Professional Documents
Culture Documents
CHAPTER I
The article aims at know how of the commodities market and how the
commodities traded on the exchange. The idea is to understand the
importance of commodity derivatives and learn about the market from
Indian point of view. In fact it was one of the most vibrant markets till
early 70s. Its development and growth was shunted due to numerous
restrictions earlier. Now, with most of these restrictions being removed,
there is tremendous potential for growth of this market in the country.
2. COTTON PROFILE
Cotton had been used to make fine, lightweight clothing since a long time. As
cotton clothes are not meant for wearing in the cold areas, clothing for the tropical
areas of the world had been provided by cotton for over years now. The cotton plant
originated as a wild plant but the human beings had understood its importance
much late. Some researchers assume that the Egyptians started using cotton in
clothes as early as 12000 BC. But the actual evidence of cotton cloth was found in
the Mexican cave that is considered to be 7000 years back. One more evidence of
cotton cloth was discovered from the archeological site of Mohenjo –Daro that is
considered to be as old as the previous evidence. This makes it clear that the wild
cotton was actually domesticated in Southern America and India only. In fact the
earliest descriptions of this plant came from the Indian subcontinent in the Rig Veda
in 1500BC that says that India has been producing the crop for more than 6000
years. Herodotus, a Greek historian, also wrote about the Indian cotton, when he
came to India in around the year 500AD.
In the 16th century, when the Spaniards came Peru just after the discovery of
America, they found that the native people had already been growing cotton and
wearing cotton clothes. They took this fiber to their homeland and it was then, when
cotton was introduced to the rest of the world. With time, it grew popular and
cultivation of cotton spread to the warmer places on the earth.
Until the start of the 18th century, cotton became the main constituent of the
clothing of the world. When Britain emerged as a super power at that time, it banned
the import of cotton and cotton clothes into its colonies so as protect its sheep and
wool industry. But the ban was lifted soon. With time the cotton textile industry
encountered various technologies with the help of which it grew and developed to
reach its current position.
4
2.1 DESCRIPTION
Cotton fiber obtained from the plant is first processed to remove proteins
from it. The remainder left is a natural polymer having characteristics like strong,
durable and absorbent and it is spun into threads for further use.
2.2 OVERVIEW
• China
• India
• Uzbekistan
• United States
• Turkey
• Pakistan
The first three countries consume almost all the cottonseed produced in the
countries. United States of America’s consumption figures are around 2.5 million
tons i.e. approximately 45% of the total cottonseed production. Even most of the
cottonseed oil cake is consumed at the place of its origin only. This also affects the
trade of oil cakes in the world. The trend of consumption of cotton and its by-
products is also fluctuating since the past years.
United States dominates the world trade situation in cottonseed and its by-
products context. It is the largest exporter of cottonseed in the world with Australia
exporting around 2 to 3 lakh tons per year. The total cottonseed oil meal traded in
the world sums up to a mere 5 to 6 lakh tons annually. China is the largest exporter
of this by-product of cotton with the exports of around 1.2 lakh tons. The major
importers of cottonseed in the world are Japan, Mexico, European union, Canada,
Turkey, Indonesia and India.
7
2.3 CULTIVATION PATTERN
The planting time of cotton crops in the world varies vastly from February to
June. In India, the crop is cultivated as a khariff crop as it is sown in the months of
March to September. The mature crop is harvested in the months of November to
March. The crop starts reaching to the Indian markets from the months of November
to March.
Cotton as a crop is produced all around the world but mostly in the warmer
regions of the world. It does not grow wild as earlier but it is commercially and
strategically produced now. The total production of cottonseed in the world marks at
around 35 million tons per annum. Other by-products of cotton like cottonseed oil
and cottonseed oilcake have their production figures hovering around 4.5 million
tons and 16 million tons respectively. Spun cotton yarns also make one of an
important by-product of cotton having an output of around 28 million tons.
8
The major producer countries of cotton and it’s by products along with their
production figures of cottonseed are
China leads the list of the cottonseed producing nations as well as cottonseed oil
meal in the world. But, though it is the largest producer of cotton in the world it is
also the largest consumer of the fiber and the large production figure is insufficient
for satisfying the domestic consumption demand in there. That is why the second
largest producer of cotton i.e. USA acts as the major player in the world market.
