Morning Business News Round up_September 28, 2015

Morning Business News :

  • Foreign Investors Get Relief From Controversial MAT
  • Marriage Of Regulators: FMC To Merge With Sebi
  • Mobiles To Fall Under Separate Category In Revised IIP
  • Lenders Approve Higher Cost In 4 Lanco Projects
  • Russian Traders Want JV With Indian Tea Cos
  • Maruti’s Agitating Workers Chalk Out Future Strategy
  • NALCO To Invest Over Rs 65K Cr For New Projects
  • FIPB To Take Up 31 FDI Proposals On Tuesday
  • India Will Be $20-Trillion Economy: PM At Facebook Event
  • Rajeev Agarwal To Oversee Commodities At Sebi
  • Fpis In Selling Mode, Take Out Rs 6,000 Cr In Sept
  • Top Six Cos Take Rs 53,886 Cr Hit In Market Valuation
  • MMTC To Produce, Market Sovereign Gold Coins
  • ICICI Makes Aggressive Push In Unsecured Loans
  • Jpmorgan Schemes To Hive Off Amtek Holdings
  • Liberty To Raise Stake In Joint Venture With Videocon To 49%
  • SEBI Steps Up Measures Against SMS, Social Media Scams
  • India Will Play Big Part In Driving Technology Forward: Pichai
  • Lenders Want Amtek Promoters To Inject Some Equity First
  • Four SME Ipos To Hit Capital Markets This Week
  • BSE Gets Shareholders’ Nod To List Its Shares
  • Moserbaer To Focus On LED Products, Targets ₹500-Cr Market Size In 3 Years


  • Govt To Complete Spectrum Harmonisation By December End
  • Xi Jinping Pledges $2 Billion For South-South Cooperation
  • Laid-Off Ssangyong Workers In Mumbai Seeking Reinstatement: Mahindra
  • German Transport Authority Asks Volkswagen To Present Car Clean-Up Plan
  • Narendra Modi Shows Keen Interest In Tesla Technology
  • Modi Invites Apple CEO Tim Cook To Set Up Manufacturing Base
  • SAIL Invests Rs 2,600 Cr In Rourkela Plant For Hot Rolled Coils
  • Qualcomm Announces To Invest $150 Mn For Indian Start-Ups
  • ITC Aims Rs 18K Cr Revenue From Agriculture Business By ‘21
  • US FDA Revokes Approval For Sun Pharma’s Seizure Drug Over Compliance Issues

Morning Business News Round up_September 03, 2015

Morning Business News :

  • India among top 5 sovereign EM debt issuers: Moody’s
  • OPEC oil output in Aug falls on Iraq disruption
  • FMC to be merged with Sebi from September 28
  • Jet Airways to merge its weak-performing arm Jet Lite
  • Fed missed rate-hike opportunity: Bill GrossNext
  • 12 mths to be challenging for realtors: Moody’s
  • Cabinet okays revenue sharing for oil & gas
  • Singapore wealth fund GIC to invest $300 mn in DLF projects
  • UP sugar mills to get booster shot of Rs 3,200 cr
  • Indian banks face broader capital challenges, says Fitch
  • Last date for e-filing of I-T return extended to Sept 7
  • Tata Motors’ Sanand plant to roll out first non-Nano model in December
  • Snapdeal acquires Silicon Valley startup Reduce Data


  • India seeks WTO members’ views on steel import norm
  • European Commission approves Shell’s purchase of BG Group
  • India’s wind energy potential estimated at 302 GW
  • CLB adjourns hearing on Financial Tech case to Sept 8
  • PTC India seeks shareholders’ nod to pay 22% dividend
  • Foxconn plans spend up to $1 billion on India start-ups
  • Welcome to quantitative tightening as $12 trillion reserves fall
  • Jim Rogers exits India, says one can’t invest just on hope
  • $250 billion opportunity to invest in renewables: Piyush Goyal
  • India is on an extremely slow path to economic recovery: Report
  • Sensex falls for 3rd day in a row, ends 243 points down, Nifty closes at 7,717
  • Oil prices extend losses on US oil inventory, manufacturing data
  • Cabinet clears extension of compensation part of Land Act to 13 other central laws
  • SAIL to spend Rs 7,500 cr on modernisation, expansion
  • RBI’s new base rate formula to push banks to cut rates more
  • Hedge funds slip as markets plumb new depths in August
  • PFRDA asks intermediaries to comply with FATCA rules
  • Monsoon deficit not to impact sales, says Tata Motors


