1. Commodity Markets
July 2010
Way2Wealth Commodities Pvt. Ltd.
making investing simpler, more understandable and profitable

2. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

3. Commodity - Definition
A commodity is any good or service produced by human labour
and offered as a product for general sale on the market
- Karl Max
Characteristics
• Commodity is anything movable (a good) that has
following characteristics
• Fungible, i.e. the same no matter who produces it
• Derivatives, i.e. involves further processing into
number of products
• Economic cost, i.e. production of it involves some cost

4. Commodities – in Real Life
Wheat in your bread
Petrol in your vehicle
Coffee on your table
Sugar in your sweets
Chana in your chhole
Gold in your necklace
……… and so on …….
Commodities are everywhere

5. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

6. Commodity – As Asset Class
 In financial parlance, assets are economic resources that is capable of
being owned or controlled to produce value
 Commodity too has gained importance currently as independent asset
class
 Commodity, being the natural goods are independent of other asset classes
Assets Classes
Equities : Performer during economic expansion & an out
performer over very long term…
Fixed Income : Performs at the later stage of recession…
Real Estate : Performs during early expansion…
Commodities : Performance spread evenly over the economic
cycle…

7. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

8. Commodity – Unique points of diversification
1. Seasonality A major force in the commodities markets
2. Correlation Unlike other asset class, commodities are
positively and negatively correlated within
& outside the group which is unique to
commodities only
3. Weather No other asset class are so much influenced
by weather patterns
4. Hedge Provides natural hedge against war,
inflation, other asset portfolios, recessions
etc. example -GOLD

9. Commodity – Performance
Returns Over Different Asset Classes in 4 Yrs.
100
88.46
90
80 73.72 75.95
69.51
70
60
50
40 31.55
30
20
10
0
-10 -1.44
SENSEX NIFTY CNX 500 NCDEX INR MCX
AGRI INDEX METAL
Source:Bloomberg,Way2Wealth Research INDEX

10. Commodity – Performance
Various Asset Classes Perform ance
260
240
220
200
180
160
140
120
100
80
60
Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09
NCDEX Ag Index Nifty USDINR MCX Metal Index

11. Contribution in global landscape
Indian Share in Global Commodity Market
Global Vs. India
9%
 Global commodity has relatively long history
 Size is 9 times larger than India
91% India
Global India
 Commodity futures, though active since 19th
century was banned later in 1970’s
 Commodity volumes shoots up significantly
Commodity Trading ( Value in Million USD) after re-launch in 2003
2009 2008  MCX emerged as world’s Sixth largest
Global 14831317 11712611 exchange
India 1469673 1067984
 Volumes on Indian exchanges are increasing
Source:FMC,Way2Wealth Research at CAGR of 73.7 percent

12. Global growth in Commodities 2004-09
Global Com m odity F&O -2004 Global Com m odity F&O -2009
12%
20%
23%
12%
68%
65%
Source : WEF Am erica Asia Europe+ME Source : WEF Am erica Asia Europe+ME
Share of Asia has jumped
more than 5 times

13. Global growth in Commodities 2008-09
Exchangew ise Volum e Share Com m odity F&O -2008 Exchangew ise Volum e Share Com m odity F&O -2009
7% 6% 5%
5% 18%
9%
11% 33%
9%
13%
38% 18%
Source: WFE 8% 20%
Source: WFE
DCE CME SHFE ZCE ICE MCX LME DCE CME SHFE ZCE ICE MCX LME
Chinese exchanges
has seen
two fold increase
in volume

14. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

15. Classification of Commodities
Bullion
Gold
Silver
Palladium
etc
Agriculture Energy
Grains Crude oil
Pulses Heating oil
Commodities
Edible oils/seeds Natural gas
Spices etc Furnace oil
Etc.
Base Metals
Copper
Zinc
Aluminum
Nickel
Tin

16. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

17. Commodity – Indian Structure
FMC – The Regulator
Commodity Exchanges
National Regional
Exchanges Exchanges
NCDEX NMCE MCX NBOT 20 Other Regional
Exchanges
Leadership position with >90% share

18. Indian Growth so far
Volume Growth in Indian Exchanges
Significant rise in
volume since 700
launch of 600 > 65% CAGR Growth
exchanges in 2003
500
400
300
200
MCX
Leader in Metals & Energy 100
0
2004 2005 2006 2007 2008 2009 2010
MCX NCDEX TOTAL
Source:FMC,Way2Wealth Research
Segment wise % Share of Commodities
2004-05 2005-06 2006-07 2007-08 2008-09 2009-10
Bullion and other metals 31.5 36.1 57.9 64.6 56.7 40.8
NCDEX
Other than bullion metals - 23.2
Leader in Agri
Agriculture 68.2 55.3- 35.8- 23.1- 11.9 - 15.7
Energy 0.3 8.4 6.3 12.3 20.3
Others 0.0 0.1 0.0 0.0 31.4 0.0 -
Source:FMC,Way2Wealth Research * 2008-09 other segment includes energy& other metals

19. Indian Growth during 2004-09
Exchange wise commodity Volumes in 2004 Exchange wise commodity Volumes in 2009
12%
38%
62%
88%
MCX NCDEX MCX NCDEX