The trend of production has ever been fluctuating over the past years. Cotton is
grown over around 31 million hectares land around the world with India leading the
list in this context
Year
Beginning 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08
August 1
World
Beginning 11.97 9.29 8.83 11.86 12.52 12.70
stock
World Cotton
19.31 21.13 27.07 25.53 26.74 25.99
Production
World Cotton
21.53 21.66 23.69 24.97 26.64 27.14
Consumption
World Cotton
6.67 7.24 7.76 9.73 8.12 8.76
Exports
World
Ending 10.06 8.83 11.86 12.52 12.70 11.55
stocks
India is the third largest producer of cotton and its derivatives in the world. The
country is responsible for the origination and domestication of the cotton crop. India
has the maximum area under cotton cultivation estimating up to around 9.50 million
tons i.e. 21% share in the world. A number of varieties of cotton are cultivated in the
country like Bengal Deshi, V-797, Jayadhar, etc and also the cotton fibers are
10
graded into three major grades i.e. ‘Short’, ’Medium’ and ‘Elongated’. The northern
areas in the country provide with mostly short and medium staple cotton, central
areas provide with long and medium staple cotton and the southern areas largely
with long staple cotton. The quantity of production of cottonseeds in India is around
5.68 million tons. The states in India producing cotton crop are
• Maharashtra
• Gujarat
• Andhra Pradesh
• Haryana
• Punjab
• Rajasthan
• Karnataka
• Tamil Nadu
• Madhya Pradesh
The above-mentioned states cover around 95% area under cotton cultivation as
well as output in India. Maharashtra followed by Andhra Pradesh and Haryana are
the largest cotton producing states of the country. Regarding the cottonseed oil,
around 80% of the cottonseed produced in the country is crushed to obtain oil.
The meal produced after the extraction of oil from the seeds sums up to around
2 million tons. Like the fluctuations in the world production of cottonseed, Indian
production also fluctuates every year. Also, the productivity of cotton in India is quite
low as compared to the productivity of the crop in the rest of the world. World
average productivity of the crop is around 500 kg per hectare but Indian productivity
just reaches 300 kg per hectare.
11
2.7 INDIAN COTTON MARKET
Cotton has been a traditional crop in India as it has been grown here since it
has been domesticated. It constitutes to around 60% of the fiber consumed in the
textile sector of the country. This sector is also very important for the country as it
provides a large number of employment opportunities and also contributes
significantly to the Gross Domestic product of the country. The country stands first
among the countries having the maximum area under cultivation of cotton and place
third in the list of cotton producing countries.
The main demand comes from the textile sector. Regarding the Indian
scenario in the world trade, India hasn’t been a significant player in the world
market. India sometimes exports cotton and its by-products and some times acts as
an importer to satisfy its huge domestic consumption demand. Cotton earns the
Indian economy the maximum foreign exchange among the exported commodities.
India is the largest exporter of cotton yarn in the world accounting up to 450 million
kg i.e. 17% market share. The countries to which India exports cotton yarn are
• China
12
• Korea
• Bangladesh
• Egypt
• Taiwan
• Hong Kong
• Turkey
• Japan
But it also adds on to the list of expenses in the budget of the economy as large
amounts of cotton are imported due to the superior quality of foreign cotton. India
imports around 22 lakhs bales of cotton, which is same as the 12% of the domestic
productions. Also the rate of imports is overtaking the rate of exports in the country
making it a net importer of cotton. Also cotton sector in India is largely unorganized
but several associations are trying to change the scenario.
India is the third largest producer of cotton in the world after China and USA
accounting for about 14% of the world cotton production. It has the distinction of
having the largest area under cotton cultivation in the world ranging between 8.00
million to 9.00 million hectares and constituting about 26% of the world area under
cotton cultivation. The yield per hectare is however, the lowest against the world
average, but over the last two years have shown a promising potential to reach near
the world average production level in near future.