Morning Business News Round up_August 25, 2015

Morning Business News:

  • China Fears Wipe 230 Bn Euros Off Euro Shares
  • North, South Korea Reach Agreement To Halt Tensions
  • France, Germany Shrug Off China-Induced Mkt Rout
  • US Inflation Probably Lower Than Reported: Fed Study
  • Yuan Devaluation, China Slowdown A Worry: Jaitley
  • FDI Reporting Module To Promote Ease Of Doing Business: RBI
  • Govt Won’t Pin Foreign Portfolio Investors On MAT
  • No Immediate Advantage To Exporters From Rupee Fall
  • Sebi Approves Merger With Commodities Regulator FMC


  • Real Estate Offers $11.8 Bn Opportunity For Builders
  • Great Fall Of China Sinks World Stocks, Dollar Tumbles
  • India Signs Pact For South Asia’s First Trans-National Oil Pipeline
  • Inflation Expectations Are Still High: Rajan
  • Union Ministry To Offer Subsidy To Ship Building Industry
  • Odisha Will Offer To Sell Iron Ore To Posco For Steel Project
  • Chennai Petroleum To Augment Its Net Worth With Rs 1,000 Crore Infusion From IOC
  • HPCL Posts Record Profit In FY-2015, Highest Since 1974
  • Crude Prices At Six-And-A-Half Year Low; India Might Gain Over Rs 1 Lakh Crore
  • CBEC Gets Ready For GST, Sets Up New Directorate
  • Indian Oil OFS Subscribed 1.18 Times
  • Monsoon In A Lull Phase Over North-West India
  • Crude Oil Hovers Below Key $40 Per Barrel Mark
  • Stock Market Wealth Crashes Below Rs. 100-Trillion Mark
  • SEBI-FMC Merger To Take Effect From September 28
  • Emerging Assets Hit New Multi-Year Lows On China Contagion
  • India Has Sufficient Forex Reserves To Address Rupee Volatility: RBI
  • Three State-Run Banks Plan To Sell Npas Worth Rs.2,700 Crore To Arcs
  • Supreme Court Vacates Stay Granted To DLF
  • Bhushan Steel In Talks With Monnet Ispat For Stake Purchase
  • Amtek Unit Bondholders Look To Move UK Courts
  • Gateway Distriparks Offers To Buy Blackstone Stake In Unit For Rs600 Crore
  • Sensex Plunges 1,625 Points To End At 25,742; Nifty At 7,809
  • Manufacturing Sector Growth Improves In August: SBI Index
  • Fiscal Deficit, Inflation Under Control; Economy In Revival Mode: FM Arun Jaitley
  • Market Mayhem: PM Reviews Situation, Calls For Reforms
  • India Has Potential To Achieve 100 GW Solar Target: Bosch
  • Heineken Eyes Control Of Indian Maker Of Kingfisher Beer
  • Ready To Use FX Reserves As Sensex Tumbles: Rajan
  • BSE To Suspend Trading In 17 Companies From Aug 26
  • Glenmark Expects USDFA Approval For 4-6 Drugs
  • IIB To Manage Transaction Exchange
  • NSE Shortens Concessions In Transaction Fee By 1 Month
  • Adani To Invest Rs 25,000 Crore In Chhattisgarh




♦ What is a commodity?

 A commodity is a product having commercial value that can be produced, bought, sold, and consumed.

♦ What is a Derivative contract & what is Commodity future?