20. Indian Growth during 2004-09
India Commodity Wise Market Share in 2004 India Commodity Wise Market Share in 2009
0% 9%
17%
12% 31%
15%
13%
1%
0%
67%
15%
20%
Gold Silver Crdue oil Copper Total agri Others Gold Silver Crdue oil Copper Total agri Others

21. Returns in Indian commodities
Returns Across Various Com m odities in 5 Yrs.
600
485.86
500
400
300
200
142.80
92.86 87.12 94.21
100 62.54 51.16
9.25 22.25 23.60
3.83 4.96 9.65
0
-12.36
-45.21
-100
Guar Gum
Mentha Oil
Guar Seed
Aluminium
Crude oil
Turmeric
Soy Oil
Soybean
Copper
Pepper
Jeera
Gold
Lead
Silver
Zinc
Source:Bloomberg,Way2Wealth Research
 Almost 45 commodities are available for trading in both NCDEX & MCX
 Though few have been de-listed during high inflation times, re-listing also has happened
 Bullion, Base metals, energy & Agri are the major contributors in terms of volumes

22. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

23. Why Invest in Commodities
 Commodity provides true diversification in financial portfolio
 Commodity act as hedge against risks involved in business
 Rising income will ensure Inflation which in turn will ensure bull
market in commodites
 Explosion of population and shriking agricultural land would leave
commodity scarce
 Returns chasing funds & investors (traders, investor &HNI) will
make it vibrant
 Consumption / Spending in infrastructure / GDP growth will lead to
depletion of metals
 Secular bull market in commodities is likely to continue

24. Who Can Invest
 Hedgers : Risk Management
o Consumers – Refineries, food processing companies
o Traders, exporters, importers
o Producers – farmers, Integrated producers
 Speculators: High Volatility Higher Leverage
o Retail investors, Commodity spot trader
o Institutional, Corporate & proprietary traders
 Arbitrageurs : Safe Opportunist
o Spot future arbitrage
o Spread Strategies
o Intra and inter market arbitrage
 Investors: Portfolio diversifier
o Individuals, Pension & Mutual Funds
o Corporate bodies

25. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

26. How to Invest
Procedure for Trading in Commodities
• Open Demat & Trading A/C (Way2Wealth)
 Filling KYC (Know Your Customer)
 Documents required : Pan Card, Address Proof, Networth, Cancelled cheque
(MICR), Photo etc
• To get familiar with this asset class, start reading research reports and
monitor advisory and execution
• Acquire full knowledge of risk involved in futures
 Mark to Market
 Daily Pay-in & pay-out
 Margin requirements
 Contract expiry & rollover
 Leverage, profit & loss etc

27. Index
 Definition
 Commodity – As Asset Class
 Commodity – Uniqueness
 Classification of Commodities
 Indian Commodity Market Size
 Commodities Offered for Trading
 Why Commodities
 How to Invest
 Commodities @ Way2Wealth

28. Research @ Way2Wealth
Methodology - Analysis
 Fundamental
• Supply-n-demand, crop survey, climatic changes, policies, logistics,
specifications, delivery stocks, physical market linkages, Cartel move, etc
 Technical
• Chart patterns, indicators etc
 Derivative
• Volume and Open Interest Change, Contract duration, rollover, Relative
analysis with other markets etc
 Statistical
• Arima modelling, Correlation & regression study, Deviation, Time series,
Seasonality, Ratio study etc.

29. Research Products @ Way2Wealth
Products
 Strategies
• Arbitrage / Spreads
• Hedging – All commodities
• Trading / Investment advisory
 Reports
• Daily
• Weekly
• Special
• Events
• Commodity Profiles
 Special Support
 Need based special coverage of non futures commodities like Coal,
Chemicals, Naptha, Freight, Carbon credits etc. (on cost basis)

30. Products @ Way2Wealth
 Trading Products
• Based on Fundamental / Technical / Derivatives & Algorithm
• Plain vanilla Trading
• Customised Trading
 Investing Products
• Algorithm or statistical based
• Trend chasing, Money management principle, premium brokerage
• Strong execution skills

31. The People @ Way2Wealth
 Sunil Ramrakhiani - COO
More than 15 years in industry. Founder member – NCDEX, Member of product
committee, Regular speaker in various forum
 Vinay Tiwary - Sales Head
More than 8 years in industry. Have worked with prominent exchange as product head for
bullions.
 Shantanu Bhardwaj - Head Business Analytics & Product Development
More than 8 years in industry. Conceptualise & Launched pulses & Guarseed contracts in
NCDEX. Have worked as Regional Manager –west in IL&FS Investsmart.
 Brajendra Talesara - Head Dealing & Arbitrage desk
More than 12 years experience in industry. Strong execution skills. Have worked in Anand
Rathi, Investsmart etc.

32. The People @ Way2Wealth
 K N Rahaman - Research Head
More than 10 years in Industry. Former Research Head in Agriwatch & Investsmart.
Consultancy Projects done for ADB, JBIC, ICICI, OXFAM, DUPONT etc. Member of All
India crop forecasting committee (industry) for pulses & oilseeds.
 Prasad MSR - Research Analyst
More than 6 years in industry as Research analyst for various commodities. Have worked
with IL&FS Investsmart, Transgraph etc
 Krishna Reddy - Research Analyst
More than 6 years in industry as Research Analyst for various commodities. Have worked in
IL&FS investsmart

33. Thank you
Team Commodities