long futures position. This is known as long hedge. A long hedge is appropriate when a company knows it will have to purchase a certain asset in the future and wants to lock in a price now.
Speculators
If hedgers are the people who wish to avoid price risk, speculators are those who are willing to take such risk. These are the people who takes positions in the market & assume risks to profit from price fluctuations in fact the speculators consume market information make forecasts about the prices & put money in these forecasts. An entity having an opinion on the price movements of a given commodity can speculate using the commodity market. While the basics of speculation apply to any market, speculating in commodities is not as simple as speculating on stocks in the financial market. For a speculator who thinks the shares of a given company will rise, it is easy to buy the shares and hold them for whatever duration he wants to. However, commodities are bulky products and come with all the costs and procedures of handling these products. The commodities futures markets provide speculators with an easy mechanism to speculate on the price of underlying commodities. To trade commodity futures on the NCDEX, a customer must open a futures trading account with a commodity derivatives broker. Buying futures simply involves putting in the margin money. This enables futures traders to take a position in the underlying commodity without having to actually hold that commodity. With the purchase of futures contract on a commodity, the holder essentially makes a legally binding promise or obligation to buy the underlying security at some point in the future (the expiration date of the contract).
Arbitrage
A central idea in modern economics is the law of one price. This states that in a competitive market, if two assets are equivalent from the point of view of risk and return, they should sell at the same price. If the price of the same asset is different in two markets, there will be operators who will buy in the market where the asset sells cheap and sell in the market where it is costly. This activity termed as arbitrage. The buying cheap and selling expensive continues till prices in the two markets reach equilibrium. Hence, arbitrage helps to equalise prices and restore market efficiency.
This project will provide the information about the investors awareness about the Commodity futures market. The reasons for investing in commodity futures market are also analyzed by the researcher. The important reason for which the investor is using commodity futures can be found by the researcher. The investors awareness about their roles and obligations are also analyzed. This will help the financial planners to realize their need to educate their investors and to improve their customers education level.
futures
3) To find the awareness level of investors about their obligation and rights. 4) To find out the preference of the investors in commodities.
Sampling Design
a. Population
b. Sampling area
: : : : :
c. Sampling size
d. Sampling method
e. Sampling unit
Primary data
Source:
The source of primary data is responses collected from the investors of Chennai. Method: The method adopted for primary data collection is questionnaire method. Under the questionnaire method, a questionnaire has to be constructed which should pertain to the factors considered under the study.
Secondary Data:
Source: The source of the secondary data is magazines, journals and websites. It also includes the projects done on Commodity futures market.
Research instrument
Scaling technique: 1. Dichotomous question
Data analysis tools and technique: 1. Correlation 2. ANOVA 3. Percentage analysis 4. Weighted average and score 5. Charts Line charts Bar charts Pie- charts
of time, other commodities were permitted to be traded in futures exchanges. Regulatory constraints in 1960s resulted in virtual dismantling of the commodities future markets. It is only in the last decade that commodity future exchanges have been actively encouraged. However, the markets have been thin with poor liquidity and have not grown to any significant level.
