The growth of the commodity futures market in India has created an impact on the global market since India is an agro-based country and for agro-based commodities, there is a huge demand for consumption, production, and trade. In recent, decades commodity futures markets as seen as impressive growth after the global crisis. The commodity futures market plays an important role in deciding the price discovery and price risk management.
India is the largest consumer of commodities such as Precious metal (bullions and silver), Metal (copper, zinc, lead, etc.) and Agricultural products (cotton, pepper, maize, wheat, sugar, coffee, dairy products, etc). India also dealt with the commodity spot market.For instance, soya creates a huge market in Indore, Ahmedabad as a major market for castor seed, for cotton, Surendranagar and Andhra Pradesh for chilli, etc. In India, the commodity futures market is started way back and as old as the United States’ future markets.
During the 1857 Bombay Cotton Trade Association as been set up, the Future market in gold was inevitable and began to emerge in Mumbai 1920. In India the major three commodity exchanges and trade happen electronically they are Multi Commodity Exchanges (MCX), National Multi- Commodity Exchange limited (NMCE), and the National Commodity and Derivative Exchange (NCDEX).
FMC (Forward Market Commission) in 2015 merged with SEBI and the Regulation and Policies framework is under the control of SEBI(Security Exchange Board of India). Commodity market in India as shown gradual evaluation of the country’s general economic distribution and it’s a linkage with the financial sectors.
Hedging is an innovative instrument to trade in commodities and also creates a different portfolio for the investors or traders, it also attracts the international investors because of diversification availability that impact on the return which benefits the domestic and as well as international investors.
The commodity futures market booming in recent years as the financial derivatives market, since our economy is an agro-based country there is a huge demand in domestic as well as internationally for our agricultural commodity.
Regulatory bodies(SEBI) are giving their topmost support to this market while framing the policies they are stretching arms to safeguard the farmers and also the market participants, hampering of technologies in recent decade keep the markets transparent and trade happens in the organized form in both the markets spot and future.
Basically, it has been categorized into Pre–global crisis and Post–global crisis reason for taking this is, in the year 2008 vital role has been played by the global crisis by crashing the world’s market and many IT companies phased the recession at the same time, the Indian rupee value got depreciated. So to analyze the price discovery process before and after the crisis is there any improvement or change that occurred in forecasting the market price.
The result found in this paper while analyzing the Pre–global crisis many authors shared their view that the Indian commodity futures market is not mature and efficient in the price discovery process and which impact on price risk management. Market participant, they don’t have proper knowledge on hedging instruments, in short, they lack in analyzing the market prices few speculators play a major role in manipulating the price and change the entire market scenario.
Trading in the commodity futures market has created chaos among the participants in identifying spot and future markets. Key findings state that there is a domination of spot to future markets.
On the other hand Post–global crisis presenter’s said that there is a gradual development in the commodity futures market.Forecasting market price (price discovery) is mature enough which reflects in the price risk management with the sophisticated technology future market can predict the market movements and exchanges also closely monitored by Regulatory bodies.
Market participants have an overview or an idea about the future market at last, the future market dominate the cash market. In a nutshell after the global crisis commodity futures market are confident inflow of information and is also efficient in the price discovery process.
Commodities are an important component of having a diversified investment portfolio. Trading in commodity futures is a fairly transparent process. The course of action leads you to fair price discovery which is controlled by large-scale participation. Indian commodity market trends depend on numerous factors such as demand and supply forces, government policies, and RBI policies.