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Commodity Presentation
Commodity Presentation
July 2010
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Commodity - Definition
A commodity is any good or service produced by human labour and offered as a product for general sale on the market - Karl Max Characteristics Commodity is anything movable (a good) that has following characteristics Fungible, i.e. the same no matter who produces it Derivatives, i.e. involves further processing into number of products Economic cost, i.e. production of it involves some cost
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Real Estate
Commodities
:
:
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
3. Weather
4. Hedge
Commodity Performance
Returns Over Different Asset Classes in 4 Yrs.
100 90 80 70 60 50 40 30 20 10 0 -10 SENSEX NIFTY CNX 500 NCDEX AGRI INDEX -1.44 INR MCX METAL INDEX 31.55 69.51 73.72 75.95 88.46
Source:Bloomberg,Way2Wealth Research
Commodity Performance
Various Asset Classes Perform ance 260 240 220 200 180 160 140 120 100 80 60 Oct-05 May-06 Dec-06 Jul-07 Nifty Feb-08 Sep-08 Apr-09 Nov-09
NCDEX Ag Index
USDINR
India
Commodity futures, though active since 19th century was banned later in 1970s Commodity volumes shoots up significantly after re-launch in 2003 MCX emerged as worlds Sixth largest exchange Volumes on Indian exchanges are increasing at CAGR of 73.7 percent
Commodity Trading ( Value in Million USD) Global India 2009 14831317 1469673 2008 11712611 1067984
Source:FMC,Way2Wealth Research
20%
12% 23%
12%
68%
65%
Source : WEF Am erica Asia Europe+ME
Source : WEF
Am erica
Asia
Europe+ME
7% 5% 11%
9%
18%
9%
6%
5%
33%
13%
8%
SHFE ZCE
38%
Source: WFE
18%
MCX LME
DCE CME SHFE ZCE
20%
ICE MCX LME
ICE
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Classification of Commodities
Bullion Gold Silver Palladium etc
Commodities
Energy Crude oil Heating oil Natural gas Furnace oil Etc.
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Commodity Exchanges
National Exchanges
Regional Exchanges
NCDEX
NMCE
MCX
NBOT
Source:FMC,Way2Wealth Research
Segment wise % Share of Commodities 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Bullion and other metals 31.5 36.1 57.9 64.6 56.7 40.8 Other than bullion metals 23.2 Agriculture 68.2 55.335.8 23.1 11.9 15.7 Energy 0.3 8.4 6.3 12.3 20.3 Others 0.0 0.1 0.0 0.0 31.4 0.0 Source:FMC,Way2Wealth Research * 2008-09 other segment includes energy& other metals
38%
62%
88%
MCX NCDEX
MCX
NCDEX
15%
13%
67%
1% 0%
15% 20%
Gold
Silver
Crdue oil
Copper
Total agri
Others
Gold
Silver
Crdue oil
Copper
Total agri
Others
Guar Gum
Guar Seed
Source:Bloomberg,Way2Wealth Research
Almost 45 commodities are available for trading in both NCDEX & MCX Though few have been de-listed during high inflation times, re-listing also has happened Bullion, Base metals, energy & Agri are the major contributors in terms of volumes
Mentha Oil
Aluminium
Soybean
Turmeric
Crude oil
Soy Oil
Gold
Copper
Pepper
Jeera
Silver
Lead
Zinc
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Returns chasing funds & investors (traders, investor &HNI) will make it vibrant Consumption / Spending in infrastructure / GDP growth will lead to depletion of metals Secular bull market in commodities is likely to continue
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
How to Invest
Procedure for Trading in Commodities
Open Demat & Trading A/C (Way2Wealth)
Filling KYC (Know Your Customer) Documents required : Pan Card, Address Proof, Networth, Cancelled cheque (MICR), Photo etc
To get familiar with this asset class, start reading research reports and monitor advisory and execution Acquire full knowledge of risk involved in futures
Mark to Market Daily Pay-in & pay-out Margin requirements Contract expiry & rollover Leverage, profit & loss etc
Index
Definition Commodity As Asset Class Commodity Uniqueness Classification of Commodities
Research @ Way2Wealth
Methodology - Analysis
Fundamental Supply-n-demand, crop survey, climatic changes, policies, logistics, specifications, delivery stocks, physical market linkages, Cartel move, etc Technical Chart patterns, indicators etc
Derivative Volume and Open Interest Change, Contract duration, rollover, Relative analysis with other markets etc
Statistical Arima modelling, Correlation & regression study, Deviation, Time series, Seasonality, Ratio study etc.
Reports
Daily Weekly Special Events Commodity Profiles
Special Support
Need based special coverage of non futures commodities like Coal, Chemicals, Naptha, Freight, Carbon credits etc. (on cost basis)
Products @ Way2Wealth
Trading Products
Based on Fundamental / Technical / Derivatives & Algorithm
Plain vanilla Trading Customised Trading
Investing Products
Algorithm or statistical based
Trend chasing, Money management principle, premium brokerage Strong execution skills
More than 15 years in industry. Founder member NCDEX, Member of product committee, Regular speaker in various forum
Vinay Tiwary
- Sales Head
More than 8 years in industry. Have worked with prominent exchange as product head for bullions.
Shantanu Bhardwaj
More than 8 years in industry. Conceptualise & Launched pulses & Guarseed contracts in NCDEX. Have worked as Regional Manager west in IL&FS Investsmart.
Brajendra Talesara
More than 12 years experience in industry. Strong execution skills. Have worked in Anand Rathi, Investsmart etc.
K N Rahaman
- Research Head
More than 10 years in Industry. Former Research Head in Agriwatch & Investsmart. Consultancy Projects done for ADB, JBIC, ICICI, OXFAM, DUPONT etc. Member of All India crop forecasting committee (industry) for pulses & oilseeds.
Prasad MSR
- Research Analyst
More than 6 years in industry as Research analyst for various commodities. Have worked with IL&FS Investsmart, Transgraph etc
Krishna Reddy
- Research Analyst
More than 6 years in industry as Research Analyst for various commodities. Have worked in IL&FS investsmart
Thank you
Team Commodities