Evolution of the commodity market in India Although India has a long history of trade in commodity derivatives, this segment remained underdeveloped due to government intervention in many commodity markets to control prices. The production, supply and distribution of many agricultural commodities are still governed by the state and forwards and futures trading are selectively introduced with stringent controls. While free trade in many commodity items is restricted under the Essential Commodities Act (ECA), 1955, forward and futures contracts are limited to certain commodity items under the Forward Contracts (Regulation) Act (FCRA), 1952. The first commodity exchange was set up in India by Bombay Cotton Trade Association Ltd., and formal organized futures trading started in cotton in 1875. Subsequently, many exchanges came up in different parts of the country for futures trade in various commodities. The Gujrati Vyapari Mandali came into existence in 1900 which has undertaken futures trade in oilseeds first time in the country. The Calcutta Hessian Exchange Ltd and East India Jute Association Ltd were set up in 1919 and 1927 respectively for futures trade in raw jute. In 1921, futures in cotton were organized in Mumbai under the auspices of East India Cotton Association (EICA). Many exchanges were set up in major agricultural centres in north India before world war broke out and they were mostly engaged in wheat futures until it was prohibited. The existing exchanges in Hapur, Muzaffarnagar, Meerut, Bhatinda, etc were established during this period. The futures trade in spices was first organized by India Pepper and Spices Trade Association (IPSTA) in Cochin in 1957. Futures in gold and silver began in Mumbai in 1920 and continued until it was prohibited by the government by mid-1950s. Options are though permitted now in stock market, they are not allowed in commodities. The commodity options were traded during the pre-independence period. Options on cotton were traded until they along with futures were banned in 1939 (Ministry of Food and Consumer Affairs, 1999). However, the government withdrew the ban on futures with passage of FCRA in 1952. The Act has provided for the
establishment and constitution of Forward Markets Commission (FMC) for the purpose of exercising the regulatory powers assigned to it by the Act. Later, futures trade was altogether banned by the government in 1966 in order to have control on the movement of prices of many agricultural and essential commodities. After the ban of futures trade all the exchanges went out of business and many traders started resorting to unofficial and informal trade in futures. On recommendation of the Khusro Committee in 1980 government reintroduced futures on some selected commodities including cotton, jute, potatoes, etc. As part of economic liberalization of 1990s an expert committee on forward markets under the chairmanship of Prof. K.N. Kabra was appointed by the government of India in 1993. Its report submitted in 1994 recommended the reintroduction of futures which were banned in 1966 and also to widen its coverage to many more agricultural commodities and silver. In order to give more thrust on agricultural sector, the National Agricultural Policy 2000 has envisaged external and domestic market reforms and dismantling of all controls and regulations in agricultural commodity markets. It has also proposed to enlarge the coverage of futures markets to minimize the wide fluctuations in commodity prices and for hedging the risk arising from price fluctuations. In line with the proposal many more agricultural commodities are being brought under futures trading.
2.
Vijai
Beopar
Muzaffarnagar 3. Rajdhani Oils & Oilseeds Exchange Ltd., Gur, Mustard seed its oil &
Delhi 4.
oilcake
5. 6.
7.
The Bombay Commodity Exchange Ltd., Oilseed Complex, Castor oil Mumbai international contracts
8.
Rajkot Seeds, Oil & Bullion Merchants Castor seed, Groundnut, its oil & Association, Rajkot cake, cottonseed, its oil & cake, cotton (kapas) and RBD palmolein.
9.
The Ahmedabad Commodity Exchange, Castorseed, cottonseed, its oil Ahmedabad and oilcake
10.
The East India Jute & Hessian Exchange Hessian & Sacking Ltd., Calcutta
11.
12.
13.
Soya seed, Soyaoil and Soya meals, Rapeseed/Mustardseed its oil and oilcake and RBD Palmolien
14.
The First Commodities Exchange of India Copra/coconut, its oil & oilcake Ltd., Kochi
15.
18.
19.
20. 21.
Exchange Ltd., Mumbai 22. 23. Multi Commodity Exchange Ltd., Mumbai Bikaner Bikaner 24. 25. Haryana Commodities Ltd., Hissar Bullion Association Ltd., Jaipur commodity Exchange Several Commodities
Ltd., Mustard seeds its oil & oilcake, Gram. Guar seed. Guar Gum Mustard seed complex Mustard seed Complex
Forward Markets Commission (FMC) headquartered at Mumbai, is a regulatory authority which is overseen by the Ministry of Consumer Affairs and Public Distribution, Govt. of India. It is a statutory body set up in 1953 under the Forward Contracts (Regulation) Act, 1952.
equity research, IIFLs research is acknowledged by none other than Forbes as Best of the Web and a must read for investors in Asia. Our research is available not just over the Internet but also on international wire services like Bloomberg, Thomson First Call and Internet Securities where it is amongst one of the most read Indian brokers.
