INVESTORS PREFERENCE IN COMMODITIES MARKET

INVESTORS PREFERENCE IN COMMODITIES MARKET

                                                         * K.Logeshwari

                                                                             ** V.Ramadevi

ABSTRACT

The study entitled “Investors preference in commodities market” was conducted in Coimbatore KARVY STOCK BROKING LIMITED. The study was undertaken to know the preference of the investors towards various Investment avenues in relation to commodity market.  The sample from the population is taken based on regular customers to the Coimbatore Karvy. The expectations of the investors are quite high. Many expect high rate of return for further investment through commodity market. The study also examines the phenomenal growth in commodity market which is ten times greater than the share market. The study reveals that the commodity market is in a nascent stage in Coimbatore.

            The investment avenues of individual investors depend mainly on annual income as well as risk taking capacity of the individuals. Regularity in investing, percentage of savings also has a major impact in choosing the investments. The study on investor’s preference in commodity market also gives an idea of the investor’s choice based on returns, risk and their awareness in choosing the market particularly in conducting appropriate training sessions and seminars frequently to the clients of Karvy Commodity market in Coimbatore at Karvy Commodity Trade Limited.

INTRODUCTION

A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or speculate rather than delivery (which is the primary activity of the cash/spot market). That is the reason commodities are used as financial instruments by not only producers and consumers but also speculators.

--------------------------------------------

* Lecturer, Department of management studies and Research, Karpagam University  , Coimbatore - 641021 ,Tamilnadu

* * Lecturer, Department of management studies and Research, Karpagam University  , Coimbatore – 641021, Tamilnadu

1. Commodity market is extremely liquid, risky and complex by nature. Futures   market is centralized market place for buyers and sellers from around the world who meet and enter into commodity futures contracts. Pricing is mostly is based on an open cry system, or bids and offers that can be matched electronically. The commodity contract will state the price that will be paid and the date of delivery. Almost all futures contracts end without the actual physical delivery of commodity.

Commodity prices are generally less volatile than the stocks. Therefore it’s relatively safer to trade in commodities. But the volume being traded in commodities is much less than the stock market. This is because of the two reasons that the investors are less aware about the commodities market and their risk perception. Hence many studies are conducted to know the investors’ preference in commodities market.

STATEMENT OF THE PROBLEM

   Commodity market has been established for the benefit of small and large investors. But the level of investment in this trading is far lesser than the other modes of investors. The need of the hour is the proper guidelines and education to all investors.. An investment in commodity market is though less risky than that of the stock market. This is because, the investors are less aware about commodities market. Hence the purpose of the study is to assess the knowledge and preference of the investors in the commodity trading.

 OBJECTIVES OF THE STUDY

 PRIMARY OBJECTIVE

v     To study the investors’ preference towards commodities market.

  SECONDARY OBJECTIVE

v     To identify the investment patterns of investors.

v     To know whether the investor’s opinion about international commodities market affects the national trading activity.

v     To identify the source of information about commodities market.

v     To profile the commodities investors.

 SCOPE OF THE STUDY

v     Understanding the investor’s risk towards commodity market.

v     The study helps us to know about the Investor’s preference towards commodity market.

 RESEARCH METHODOLOGY

         Research Design                                      : Descriptive Research

         Data Source                                             : Primary and Secondary Data

         Primary Data Collection                          : Survey Method

         Primary Data Collection Instrument        : Questionnaire

        Sampling Methods & Technique              : Non-Probability Method, Convenience 

                                                                Sampling Technique

         Sample size                                               : 150 respondents

         Pilot study                                                : 10 respondents

TOOLS USED

 PERCENTAGE ANALYSIS

• The tool used for the sampling technique is percentage analysis.
• It is used to determine the percentage of the samples to be selected from the entire population.

 CHISQUARE TEST

 The chi-square test is an important test amongst the several tests of significance. Chi-Square, symbolically written as  (Pronounced as
Ki-Square), is a statistical measure used in the context of sampling analysis for comparing a variance to a theoretical variance.

       =         

where

            Oij = Observed frequency of the cell in ith row and jth column.

            Eij = Expected frequency of the cell in ith row and jth column.

• The statistical tool is used for the analysis part of the study is chi-square test. It is a statistical measure used in the context of sampling analysis foe comparing a variance to a theroretical variance.
•  It can be used in calculations to test for statistical significance of estimated parameters and to measure goodness of fit of individual equations in a model.

