“A Study of Commodity Market in India, Its Problems and Difficulties”

Abstract

A Derivative is a contract whose value is derived from an underlying asset. This underlying asset could be anything such as a share, commodity, and currency. If the value of the underlying asset changes it goes up or down. A commodity is a good or material that is reasonably interchangeable, bought and sold freely as an article of commerce. Commodities include agricultural products, fuels and metals and are traded in bulk on a commodity exchange or spot market. The evolution of organized commodity in India started in the nineteenth century when cotton trade association started futures trading in 1875. As years passed derivative market developed in several commodities in India. Followed by cotton derivative market were expanded by oilseed in Bombay (1900), raw jute and jute goods in Calcutta (1912), wheat in Hapur (1913) and bullion in Bombay (1920). Commodities in reality offer enormous potential to become a separate asset class for market-savvy investors, arbitrageurs and speculators. Retail investors who claim to understand the equity market may find commodities market an unsound one. This paper discuss about the structure of the commodities market in India, the issues and challenges faced by the commodity market in the present circumstances. The government has set up

commodity exchange as an legal entity that determines and enforces rules and procedures for trading standardized commodity contracts and related investment products , it is a physical center where trading takes place. Apart from several regional exchanges, India has six national commodity exchanges they are 1) Multi Commodity Exchange (MCX) 2) National Commodity and Derivatives Exchange (NCDEX) 3) National Multi (NMCE) 4) Indian Commodity Exchange (ICEX) 5) The ACE Derivatives Exchange (ACE) and 6) The Universal Commodity Exchange (UCX) .The regulatory body is forward markets commission (FMC) which was set up in 1953. As of September 2015 FMC was merged with the Securities and Exchange Board of India SEBI.