1997
Launched research products of leading Indian companies, key sectors and the economy Client included leading FIIs, banks and companies
1999
Launched www.indiainfoline.com
2000
Launched online trading through www.5paisa.com Started distribution of life insurance and mutual fund
2003
2004
2005
2006
2007
Commenced institutional equities business under IIFL Formed Singapore subsidiary, IIFL (Asia) Pte Ltd
2008
2009
Acquired registration for Housing Finance SEBI in-principle approval for Mutual Fund Obtained Venture Capital license
2010
2011
CHAPTER-III
Internal factors
External factors
Investor need
Acquiring the required knowledge Identification of investment opportunities in the commodity futures Choosing the commodity for Investing Post Investment Behavior Continue with the investing
CHAPTER IV
4.1 DATA
No of people
52
27
16
Percentage
47
25
25
INFERENCE: Among the total respondents 47% of people are in the segment 1.5 to 3 lakhs, 25% of people belongs to 3 to 5 lakhs , 15% of people are lying between 5 to 10 lakhs and remaining 7% and 6% of peple are in between less than 1.5 lakhs and above 10 lakhs. Majority of the annual income of the people lies with the 1.5 lakhs to 3 lakhs.so it shows their investment level approach would be maximum. Chart: 4.1.1. Chart showing the Annual Income of the Respondents:
Table 4.1.2. Table showing the Type of investor Type of investor No of Respondents Percentage Aggressive 50 45% Moderate 45 41% Conservative 15 14%
Source: Primary Data Inference: The above table shows that the major portion of people are aggressive in investing. It shows that the people are interested in savings. Amoung the respondents 45%, 41% and 15% of belongs to aggressive, moderate and conservative respectively. The major portion of people, nearly 86% are continuesly investing and intersted in investing. Chart 4.1.2: Chart showing the Type of Investor
Table 4.1.3: Table showing the Level of awareness about commodity futures amoung the respondents
Awareness futures
about
commodity
YES 47 42%
NO 63 58%
No of Respondents Percentage
Source: Primary Data Inference: The above table clearly shows that nearly 63 respondents are not aware about commodity futures market. Among the Respondents 47 people have awareness about commodity futures market. The major group of this segment belongs to MBA and people working in Banking sector. Chart 4.1.3: Chart showing the awareness about commodity futures amoung the respondents
Table 4.1.4: Table showing the Details about Inducing Factors: Induced Invest to Advertisements Financial Planner 32 29.09 Friends/Relatives Own Interest 47 42.73 Others
No of Respondent 16 s Percentage
14.55
4 3.64
11 10.00
Source: Primary Data Inferences: The major factor that influences the people to invest is their Own Interest. The rest of the factors are financial planners, advertisements, others and friends / relatives. Chart 4.1.4: Chart showing the Details about Inducing Factors:
Source: Primary Data Inference: Most of the respondents used to invest between 5 to 10 lakhs, and 2 to 5 lakhs respectively. Totally 61% of people investment between 2 to 10 lakhs. Out of 23 people ,21% of people invest amount between 1 to 2 lakhs. Chart 4.1.5: Chart showing the Level of investment of the respondents:
Reason
Risk
Volatility
Low returns
No of 12 respondents Percentage 11
26 24
10 9
21 19
Source: Primary Data Inference: The important reason for respondents not investing in commodity futures is the lack of awareness about the commodity futures market. Nearly 31% of respondents are not aware about commodity futures. The other important reasons are volatility, low returns from their investment , risk and marginal trading respectively. Chart 4.1.6. Chart showing the Reason for Not Investing in COMMODITY FUTURES:
Source: Primary Data Inference: From the above table it is clear that the respondents preference first goes to bullions next to that are energy,agri-products and base metals. Chart 4.1.7. Chart showing the Customer Preference In Commodities:
Source: Primary Data Inferences: Amoung the respondents nearly 64 are investing in shares and bonds. In mutual funds, 58 people are investing.
Around 65 respondents are investing in insurance. In commodities, 47 respondents are invested 25 respondents are investing in post office and banks
table 4.1.8 :table showing the Expected return Expected return <8 % 8 12 % 12 16 % 16 20 % >20 %
No
of
respondents Percentage
19 17
18 16
13 12
50 46
10 9
Chart 4.1.8 :Chart showing the Expected return Inference: 19 respondents are expected return below 8%, and 18 and 13 repondents are expected return between 8%to 16% .and 50 respondents are expected return for 16%to20%. So more respondent like high return
4.1.9. Type of investor and the reason for investing in commodity futures:
Table 4.1.9. Table showing the Weighted average score and ranking of the reason for investing in commodity futures respective to the type of investor: Investor Type Aggressive Moderate Conservative
Reason for Investing in weighted Rank Weighted Rank weighted commodity Futures Average Score Average Score Average Score INVESTMENT AMOUNT RISK MARKED TO MARKET HEDGING PURPOSE EXPOSURES VARIETY COMMODITIES AVAILABLE 3.92 3.70 3.72 3.64 2.96 OF 3.24 2 4 3 5 8 7 4.09 3.36 3.31 3.73 3.18 3.38 2 5 6 3 8 4 4.07 3.47 3.53 3.60 3.00 3.27
Rank 2 5 4 3 8 7
3.28 4.30
6 1
3.29 4.13
7 1
3.47 4.47
6 1
It is well known from the table that for all the three type of Investors, Diversification and Investment amount are in the first and second position.Reason for investment changes for all the three type of investors,it depends upon their personal thoughts.