• Akola (Maharashtra)
• Parbhani (Maharashtra)
• Nagpur (Maharashtra)
• Yeotmal (Maharashtra)
• Adilabad (Andhra Pradesh)
• Karimnagar (Andhra Pradesh)
• Dhule (Maharashtra)
• Surendranagar (Gujarat)
• Bhavnagar (Gujarat)
• Sriganganagar (Rajasthan)
• Bhatinda (Punjab)
• Hisar (Haryana)
• Sirsa (Haryana)
• Guntur (Andhra Pradesh)
• Kurnool (Andhra Pradesh)
• Coimbatore (Tamil Nadu)
• Gulbarga (Karnataka)
• Ahmednagar (Maharashtra)
• Sangli (Maharashtra)
• Kota (Rajasthan)
• Mumbai (Maharashtra)
• Ludhiana (Punjab)
• Delhi
• Kanpur (Uttar Pradesh)
14
• Bhilwara (Rajasthan)
• Ahmedabad (Gujarat)
• Surat (Gujarat)
• Indore (Madhya Pradesh)
• Kolkata (West Bengal)
• Tirupur (Tamil Nadu)
• Madurai (Tamil Nadu)
• Cotton L staple
• Cotton M staple
• Cotton S staple
• Kapas
• Cotton yarn
• Indian 28 mm cotton
• Indian 31 mm cotton
• Cotton Seed Oilcake
• Medium Staple Cotton
• Cotton Seed
• Cotton Seed Oil
• Raw Jute
15
• The Government of India fixes the Minimum Support Price for cotton and
several Government agencies like Cotton Corporation of India, Maharashtra
State Co-operative Cotton Growers' Marketing Federation procure cotton at
this price. This sets the trend for the price initially. But the industry involves
large number of players and the market forces determine the price soon.
• The imports of cotton into the country and exports from the country.
• Variations in cotton production and its effect on cottonseed, meal and oil
production in the country.
• The arrival of cottonseed for crushing from the ginning centers of the
country.
• Comparative price with other oilseeds, oil and meal in the domestic market.
• The demand from the cattle-feed industry, which is the major consumer of
cottonseed meal.
17
Ever since the dawn of civilization trading has become an integral part in the
life of mankind. The very reason for the lies in the fact that commodities represent
the fundamental elements of utility for human beings. The term commodity refers to
any material, which can be bought and sold. Commodities in a market’s context
refer to any movable property other than actionable claims, money and securities.
Over the year commodities markets have been experiencing tremendous progress,
which is the evident from the fact that the trade in this segment stands as the boon
for the global economy today. The promising nature of the market has made them
an attractive investment avenue for investors.
In the early days people followed a mechanism for trading called Barter
System, which involves exchange of goods for goods. This was the first form of
trade between individuals. The absence of commonly accepted medium of
exchange has initiated the need for Barter System. People used to buy those
commodities, which they lake and sell those commodities which are excess with
them.
18
The commodities trade is believed to have genesis in Sumerian. The early
commodity contracts were carried out using clay tokens as medium of exchange.
Animals are believed to be the first commodities, which were traded, between
individuals. The internationalization of commodities trade can be better understood
by observing the commodity market integration that occurred after the European
voyages of discovery.
The first organized future market in India was established in 1875 under the
aegis of the Bombay Cotton Trade Association to trade in cotton contracts which
was followed by oilseeds and food grains. Before the Second World War, a large
number of commodity exchanges trading futures contracts in several commodities
like cotton, groundnut, groundnut oil, raw jute, jute goods, castor seed, wheat, rice,
sugar, precious metals like gold and silver were flourishing throughout the country.
During the Second World War future trade was prohibited. After
independence, especially in the second half of 1960s, commodity futures trading
picked up. However, due to shortage during the early and mid-sixties futures trading
in most of the commodities was prohibited.
In order to sustain the increasing volumes in commodities trade, the need for
proper clearing and settlement systems, warehousing facilities and efficient pricing
mechanisms have been identified. With the recent boom in commodities markets,
Indian participants are gearing up exploiting the potential opportunities in the future.
Commodity markets are of great help not only for the participants but also the
economy as a whole. The twenty year bear market for commodities has drastically
reduced the prices of many commodities to their lowest levels. The present shift in
trend in commodity trading complimented by the global increase in demand will
certainly hold a promising future for the investments in this segment.
20
MCX has also setup in joint venture the National Spot Exchange a purely
agricultural commodity exchange and National Bulk Handling Corporation (NBHC)
which provides bulk storage and handling of agricultural products.