 A derivative contract is an enforceable agreement whose value is derived from the value of an underlying asset; the underlying asset can be a commodity, precious metal, currency, bond, stock, or, indices of commodities, stocks etc. Four most common examples of derivative instruments are forwards, futures, options and swaps/spreads.Commodity future is a contract to buy or sell specific commodity, of a specific quality, at a specific price, for a specific future date on the exchange.

♦ What is a forward contract?

 A forward contract is a legally enforceable agreement for delivery of goods or the underlying asset on a specific date in future at a price agreed on the date of contract. Under Forward Contracts (Regulation) Act, 1952, all the contracts for delivery of goods, which are settled by payment of money difference or where delivery and payment is made after a period of 11 days, are forward contracts.

♦ What is a futures contract?

 Futures Contract is a type of forward contract. Futures are exchange traded contracts to sell or buy standardized financial instruments or physical commodities for delivery on a specified future date at an agreed price. Futures contracts are used generally for protecting against rich of adverse price fluctuation i.e. hedging.

♦ How are futures prices determined?

 Futures prices evolve from the interaction of bids and offers emanating from all over the country which converge in the trading floor or the trading engine. The bid and offer prices are based on the expectations of prices on the maturity date.

♦ What is long position?

 In simple terms, long position is a net bought position and its opposite term is Short position.

♦ What is the difference between spot market and futures market?

 In a spot market, commodities are physically bought or sold usually on a negotiable basis resulting in delivery. While in the futures markets, commodities can be bought or sold irrespective of the physical possession of the underlying commodity. The futures market trades in standardized contractual agreements of the underlying asset with specific quality, quantity, and mode of delivery whose settlement is guaranteed by regulated commodity exchanges.

♦ What is a Commodity Exchange?

 As in capital markets, a commodity exchange is an association or a company or any other body corporate that is organizing futures trading in commodities and is registered with FMC (Forward Market Commission). Two major national level commodities exchanges are Multi Commodities Exchange of India (MCX), National Commodities and Derivatives Exchange of India (NCDEX).

♦ Who regulates the commodity exchanges in India?

 Commodity Market in India is regulated by Forward Market Commission (FMC) under the guidance of the Ministry of Consumer Affairs, Food, & Public Distribution.

♦ What are the benefits of futures trading in commodities?

 The biggest advantage of trading in commodity futures is price risk management and price discovery. Farmers can protect themselves against undesirable price movements and decide upon cropping pattern. The merchandisers avoid price risk. Processors keep control on raw material cost and decreasing inventory values. International traders also can lock in their prices.

♦ What is hedging?

 Hedging means taking a position in the futures or options market that is opposite to a position in the physical market. It reduces or limits risks associated with unpredictable changes in price. The objective behind this mechanism is to offset a loss in one market with a gain in another.

♦ What is arbitrage in commodity markets?

 Arbitrage is making purchases and sales simultaneously in two different markets to profit from the price differences prevailing in those markets. The factors driving arbitrage are the real or perceived differences in the equilibrium price as determined by supply and demand at various locations.

♦ Unlike equities where rate is per share basis, does the commodities market have different rate units for different commodities?

 Commodities have predefined lot sizes (set by the respective exchanges as per existing regulation) where current price of a particular commodity, for selected expiry, is shown in contract information available & rate units differ for different commodities. The standard unit based on which the price of the contract is quoted for trading is called quotation or base value. E.g. for gold contract, the quotation or base value is 10 grams while it is 1 kg in case of silver on MCX.

♦ What is a lot Size? Do the trading & delivery lot sizes differ from each other?

 It is the quantity of a commodity specified in the contract as tradable units. The lot size is different for each commodity. The details About lot sizes / delivery lot can be obtained from the respective exchanges’ website. Each contract has a lot size and a delivery size, which are not the same; in the case of gold, the lot size on the NCDEX is 100 gm while the delivery size is 1000 gm. If a person wants to enter into a delivery settlement for gold, he will have to enter into a minimum of 10 contracts or multiples thereof. Market participants are required to negotiate only the quantity and price of the contract, as all other parameters are predetermined by the exchange.