 LIMITATIONS OF THE STUDY

Though utmost care was taken to do the research, some of limitations viz.,

v     The study is limited to Coimbatore city.

v     It is conducted only with the investors of KAVRY com trade private limited.

v     The data collected from the samples might not be completely appropriate.

v     The respondents were less interested in answering the questionnaire, as they felt that it was an interruption to their regular work.

v     All respondents were not very much open in giving their details. As the questionnaire contains details of the trader’s income the trader might not have given the correct information for their own savings (for tax problem).

RESULTS AND DISCUSSIONS

Ø It is found that 86%of the respondents belong to male gender and 68% of the respondents are married.

• Respondents to the extent of 40% belong to the age group of 26 years to 50 years.

Ø About 48% of the respondents are postgraduates.

Ø About 46% of the respondents are salaried.

Ø The study reveals that 52% of the respondent’s annual income ranges between Rs. 1, 00,000 to Rs 5, 00,000.

• It is found that 42%of the respondents specify Gold in Bullion market.

Ø It is found that 48% of the respondents specify Peeper in Agri-commodity market

• It is found that 44% of the respondents specify Zinc in Metals.

Ø About 54% of the respondents invest 25 % to 50% of their income.

• About 62% of the respondents will definitely recommend others to enter in to the commodity market.

Ø It is found that 38 %of the respondents were referring friends as their source of information.

Ø About 36% of the respondents will rank 2nd & 3rd  place in their specialty of trading in commodity market as Price Hedging

Ø About 38% of the respondents rank 3rd place in Regulated market.

Ø About 46% of the respondents rank 1st place in High return.

• Majority 62% of the respondents do their trading daily.

Ø About 56% of the respondents aware about the commodity market to some extent.

Ø About 52% of the respondents are been satisfied with their commission charges paid.

Ø Majority 66% of the respondents are been traded up to the margin money below    5, 00,000.

Ø About 40% of the respondents are satisfied with their level of returns.

Ø It is found that 97% of the respondents agree that international market has got an impact over national market.

Ø About 70% of the respondents’ High risk is involved in the commodity market.

Ø Majority 82% of the respondents will also invest in other modes of investment.

Ø Respondents to the extent of 50% invest in the shares.

Ø Out of their past experience respondents would take to control risk by 36% while at the time of buying and selling the commodities.

 CONSIDERED RECOMMENDATIONS

Ø The company can rise up its investments by educating the public about the benefits that they can reap from the commodities market through awareness programs, advertisements.

Ø Since most of the investors are those who trade in share market and it is very easy to make them invest in higher margin commodities.

Ø The findings reveal that majority of the investors are within the age group of 26-35 years, so the company can provide their customers some additional assistance like daily trading tips, daily positions, and general news for doing a better trading with the commodities market.

Ø The investors in Coimbatore are not much aware of commodity market and the commodities being traded in the commodity market. So, awareness about the commodity market and the commodities being traded.

Ø A regular investor’s friendly seminar can be organized to suit the timings of the investing public. Seminars can be in the form of interactive sessions, arranged at frequent intervals.

Ø The newsletters published by Karvy must include the suggestions provided by the research team to help the investors to better understand the tactics of trading in commodity market. Hence newsletter can be published for guidance.

Ø Workshops can be conducted in villages for the farmers to educate them about commodity market.

 CONCLUSION

Commodities market provides a platform for the investors as well as hedgers to protect their economic interests as well as increase their investible wealth.  However, there is a need to profile the investors in this market with their preferences and pattern.  This will help the commodity trading companies to focus their offerings to suit the needs of the commodity investors.  Also, the companies should understand the expectations of their clients and their level of satisfaction.  With this in mind, a study was conducted through the Karvy Comtrade Limited, where a sample of 150 respondents was drawn for study.  A structured questionnaire with the relevant indicators was administered to primarily identify the investors’ preference towards commodities market.  The study also intended to identify the investment patterns of investors, to know the investors’ opinion on the effect of international commodities market over the national trading activity, to identify the source of information about commodities market, and to profile the commodities investors.

1. The investors are not fully aware of the functioning of commodity market and they draw market information from Print media, Web media and Peer groups.

INVESTORS PREFERENCE IN COMMODITIES MARKET

                                                         * K.Logeshwari

                                                                             ** V.Ramadevi

ABSTRACT

The study entitled “Investors preference in commodities market” was conducted in Coimbatore KARVY STOCK BROKING LIMITED. The study was undertaken to know the preference of the investors towards various Investment avenues in relation to commodity market.  The sample from the population is taken based on regular customers to the Coimbatore Karvy. The expectations of the investors are quite high. Many expect high rate of return for further investment through commodity market. The study also examines the phenomenal growth in commodity market which is ten times greater than the share market. The study reveals that the commodity market is in a nascent stage in Coimbatore.