METAL BULLION
21
Aluminum, Copper, Lead, Nickel, Gold, Gold HNI, Gold M, i-gold, Silver,
Sponge Iron, Steel Long (Bhavnagar), Silver HNI, Silver M
Steel Long (Govindgarh), Steel Flat,
Tin, Zinc
FIBER ENERGY
SPICES PLANTATIONS
PULSES PETROCHEMICALS
Castor Oil, Castor Seeds, Coconut Cake, Coconut Oil, Cotton Seed, Crude Palm
Oil, Groundnut Oil, Kapasia Khalli, Mustard Oil, Mustard Seed (Jaipur), Mustard
Seed (Sirsa), RBD Palmolein, Refined Soy Oil, Refined Sunflower Oil, Rice Bran
DOC, Rice Bran Refined Oil, Sesame Seed, Soymeal, Soy Bean, Soy Seeds
22
CEREALS OTHERS
• AGRI-BASED COMMODITIES
Mentha Oil, Mulberry Green Cocoons, Mulberry Raw Silk, Rapeseed - Mustard
Seed
Pepper, Raw Jute, RBD Palmolein, Refined Soy Oil, Rubber, Sesame Seeds, Soy
Bean
Sugar – Small, Sugar – Medium, Turmeric, Urad (Black Matpe), V-797 Kapas
Yellow Peas, Yellow Red Maize, Yellow Soybean Meal
• BULLION
• ENERGY
• FERROUS METALS
• PLASTICS
• NON-FERROUS METALS
3.2.1 DERIVATIVES
• EXCHANGE
27
Exchange is a central marketplace for buyers and sellers of different asset
classes and financial instruments (contracts) that derive their value from these
assets as the underlying. The contracts are standardized to ensure homogeneity in
the financial instruments traded. The prices in an exchange are determined in the
form of a continuous auction. This auction provides a readily available, widely
accepted reference price for the underlying. This facilitates liquidity in the derivative
instrument being traded due to easy transferability, thereby resulting in price
discovery-the fair value is determined by market participants. For example, all
participants in the futures markets are subject to the same specifications of quality,
quantity (lot size of each futures contract) and delivery terms. It is important to
understand that the exchange neither takes positions in the market nor advises the
market is fair and orderly. The exchange provides “Trade Guarantee” using the
Settlement Guarantee Fund, thereby minimizing counterparty default (credit) risk.
Regulatory bodies are appointed by the government to regulate the functioning of all
exchanges. In India, the Forward Markets Commission (FMC) is the regulatory
authority for commodity futures exchanges in India. Members violating the rules of
the exchange and the regulatory body can be penalized.
• OVER-THE-COUNTER (OTC)
• FORWARD CONTRACT
One party agrees (obligated) to sell, the other to buy, for a forward price
agreed in advance. In a forward transaction, no actual cash changes hands. If the
transaction is collateralized, exchange of margin will take place according to a pre-
agreed rule or schedule. Otherwise no asset of any kind actually changes hands,
until the maturity of the contract.
The forward price of such a contract is commonly contrasted with the spot
price, which is the price at which the asset changes hands (on the spot date, usually
two business days). The difference between the spot and the forward price is the
forward premium or forward discount.
• FUTURES CONTRACT
A futures contract gives the holder the obligation to buy or sell, which differs
from an options contract, which gives the holder the right, but not the obligation. In
other words, the owner of an options contract may exercise the contract, but both
parties of a "futures contract" must fulfill the contract on the settlement date. The
seller delivers the commodity to the buyer, or, if it is a cash-settled future, then cash
is transferred from the futures trader who sustained a loss to the one who made a
profit. To exit the commitment prior to the settlement date, the holder of a futures
position has to offset their position by either selling a long position or buying back a
short position, effectively closing out the futures position and its contract obligations.
• OPTION
An option gives the right but not the obligation to the option owner, to buy or
sell an underlying asset at a specific price at a specific time period in the future.
• CALL OPTION
A call option is an option contract that gives the owner of the option, the right,
but not the obligation to buy the underlying asset on or before a specific date and at
a specific price
• PUT OPTION
30
A put option is an option contract that gives the option owner the right, but
not the obligation to sell the underlying asset on or before a specific date and at a
specific price.