Chart 4.1.9. Chart showing the Semantic chart for type of investor and the reason for investing in commodity futures:
4.1.10. Overall all weighted average score for the reason for investing in commodity futures market:
Table 4.1.10. Table showing the Overall all weighted average score for the reason for investing in commodity futures market:
Reason for Strong Investing in ly commodity Agree Futures DIVERSIFICA 49 TION INVESTMEN T AMOUNT HEDGING PURPOSES RISK 45 25 13
Agree
Strongl y Disagre e 0 0 3 0 3 10
Total No weighte of Weigh d Ran Respond t score Average k ents Score 110 110 110 110 110 110 468 441 404 388 388 364 4.25 4.01 3.67 3.53 3.53 3.31 1 2 3 4 5 6
40 30 46 52 40 29
28
37
19
110
363
3.30
26
36
32
110
336
3.05
Inference: The overall order of reason for investing in commodity futures are Diversification, Investment amount, Hedging purpose, Risk, Marked to Market, Financial Advisor, variety of commodities available and exposures. Chart 4.1.10. Chart showing the Overall all weighted average score for the reason for investing in commodity futures market:
4.1.11: Semantic income level of the people and their objective of investments:
Type 4.1.11: Table showing the Semantic table for income level of the people and their objective of investments: Level Income of < 1 lakhs 1 lakhs to 2 2 to 5 lakhs lakhs weight ed Ran Avera k ge Score 1 4.07 5 to 10 lakhs 10 lakhs to 20 lakhs
weight ed Objective of Avera Investment ge Score FOR ME & 4.00 MY SAFETY SHORT TERM GAINS 2.50
Ran k
3.40
3.48
3.63
3.43
LONG TERM 3.75 GAINS USE MY SURPLUS 3.63 CASH FUTURE REQUIREME 3.50 NTS HOBBY KNOWLEDG E 2.63 3.25
3.50
3.41
3.69
3.43
3.25
3.30
3.38
3.71
4 6 5
2 6 3
2 5 7
4 6 7
2 6 7
Source: Primary Data Inference: From the above table it is clear that the Income level group upto 10 lakhs, they are investing for their personal things and their family safety. It remains in the first position.But for income level above 10 lakhs it changes, for them the first objective of investment is to use their surplus cash and gain return from that.
Chart 4.1.11:Chart showing the Semantic chart for income level of the people and their objective of investments:
Objective Investment
Rank
FOR ME & MY 42 SAFETY FUTURE 20 REQUIREMENTS LONG GAINS SHORT GAINS TERM TERM 22 16
1 2 3 4 5 6 7
Source: Primary Data Inference: The order of investors objective of investment is 1. For me and my family safety 2. Future requirements 3. Longterm gains 4. Shortterm gains 5. Use the surplus cash and get return from that 6. Knowledge
7. Hobby Chart 4.1.12. Chart showing the Overall weighted average score for the objective of investment:
Precautions
50
24
Amoung the respondents 70 people are portfolio updating when the market faces downtrend or uptrend.
27 people are doing markeet updating 22 people are changing the funds and 11 people are not taking any precautions, they are not responding to the market movements.
Venn Diagram:4.1.13. Chart showing the venn diagram of Precautions taken by the respondents when market uptrend and downtrend
Period of investment/Level < 1 lakhs of investment < 1 year 1 2 years 2 3 years 3 5 years 5 10 years 10 to 15 years 3 5 0 1 0 0
Source: Primary Data The correlation between the level of investment and period of investment is 0.57.
Inference: The correlation between the level of investment and period of investment is 0.57.So the level of investment and the period of investment is positively correlated. If there is a increase in the period of investment definitly there is a increase in level of investment and vice versa. The period of investment and level of investment is directly proportinal to each other.