            The investment avenues of individual investors depend mainly on annual income as well as risk taking capacity of the individuals. Regularity in investing, percentage of savings also has a major impact in choosing the investments. The study on investor’s preference in commodity market also gives an idea of the investor’s choice based on returns, risk and their awareness in choosing the market particularly in conducting appropriate training sessions and seminars frequently to the clients of Karvy Commodity market in Coimbatore at Karvy Commodity Trade Limited.

INTRODUCTION

A commodity futures contract is a type of derivative, or financial contract, in which two parties agree to transact a set of financial instruments or physical commodities for delivery at a particular price at later date. But participating in the commodity market does not necessarily means that you will be responsible for receiving or delivering large inventories of physical commodities. Buyers and sellers in the futures market primarily enter into futures contracts to hedge risk or speculate rather than delivery (which is the primary activity of the cash/spot market). That is the reason commodities are used as financial instruments by not only producers and consumers but also speculators.

--------------------------------------------

* Lecturer, Department of management studies and Research, Karpagam University  , Coimbatore - 641021 ,Tamilnadu

* * Lecturer, Department of management studies and Research, Karpagam University  , Coimbatore – 641021, Tamilnadu

1. Commodity market is extremely liquid, risky and complex by nature. Futures   market is centralized market place for buyers and sellers from around the world who meet and enter into commodity futures contracts. Pricing is mostly is based on an open cry system, or bids and offers that can be matched electronically. The commodity contract will state the price that will be paid and the date of delivery. Almost all futures contracts end without the actual physical delivery of commodity.

Commodity prices are generally less volatile than the stocks. Therefore it’s relatively safer to trade in commodities. But the volume being traded in commodities is much less than the stock market. This is because of the two reasons that the investors are less aware about the commodities market and their risk perception. Hence many studies are conducted to know the investors’ preference in commodities market.

STATEMENT OF THE PROBLEM

   Commodity market has been established for the benefit of small and large investors. But the level of investment in this trading is far lesser than the other modes of investors. The need of the hour is the proper guidelines and education to all investors.. An investment in commodity market is though less risky than that of the stock market. This is because, the investors are less aware about commodities market. Hence the purpose of the study is to assess the knowledge and preference of the investors in the commodity trading.

 OBJECTIVES OF THE STUDY

 PRIMARY OBJECTIVE

v     To study the investors’ preference towards commodities market.

  SECONDARY OBJECTIVE

v     To identify the investment patterns of investors.

v     To know whether the investor’s opinion about international commodities market affects the national trading activity.

v     To identify the source of information about commodities market.

v     To profile the commodities investors.

 SCOPE OF THE STUDY

v     Understanding the investor’s risk towards commodity market.

v     The study helps us to know about the Investor’s preference towards commodity market.

 RESEARCH METHODOLOGY

         Research Design                                      : Descriptive Research

         Data Source                                             : Primary and Secondary Data

         Primary Data Collection                          : Survey Method

         Primary Data Collection Instrument        : Questionnaire

        Sampling Methods & Technique              : Non-Probability Method, Convenience 

                                                                Sampling Technique

         Sample size                                               : 150 respondents

         Pilot study                                                : 10 respondents

TOOLS USED

 PERCENTAGE ANALYSIS

• The tool used for the sampling technique is percentage analysis.
• It is used to determine the percentage of the samples to be selected from the entire population.

 CHISQUARE TEST

 The chi-square test is an important test amongst the several tests of significance. Chi-Square, symbolically written as  (Pronounced as
Ki-Square), is a statistical measure used in the context of sampling analysis for comparing a variance to a theoretical variance.

       =         

where

            Oij = Observed frequency of the cell in ith row and jth column.

            Eij = Expected frequency of the cell in ith row and jth column.

• The statistical tool is used for the analysis part of the study is chi-square test. It is a statistical measure used in the context of sampling analysis foe comparing a variance to a theroretical variance.
•  It can be used in calculations to test for statistical significance of estimated parameters and to measure goodness of fit of individual equations in a model.