• SWAPS
3.4.1 HEDGING
3.4.3 ARBITRAGE
CHAPTER II
• To find the major factors that influence cotton items trading in the commodity
market
• This study has certain limitations, as it is restricted to only one area i.e.
Coimbatore.
• The sample respondents are restricted to 50 only which may leads to some
discrepancies in conclusion.
34
6. RESEARCH METHODOLOGY
In this research design, the researcher has focused on the cotton traders in
the commodity market. The researcher already knows the research questions
should be addressed. The research is based on descriptive research
The sample unit in this project consists of the cotton industries and cotton
traders in Coimbatore
The data collection method includes both primary and secondary data
A) PRIMARY DATA
B) SECONDARY DATA
Secondary data includes data, which exist already and are directly applied to
the study. Secondary data was collected from the literature published by various
books and related websites.
36
Simple percentage method is used in this study to carry out the percentage
analysis.
CHAPTER III
To find the cotton industries might aware about the cotton items traded in the
commodity market.
TABLE NO: 1
INFERENCE
37
From the above table 72% of cotton industries aware about the cotton item
traded in the commodity market and 28% are not aware about the commodity
market
CHART: 1
40
36
35
30
No of Respondents
25
Aware
20
Unaware
14
15
10
0
38
To find the number of traders in the cotton items in the commodity market
TABLE NO: 2
INFERENCE
It is inferred from the above table there are 26% of cotton items trader are
available in the commodity market and 37% are not traded in the cotton items in the
commodity market.
39
CHART: 2
40 37
35
30
No of Respondents
25
Traded
20
Not Traded
15 13
10
0
40
To find the cotton items trade in the commodity market should be suitable for
long term trade
TABLE NO: 3
The table showing respondents’ opinion about cotton items trading suitable
for long term trade
INFERENCE
From the above table it shows that 38% of the cotton traders are favorable
for long term trade and 62% of the cotton traders are not favorable for long term
trade.
41
CHART: 3
The chart showing respondents’ opinion about cotton items trading suitable
for long term trade
35
31
30
25
No of Respondents
19
20
Yes
No
15
10
0
42
7.4 COMMODITY MARKET OFFERS BETTER QUALITY COTTON MATERIALS
To find the commodity market offers the good quality of cotton materials to
cotton traders in the commodity market.
TABLE NO: 4
INFERENCE
From the above table 46% of cotton traders are agree the cotton commodity market
offer good quality cotton materials and 54% of cotton traders are not agree the
cotton commodity market offer the good quality cotton materials
43
CHART: 4
28
27
27
26
No of Respondents
25
Yes
No
24
23
23
22
21
TABLE NO: 5
The table showing respondents’ opinion about reasons for trading cotton
items in the commodity market
INFERENCE
From the above table it shows that 30% of cotton traders are favorable for
standardization and 32% of cotton traders is favorable for price and 4% cotton
traders is favorable for delivery and 34% of cotton traders are not specify the
reason.
CHART: 5
The chart showing respondents’ opinion about reasons for trading cotton
items in the commodity market
45
18 17
16
16 15
14
No of Respondents
12
Standardization
10 Price
8 Delivery
No Answer
6
4
2
2
To know the cotton traders in which commodity exchange those who trade
cotton items in the commodity market.
46
TABLE NO: 6
INFERENCE
From the above table 26% of cotton traders are trade only in MCX and there
is no cotton traders are trade in NCDEX
CHART: 6
40 37
35
30
No of Respondents 25
MCX
20 NCDEX
Others
15 13
10
5
0
0
To know the No of years of cotton traders make a trade in cotton items in the
commodity market.
TABLE NO: 7
48
The table showing respondents’ opinion about trading years of the person
trade in cotton items in the commodity market
INFERENCE
It is inferred from the above table there are 16% of cotton traders are trade
below one year and 10% of cotton traders are trade between 1 to 5 years and no
person trade more than 5 years.
CHART: 7
The chart showing respondents’ opinion about trading years of the person
trade in cotton items in the commodity market
49
40 37
35
30
10 8
5
5
0
0
There are two basis of trade of cotton items in the commodity market those
are one day trader and more than a day trader.
TABLE NO: 8
50
The table showing respondents’ opinion about basis of trade cotton items in
the commodity market
INFERENCE
It is inferred from the above table only 2% of trader is done one day trade
and 24% of cotton traders are done more than a day trade.