< 8% 0 7 12 19
8 12 % 9 11 3 23
12 16 16 20 >20% % % 8 5 0 13 24 21 0 45 9 1 0 10
254 SSR = sum of squares between the type of investor = 950 807 = 143
Error sum of squares = 785 254 143 = 388
Hypothesis:
Null hypothesis H0:
There is no significant difference in the expectation of return of the three type of investors
There is no significant difference in the type of investor with regard to expectation of return
Alternate hyphothesis H1:
1. There is a significant difference in the expectation of return of the three type of investors 2. There is a significant difference in the type of investor with regard to expectation of return
Sources of variation Between the Expected return Between the type of investors Error Total
Degrees of freedom 4
S.S
254
143
4.46
8 Cr 1 =14
388 785
Table value of F at 5%: 1. 2. Value of F at degrees of freedom (4,8) = 3.84 Value of F at degrees of freedom (2,8) = 4.46
Conclusion: Since the calculated value is less than the table value of F for the two null hyphothesis. So we fail to reject the null hyphothesis
Null hypothesis H0:
There is no significant diffrence in the expectation of return of the three type of investors
There is no significant difference in the type of investor with regard to
expectation of return
Period investment Expected return < 1 year 1 2 years 2 3 years 3 5 years 5 10 years Grand total
of /
< 8%
8 12 %
12 16 %
16 20 %
>20%
Grand Total
16 23 31 20 20 110
3 9 4 1 2 19
5 2 10 3 3 23
1 3 2 3 4 13
6 4 14 13 8 45
1 5 1 0 3 10
152 SSR = sum of squares between the type of investor = 509 484 = 25
Error sum of squares = 330 152 25 = 153
Hypothesis:
Null hypothesis H0:
The period of investment does not vary with respect to expected return
Alternate hyphothesis H1:
The expected of return is not same for all the period of investment The period of investment vary with respect to expected return Table 4.1.16. 1. ANOVA TABLE :
Sources of variation Between the Expected return Between the type of investors Error Total
Degrees of freedom 4
S.S
MSS=S.S/d.o.f MSC= 152/4 =38 MSR= 25/4 = 6.25 MSE= 153/16 = 9.56
152
25
3.01
16 Cr 1 = 24
153 330
Conclusion: In this case we have to accept one null hypothesis and reject the other.
Null hypothesis H0:
The expected of return is same for all the period of investment The period of investment does not vary with respect to expected return
Alternate hyphothesis H1:
The expected of return is not same for all the period of investment The period of investment vary with respect to expected return Here we are accepting The period of investment does not vary with respect to expected return
The expected of return is not same for all the period of investment
10 lakhs
45%, 41% and 15% of respondents are belongs to aggressive, moderate and conservative
this segment belongs to MBA and people who are working in banking sector.
The major factor that influences the respondents to invest is their own interest. The factors
that influences the respondents to invest are financial planners, advertisements, others and friends and relatives
40% and 27% respondents investment level belongs to 5 to 10 lakhs, and 2 to 5 lakhs
respectively.61% of people investment level belongs to 2 to 10 lakhs.21% of peoples investment level belongs to 1 to 2 lakhs
80% of respondents are getting periodic information from their financial advisor and
70% of people are updating portfolio, when the market faces downtrend or uptrend.
27% of people are doing market updating. 22% of people are changing the funds and 11% people are not taking any precautions, they
The other important reason are volatility, low returns, risk and marginal trading
respectively.
The order of the Respondents preference in commodities 1. Bullions 2. Energy 3. Agri-products 4. Base metals The order of reason for investing in commodity futures is
1. Diversification, 2. Investment amount, 3. Hedging purpose, 4. Risk, 5. Marked to market, 6. Financial advisor, 7. Variety of commodities available and 8. Exposures.
Income level group upto 10 lakhs, they are investing for them and their family safety. It remains in the first position. But for income level above 10 lakhs it changes, for them the first objective of investment is to use their surplus cash and gain return from that. The order of investors objective of investment is
1. For me and my family safety 2. Future requirements 3. Longterm gains 4. Shortterm gains 5. Use the surplus cash and get return from that 6. Knowledge 7. Hobby The correlation between the level of investment and period of investment is 0.57.So the level of investment and the period of investment is positively correlated. If there is a increase in the period of investment definitly there is a increase in level of investment and vice versa. The period of investment and level of investment is directly proportinate to each other.