 LIMITATIONS OF THE STUDY

Though utmost care was taken to do the research, some of limitations viz.,

v     The study is limited to Coimbatore city.

v     It is conducted only with the investors of KAVRY com trade private limited.

v     The data collected from the samples might not be completely appropriate.

v     The respondents were less interested in answering the questionnaire, as they felt that it was an interruption to their regular work.

v     All respondents were not very much open in giving their details. As the questionnaire contains details of the trader’s income the trader might not have given the correct information for their own savings (for tax problem).

RESULTS AND DISCUSSIONS

Ø It is found that 86%of the respondents belong to male gender and 68% of the respondents are married.

• Respondents to the extent of 40% belong to the age group of 26 years to 50 years.

Ø About 48% of the respondents are postgraduates.

Ø About 46% of the respondents are salaried.

Ø The study reveals that 52% of the respondent’s annual income ranges between Rs. 1, 00,000 to Rs 5, 00,000.

• It is found that 42%of the respondents specify Gold in Bullion market.

Ø It is found that 48% of the respondents specify Peeper in Agri-commodity market

• It is found that 44% of the respondents specify Zinc in Metals.

Ø About 54% of the respondents invest 25 % to 50% of their income.

• About 62% of the respondents will definitely recommend others to enter in to the commodity market.

Ø It is found that 38 %of the respondents were referring friends as their source of information.

Ø About 36% of the respondents will rank 2nd & 3rd  place in their specialty of trading in commodity market as Price Hedging

Ø About 38% of the respondents rank 3rd place in Regulated market.

Ø About 46% of the respondents rank 1st place in High return.

• Majority 62% of the respondents do their trading daily.

Ø About 56% of the respondents aware about the commodity market to some extent.

Ø About 52% of the respondents are been satisfied with their commission charges paid.

Ø Majority 66% of the respondents are been traded up to the margin money below    5, 00,000.

Ø About 40% of the respondents are satisfied with their level of returns.

Ø It is found that 97% of the respondents agree that international market has got an impact over national market.

Ø About 70% of the respondents’ High risk is involved in the commodity market.

Ø Majority 82% of the respondents will also invest in other modes of investment.

Ø Respondents to the extent of 50% invest in the shares.

Ø Out of their past experience respondents would take to control risk by 36% while at the time of buying and selling the commodities.

 CONSIDERED RECOMMENDATIONS

Ø The company can rise up its investments by educating the public about the benefits that they can reap from the commodities market through awareness programs, advertisements.

Ø Since most of the investors are those who trade in share market and it is very easy to make them invest in higher margin commodities.

Ø The findings reveal that majority of the investors are within the age group of 26-35 years, so the company can provide their customers some additional assistance like daily trading tips, daily positions, and general news for doing a better trading with the commodities market.

Ø The investors in Coimbatore are not much aware of commodity market and the commodities being traded in the commodity market. So, awareness about the commodity market and the commodities being traded.

Ø A regular investor’s friendly seminar can be organized to suit the timings of the investing public. Seminars can be in the form of interactive sessions, arranged at frequent intervals.

Ø The newsletters published by Karvy must include the suggestions provided by the research team to help the investors to better understand the tactics of trading in commodity market. Hence newsletter can be published for guidance.

Ø Workshops can be conducted in villages for the farmers to educate them about commodity market.

 CONCLUSION

Commodities market provides a platform for the investors as well as hedgers to protect their economic interests as well as increase their investible wealth.  However, there is a need to profile the investors in this market with their preferences and pattern.  This will help the commodity trading companies to focus their offerings to suit the needs of the commodity investors.  Also, the companies should understand the expectations of their clients and their level of satisfaction.  With this in mind, a study was conducted through the Karvy Comtrade Limited, where a sample of 150 respondents was drawn for study.  A structured questionnaire with the relevant indicators was administered to primarily identify the investors’ preference towards commodities market.  The study also intended to identify the investment patterns of investors, to know the investors’ opinion on the effect of international commodities market over the national trading activity, to identify the source of information about commodities market, and to profile the commodities investors.The investors are not fully aware of the functioning of commodity market and they draw market information from Print media, Web media and Peer groups.

BIBILIOGRAPHY

1. Pandey .I.M. Financial Management, Vikas publishing house Pvt Ltd(1991) 9 th  edition

2Kothari Rubin , Statistics for Management , Prentice Hall of India Pvt. Ltd 8 th edition

3Kothari C.R. Research Methodology , New Age International Pvt Ltd 8 th edition

4.The Karvy Finapolis Magazine – Weekly , Monthly & Yearly edition

WEB SITES

1. www.karvycomtrade .com

2. www.karvy .com

3. www. Mcxindia.com

4. www.dailyfutures.com