CHART: 8
The chart showing respondents’ opinion about basis of trade cotton items in
the commodity market
51
40 37
35
30
No of Respondents 25
Daily Trader
20 More than a Day
Others
15 12
10
5
1
0
To find the level of fluctuation price in cotton items in the commodity market.
TABLE NO: 9
52
The table showing respondents’ opinion about fluctuation price of cotton
items in the commodity market
INFERENCE
From the above table 8% of cotton traders are favorable for high fluctuation
price and 14% of cotton traders are favorable for medium level and 4% cotton
traders are favorable for low level fluctuation price of cotton items in the commodity
market.
CHART: 9
40 37
35
30
No of Respondents 25 High
Medium
20
Low
15 Others
10 7
4
5 2
To know the cotton items trade in the commodity market is suitable for bulk
purchase.
TABLE NO: 10
54
The table showing respondents’ opinion about cotton items in the commodity
market is convenient for bulk purchase
INFERENCE
From the above table 20% of cotton traders are favorable for bulk purchase
and 6% of cotton traders are not favorable for bulk purchase of cotton items in the
commodity market.
CHART: 10
The chart showing respondents’ opinion about cotton items in the commodity
market is convenient for bulk purchase
55
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15
10
10
5 3
To know the cotton traders those who take any delivery of cotton items in the
commodity market.
56
TABLE NO: 11
The table showing respondents’ opinion about delivery of cotton items in the
commodity market
INFERENCE
From the above table there are no person take deliveries of cotton items in
the commodity market.
CHART: 11
The chart showing respondents’ opinion about delivery of cotton items in the
commodity market
57
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15 13
10
5
0
0
There are some cotton items traded in the commodity market if there is any
need for include of cotton items in the commodity market.
TABLE NO: 12
58
The table showing respondents’ opinion about cotton varieties can be added
in the commodity market
INFERENCE
It is inferred from the above table there are 4% of cotton traders are wanted
to include some cotton items in the commodity market and 22% of cotton traders
are not need to include of cotton items in the commodity market.
CHART: 12
The chart showing respondents’ opinion about cotton varieties can be added
in the commodity market
59
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15
11
10
5
2
TABLE NO: 13
60
The table showing respondents’ opinion about problems of cotton items
trading in the commodity market
INFERENCE
From the above table 4% of cotton traders are faces the problem of quality
and 2% of cotton traders are faces the problem of price variations and 20% of
cotton traders are faces the problem in taking delivery of cotton items in the
commodity market.
CHART: 13
40
37
35
30
No of Respondents 25 Quality
Price
20
Delivery
15 Others
10
10
5
2
1
0
There are two types of market one is spot market and another one is
commodity market. According to those markets which market gives cheapest mode
for purchasing cotton items in the commodity market.
TABLE NO: 14
62
The table showing respondents’ opinion about cheapest mode for purchasing
cotton items
INFERENCE
From the above table 74% of cotton traders found spot market is the
cheapest mode for purchasing cotton and 26% of cotton traders are favorable for
cotton items in the commodity market are cheapest mode for purchasing cotton.
CHART: 14
The chart showing respondents’ opinion about cheapest mode for purchasing
cotton items
63
40
37
35
30
No of Respondents 25
Spot Market
20
Commodity Market
15 13
10
There are two types of market one is spot market and another one is
commodity market. In above two markets which market gives more discount rate for
purchasing of cotton items in the commodity market.
TABLE NO: 15
64
INFERENCE
It is inferred from the above table there are 74% of cotton traders are
favorable for spot market and 26% of cotton traders are favorable for commodity
market.
CHART: 15
40
37
35
30
No of Respondents 25
Spot Market
20
Commodity Market
15 13
10
The table showing respondents’ opinion about introducing the options for
trading of cotton items in the commodity market
INFERENCE
From the above table 22% of cotton traders are willing to introduce the
OPTIONS choice in the commodity market and 4% percentage of cotton traders are
not willing to introduce the OPTIONS choice in the commodity market.
CHART: 16
The chart showing respondents’ opinion about introducing the options for
trading of cotton items in the commodity market
67
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15
11
10
5
2
For cotton traders in the commodity market does have any tax reduction for
their trade of cotton items in the commodity market.
