Risk and Return of Commodity Futures: Guru Prasad Sajjanagoudra

A Study on
RISK AND RETURN OF COMMODITY FUTURES

(With reference to SHARE KHAN LTD, Bangalore)
Submitted in Partial Fulfillment for the Requirements of

Bangalore University for the Award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
By
GURU PRASAD SAJJANAGOUDRA

Reg.No.05JJCM6019
Under Guidance of
PRO. ALOYSIUS EDWARD
KRISTU JAYANTI COLLEGE OF MANAGEMENT

K.NARAYANAPURA, BANGALORE-77
2005-2007
DECLARATION
I hereby declare that this project titled “Risk and Return Commodity Future”
submitted by me to Department of Management, Bangalore University in partial
fulfillment of requirements of MBA Programme is a bonafide work carried by me under
the guidance of prof. Aloysius Edward.
This has not been submitted earlier to any other University or Institution for the award of
any degree diploma/ certificate or published any time before.
Place: Bangalore (GURUPRASAD JANAGOUDRA)
Date:
CERTIFICATE FROM GUIDE & HEAD OF THE INSTITUTION
Certified that this project entitled “Risk and Return of Commodity Future” submitted
in partial fulfillment for the award of MBA Degree of Bangalore University was carried
out by Mr. Guruprasad Sajjangoudra under the guidance of Prof. Aloysius Edward. This
has not been submitted to any other university or institution for the award of any degree/
diploma/ certificate.
GUIDE DEAN
MBA DEPARTMENT
PRINCIPAL
ACKNOWLEDGEMENT
At the successful completion of my project I would like to extend my gratitude to all
those without whose valuable guidance and support it would have not been possible.
A special word of thanks to Dr. Arun Kumar (Dean of MBA Department) for his
guidance and support throughout the project work.
I also owe my gratitude to my internal guide Prof. Guruprasad Sajjanagoudra
(Professor, Kristu Jayanti College of Management) for valuable suggestions and
guidance.
Above all I thank my family and friends for their constant support and encouragement
EXECUTIVE SUMMARY
Commodity futures have recently made reappearance on the Indian horizon after a ban
was imposed by the government in 1966. With a full-fledged regulator to control market
functioning, establishment of three nationwide online multi commodity exchanges, over
twenty regional bourses along with a wide network of 2,000 brokers and several players
tracking prices round the clock, the Indian commodity market is all set for a paradigm
shift. Given the fact that India is largely an agrarian economy, the commodities market
offers unparalleled growth opportunities and advantages to a large cross-section of
participants including Producers/Processors, Traders, Corporates, Cooperatives, Industry
Associations, amongst others.
The commodity futures trading, consists of a futures contract, which is a legally binding
agreement providing for the delivery of the underlying asset or financial entities at
specific date in the future.
Commodity future contract are agreements to buy or sell something at a later date and at
a price that has been fixed earlier by the buyer and seller. So, for example, a cotton
farmer may agree to sell his output to a textiles company many months before the crop is
ready for actual harvesting. This allows him to lock into a fixed price and protect his
earnings from a steep drop in cotton prices in the future. The textiles company, on the
other hand, has protected itself against a possible sharp rise in cotton prices.
Futures market plays an important role in the world of finance. Many kinds of futures
instruments have been developed and the use of futures has received a great deal of
attention. From the point of view of investor’s particularly institutional investors,
financial futures are very important .futures contracts like option are important derivative
instrument and a major innovation in the field of risk management.
I have taken 10 commodity futures as my sample for calculating Beta and Volatility with
the help of historical data for the month of March. Beta shows the measurement of risk
and Volatility shows the variations of the respective commodity.
TABLE OF CONTENTS
CHAPTER NO. TITLE PAGE

NO.
1 1-15
INTRODUCTION
Introduction
Subject background of the Research Topic
2 RESEARCH DESIGN 16-19
Introduction
Statement of Problem
Objectives of the Study
Scope of the Study
Methodology
Data Collection
Tools used for Analysis
Limitations of the Study
3 PROFILE 20-52
4 ANALYSIS OF DATA 53-82
5 SUMMARY OF FINDINGS, CONCLUSION AND 83-88

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A Study on

RISK AND RETURN OF COMMODITY FUTURES

Submitted in Partial Fulfillment for the Requirements of

GURU PRASAD SAJJANAGOUDRA

KRISTU JAYANTI COLLEGE OF MANAGEMENT

Place: Bangalore (GURUPRASAD JANAGOUDRA)

At the successful completion of my project I would like to extend my gratitude to all

guidance and support throughout the project work.

I also owe my gratitude to my internal guide Prof. Guruprasad Sajjanagoudra

(Professor, Kristu Jayanti College of Management) for valuable suggestions and

CHAPTER NO. TITLE PAGE

2 RESEARCH DESIGN 16-19

4 ANALYSIS OF DATA 53-82

5 SUMMARY OF FINDINGS, CONCLUSION AND 83-88

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