commodity presentation (july 10)

Way2Wealth Commodities Pvt. Ltd.making investing simpler, more understandable and profitableCommodity MarketsJuly 2010

Index

DefinitionCommodity As Asset ClassCommodity UniquenessClassification of Commodities Indian Commodity Market Size Commodities Offered for TradingWhy CommoditiesHow to InvestCommodities @ Way2Wealth

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

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 everywhereCommodities in Real Life

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Commodity As Asset ClassIn 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 classCommodity, being the natural goods are independent of other asset classes

Assets Classes

Equities:Performer during economic expansion & an out performer over very long termFixed Income:Performs at the later stage of recession

Real Estate: Performs during early expansion

Commodities:Performance spread evenly over the economic cycle

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Commodity Unique points of diversification1. SeasonalityA major force in the commodities markets 2.CorrelationUnlike other asset class, commodities are positively and negatively correlated within & outside the group which is unique to commodities only

WeatherNo other asset class are so much influenced by weather patterns

HedgeProvides natural hedge against war, inflation, other asset portfolios, recessions etc. example -GOLD

Commodity Performance

Contribution in global landscapeGlobal Vs. India

Global commodity has relatively long history Size is 9 times larger than India

India

Commodity futures, though active since 19th century was banned later in 1970sCommodity volumes shoots up significantly after re-launch in 2003MCX emerged as worlds Sixth largest exchangeVolumes on Indian exchanges are increasing at CAGR of 73.7 percent 20092008Global1483131711712611India14696731067984Source:FMC,Way2Wealth ResearchCommodity Trading ( Value in Million USD)

Global growth in Commodities 2004-09Share of Asia has jumped more than 5 times

Global growth in Commodities 2008-09Chinese exchanges has seen two fold increase in volume

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Classification of Commodities

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Commodity Indian Structure20 Other Regional ExchangesNMCECommodity ExchangesMCXNational ExchangesRegional ExchangesFMC The RegulatorNBOTNCDEXLeadership position with >90% share

Indian Growth so far2004-052005-062006-072007-082008-092009-10Bullion and other metals31.536.157.964.656.740.8Other than bullion metals-----23.2Agriculture68.255.335.823.111.915.7Energy0.38.46.312.3-20.3Others0.00.10.00.031.40.0Source:FMC,Way2Wealth ResearchSegment wise % Share of Commodities* 2008-09 other segment includes energy& other metalsSignificant rise in volume since launch of exchanges in 2003MCX Leader in Metals & EnergyNCDEX Leader in Agri> 65% CAGR GrowthVolume Growth in Indian Exchanges

Indian Growth during 2004-09

Returns in Indian commoditiesAlmost 45 commodities are available for trading in both NCDEX & MCXThough few have been de-listed during high inflation times, re-listing also has happenedBullion, Base metals, energy & Agri are the major contributors in terms of volumes

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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 continueWhy Invest in Commodities

Hedgers : Risk ManagementConsumers Refineries, food processing companiesTraders, exporters, importersProducers farmers, Integrated producers

Speculators: High Volatility Higher LeverageRetail investors, Commodity spot traderInstitutional, Corporate & proprietary traders

Arbitrageurs : Safe OpportunistSpot future arbitrageSpread StrategiesIntra and inter market arbitrage

Investors: Portfolio diversifierIndividuals, Pension & Mutual FundsCorporate bodiesWho Can Invest

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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 MarketDaily Pay-in & pay-outMargin requirementsContract expiry & rollover Leverage, profit & loss etc

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Methodology - Analysis

FundamentalSupply-n-demand, crop survey, climatic changes, policies, logistics, specifications, delivery stocks, physical market linkages, Cartel move, etc

TechnicalChart patterns, indicators etc

DerivativeVolume and Open Interest Change, Contract duration, rollover, Relative analysis with other markets etc

StatisticalArima modelling, Correlation & regression study, Deviation, Time series, Seasonality, Ratio study etc.Research @ Way2Wealth

Products

StrategiesArbitrage / SpreadsHedging All commoditiesTrading / Investment advisory

ReportsDailyWeeklySpecialEventsCommodity Profiles

Special SupportNeed based special coverage of non futures commodities like Coal, Chemicals, Naptha, Freight, Carbon credits etc. (on cost basis)Research Products @ Way2Wealth

Trading Products

Based on Fundamental / Technical / Derivatives & Algorithm

Plain vanilla TradingCustomised Trading

Investing Products

Algorithm or statistical based

Trend chasing, Money management principle, premium brokerageStrong execution skills

Products @ Way2Wealth

The People @ Way2WealthSunil 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.

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

Thank you

Team Commodities

commodity presentation (july 10)

Documents

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