TABLE NO: 17
68
INFERENCE
From the above table 18% of cotton traders got the tax reduction of trade of
cotton items in the commodity market and 8% of cotton traders not got any tax
reduction for their trade of cotton in the commodity market.
CHART: 17
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15
9
10
4
5
The cotton traders get some recommendation from their commodity broker
TABLE NO: 18
70
INFERENCE
From the above table 36% of cotton traders got recommendation for the
trade of cotton items in the commodity market.
CHART: 18
40
37
35
30
No of Respondents 25
Yes
20 No
Others
15 13
10
5
0
0
The recommendations from their commodity broker are that helpful for trade
of cotton items in the commodity market.
TABLE NO: 19
72
INFERENCE
From the above table shows that 12% of cotton traders are favorable for the
recommendation of their commodity broker and 14% of cotton traders are not
favorable for the recommendation of their commodity broker for the trade of cotton
items in the commodity market.
CHART: 19
37
No of Respondents Yes
No
Others
7
6
NO OF RESPONDENS
8. FINDINGS
• India is the third largest producer of cotton in the world after China and USA
accounting for about 14% of the world cotton production.
74
• India produces around 35 million tons of cotton seed in a year. India is the
largest exporter of cotton yarn in the world accounting up to 450 million kg
i.e. 17% market share.
• The Indian commodity market has failed to focus on the cotton industries and
most of the cotton industries are not traded in the commodity market
9. SUGGESTIONS
• If OPTIONS are introduced in the future market most of the investors will get
benefited by trading.
• Government may fix the rate of the purchase of cotton items in the
commodity market
10. CONCLUSION
The various organization and association are focused to develop the cotton
trade in the commodity market as well as in the spot market. Particularly in
Coimbatore city have south India cotton association (SICA) plays a very major role
for the development of the cotton items trade in the commodity market and also spot
market in the Coimbatore.
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The commodity exchanges in India plays vital role in the trade of cotton items
in the commodity market and all controls of the commodity exchanges comes under
the Forward Market Commission (FMC).
BOOKS
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• C.R. Kothari (2002) ‘Research Methodology’, Wishwa Prakashan, New Delhi
2nd Edition.
• Reference Material ‘MCX certified commodity professional (MCCP)’
• Commodity & Derivatives (Issue No: 8 August 2007)
• Philip Kotler & Gary Armstrong, Principles of Marketing, ed7, Prentice-Hall of
India,
• New Delhi, 1997.
REPORTS
NEWSPAPERS
WEBSITES
• www.mcxindia.com
• www.ncdex.com
• www.nmce.com
• www.google.com
• www.wikepedia.com
• www.cotcorp.gov.in
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• www.commodityindia.com
12. APPENDIX
Company Name :
1) Are you aware of the cotton items traded in the commodity market?
□ Aware □ Unaware
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If UNAWARE please specify the any of the following reasons given below:
□ Lack of awareness
□ Lack of standards
□ Price dissemination
□ Future risk
□ Deliver basis procedures
□ Any other reason please specify ………………..
6) Specify the name of the commodity exchange through whom you trade?
□ MCX □ NCDEX □ Others
7) How long have you been trading with cotton items in the commodity
Market?
□ Less than one year □ 1 to 5 year □ More than 5 year
9) How is the fluctuation in the price of cotton items in the commodity market?
□ High □ Medium □ Low
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10) The commodity market transactions are convenient for bulk purchase?
□ Yes □ No
11) Have you taken any delivery of cotton in the commodity market?
□ Yes □ No
12) Do you think any more cotton varieties can be added in the commodity
market?
□ Yes □ No
13) What are the problems faced in commodity market while you trading in cotton?
□ Quality □ Price □ Delivery
14) According to you which is the cheapest mode for purchasing cotton items?
□ Spot market □ commodity market
15) Which market gives you more discount rate while purchasing cotton items?
□ Spot market □ commodity market
16) If OPTIONS will introduce in commodity market is useful for trading the cotton
items?
□ Yes □ No
17) Are you availing any tax reduction in transaction of cotton items in the
commodity market?
□ Yes □ No
18) Did you got any recommendations from your commodity broker?
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□ Yes □ No