Future Trading in India and Commodity Price Risk Management: A Pragmatic Study
Journal Title: SDMIMD Journal of Management - Year 2014, Vol 5, Issue 1
Abstract
Commodity future markets in India are experiencing unparalleled growth and have attained critical economic significance in the last one decade. On the other hand, instability in commodity prices is becoming an issue of great concern not only for India, but all over the world impacting income, economic growth and a poor adversely. Ever-increasing demand and supply side constraints are adding to the upsurge in prices of metal and agricultural commodities, affecting manufacturers and consumers at the same time. Moreover, farmer participation in the market has been very poor. So the price risk management in commodity is not a cliché but a necessity for the development of future market. In an agriculture based economy like India, commodity derivatives are expected to play a pivotal role in the process of price discovery and risk management. The price discovery in futures markets would not be effective unless spot markets are regulated and integrated. The present paper aims to analyse the performance of futures trading in improvising commodity price risk management in India. The study employs co-integration technique to study the existence of long-term relationship between the spot and future prices of agricultural and metal commodities traded in Indian commodity exchanges. The study also explores the volatility aspect in spot and future prices to test the informational efficiency of the contracts and comment on their suitability for hedging activities. Based on the results, propositions would be made on the nature of speculative conditions and offer suggestions for improvement futures trading in commodities.
Authors and Affiliations
Nirmala K. Reddy, B. M. Chandra Shekar, R. Munilakshmi
Keywords
Related Articles
- EP ID EP556839
- DOI 10.18311/sdmimd/2014/2672
- Views 140
- Downloads 0
Composite Portfolio Performance: An Investigation into Indian Mutual Funds
Earlier in the 1960s, though they were aware of the concept of risk, the portfolio managers did not know as to how to measure and hence their performance was measured only in terms of rate of return. Though quite a few m...
A Statistical Distribution for the Solvency Ratio of Indian Non-life Insurers
The Indian Insurance Industry, which was privatized in the year 1999, has witnessed steep growth in terms of its business statistics, such as number of insurance companies, number of policies issued, aggregate premium un...
The Power of Deduction - Failure Modes and Effects Analysis for Design
No Abstract
Status of Trainers in Commercial Banks: Nitty Gritties
Trainer is both the captain and the steward of the training mission who not only holds the steering of the training effectiveness but also acts as a problem solver to the trainees. He stimulates the process of learning,...
Leveraging Information Technology for Effective Performance Appraisal in the Nigerian Public Service
The paper explores the utility of information technology in facilitating effective performance appraisal in the public service sector of Nigeria, Africa’s largest economy and most populous nation. Save for recent develop...