5.2 SUGGESTIONS;
Generally respondents are not aware about commodity futures market. The respondents
mainly MBA graduates and Banking people are aware about the commodity futures. By educating and making the people aware of commodity futures market will attract the most number of people to invest in commodities futures market.. The promotion of this commodity market can be done by means of the advertisement and financial planners .
More respondents are preferring bullions in commodities. The respondents main objective of the investment is their safety. So, the investor thinks
2. Procedural:
All the data collected generally limited by the method adopted. This limits to the extent of data generation available through that method.
3. Specific:
Some of the respondents were reluctant in giving information.
5.4CONCLUSIONS;
Most of the investors were unaware about the commodity future market. Commodity futures are used by the investor as a hedging tool. It helps the investors to diversify the portfolio and reduce the risk. Many of the people are interested in bullions and energy commodities. Now commodity futures are widely used by the investor to minimize the risk. Many of the people were interested in investing the money in the commodity market but their main problem is that they were not that much well known about the market. By means of educating them, the problem can be eradicated then many will show interest and confidently they will invest their money in the market.
5.5 REFERENCES
BOOKS:
Executive Corporate Finance by Samir Asaf, Second edition 2002. A Traders First Book on Commodity by Carley Garner, Third edition 2003. Investment in Shares by Joshua Rosenbaum, Second edition 2003. Commodity Investing by Adam Dunsby, Fourth edition 2004. Careers in Finance by Trudy Ring, Second edition 2004.
WEBSITES:
www.indiainfoline.in www.5paisa.com www.wikipedia.org www.nseindia.com www.moneycontrol.com www.myiris.com
A Study on Identification of Investment Opportunities in Commodity Futures Market Questionnaire Dear Sir/Madam, As a part of my MBA program, I am doing a research study in the above-mentioned topic. In order to collect data for my research, I request you to kindly provide data and information for the same. I assure that no part of this questionnaire will be misused for any kind of activity and its used only for the sole purpose of this research. Thanking you With regards, Sivasankaran.R, II MBA, Hindustan Institute of Technology and Science, Chennai.
Gender: ______
Age: _____
Qualification: ______________
1. Mention your annual income? Less than 1.5lakhs 1.5 to 3Lakhs 3lakhs to 5lakhs
above 10lakhs
moderate
Conservative
4. What induced you to invest? Advertisements Own interest Financial planners Others Friends/Relatives
5. What is your level of investment? Less than 1 lakhs 5 to 10 lakhs 1 lakhs to 2 lakhs 10 to 20 lakhs 2 to 5 lakhs more than 20 lakhs
6. What is the reason for not investing in commodities? Risk Volatility Marginal trading Low returns
dont know about commodity futures market 7. If you are interested in commodity market which commodity do you prefer? Energy Bullions Base metals Agri-products
8. In which of the following you are investing? Post Office & Banks commodities Shares &Bonds
Mutual funds
Insurance
others
9. Will you review the financial situation of your investment periodically? Yes No
10. Will you ask your advisor to provide you the periodic review of your portfolio? Yes No
11. Which precautions will you take during uptrend and downtrend of the market? Changes in fund Portfolio updating Market updating No Precautions
12. The reason for investing in commodity futures is Strongly agree Investment amount Risk Marked to market Hedging purpose Exposures Variety commodities available Financial advisor Diversification of portfolio of Strongly Disagree
Agree
Neutral
Disagree
14. How long you have been investing? Less than one year 5- 10 years 1- 2 years 2-3 years 3-5 years
15. Please Rank the following Objective of Your Investment according to your preference 1Very high 2High 3 Neither high nor Low 4Low 5 Very Low
S.No 1 2 3 4 5 6 7
Factors I invested for me and my family Safety I invested for the Short term gains I invested For the Long Term Gains I Invested to Use my Surplus Cash and get the return from it I Invested to meet my Future Requirements Investing is my hobby Investing gives me to update my knowledge
16. How much returns you expect from your investment? Less than 4% 16% 20% 4% to 8 % More than 20% 8% to 12 % 12% 16%