♦ What is the meaning of Basis?

 Basis is the difference between the spot price of an asset and the futures price of the same asset underlying. The spot price is the ready price prevailing in the physical commodity market while the futures price is the price of any specific contract that is prevailing in the exchanges where it is traded.

♦ What is meant by basis risk?

 Generally, the spot price of a commodity and future price of the same underlying commodity do not change by the same amount during the life of the futures contract. This uncertainty in the variation of basis is known as basis risk.

♦ What is initial margin?

 It is the minimum percentage of the contract value required to be deposited by the members/clients to the exchange before initiating any new buy or sell position. This must be maintained throughout the time their position is open and is returnable at delivery, exercise, expiry or closing out.

♦ What do you mean by delivery period margin?

 It is the extra margin imposed by the exchange on the contracts when it enters the concluding phase i.e. it starts with tender period and goes up to delivery/settlement of trade. This amount is applicable on both the outstanding buy and sell positions.

♦ What is Mark-to-market (MTM)?

 Mark-to-market margins (MTM or M2M) are payable based on closing prices at the end of each trading day. These margins will be paid by the buyer if the price declines and by the seller if the price rises. This margin is worked out on difference between the closing/clearing rate and the rate of the contract (if it is entered into on that day) or the previous day’s clearing rate. The Exchange collects these margins from buyers if the prices decline and pays to the sellers and vice versa.

♦ What is due date rate?

 It is the rate at which the contract is settled on the expiry date. Usually it is the average of the spot prices of the last few trading days (as specified by the exchange) before the contract maturity.

♦ What is Cash Settlement?

 It is a process of settling a futures contract by payment of money difference rather than by delivering the physical commodity or instrument representing such physical commodity (like, warehouse receipt). In India, most of the future trades are cash settled.

♦ What is meant by calendar spread?

 A calendar spread means taking opposite positions in futures contract of the same commodity with different expiry dates. It is also known as an intra-commodity spread.

♦ Are there any circuit breakers in commodities like in equity markets?

 Yes, like equity markets, commodity market has circuit breakers. Exchanges have circuit filters in place. The filters vary from commodity to commodity but the maximum individual commodity circuit filter is 6 per cent. The price of any commodity that fluctuates either way beyond its set price limit will fall in circuit breaker category.

♦ What kinds of risks do participants face in derivatives markets?

 A.Credit risk:Credit risk on account of default by counter party: This is very low or almost zeros because the Exchange takes on the responsibility for the performance of contracts

B.Market risk:Market risk is the risk of loss on account of adverse movement of price.

C.Liquidity risk:Liquidity risks is the risk that unwinding of transactions may be difficult, if the market is illiquid

D.Legal risk:Legal risk is that legal objections might be raised; regulatory framework might disallow some activities.

E.Operational:Operational risk is the risk arising out of some operational difficulties, like, failure of electricity, due to which it becomes difficult to operate in the market.

♦ Can I take delivery of the commodity? If yes, how can I do the same?

 A settlement takes place either through squaring off your position or by cash settlement or physical delivery. Squaring off is taking a opposite position to the initial stance, which means in the case of an original buy contract an investor would have to take a sell contract.
An investor who intends to give or take delivery would have to inform his broker of the same prior to the start of delivery period. In case of delivery, a warehouse receipt is provided. Delivery is at the option of the seller; a buyer can take delivery only in case of a willing seller. All unmatched/rejected/excess positions are cash settled; all open positions for which no delivery information is submitted are also cash settled. Under cash settlement, the difference between the contract price and settlement price is to be paid or received.  In online commodity trading, client can not go for delivery & all positions are cash settled.

♦ What are the costs involved in trading of commodities?

 While trading in commodities, with any registered broker, client has to pay certain charges (apart from margin requirements for trading) which are as follows:

  1. Brokerage
  2. Service  Tax
  3. Exchange Transaction Charges
  4. Educational Cess


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