Insights into Commodity Trading

Commodities are the actual physical goods like corn, soybeans, gold, and crude oil. They are interchangeable with other goods and can be bought and sold physically as well in future market. They are tradable in the same way as financial futures with only one difference that this commodity can have physical settlement and asset quality is taken into consideration unlike financial futures. Futures are contracts of commodities that are traded at a futures exchange like the Chicago Board of Trade (CBOT), COMEX in USA and MCX and NCDEX in INDIA. They are standardized contracts among buyers and sellers of commodities that specify the amount of a commodity, grade/quality and delivery location. Each futures contract has a standard size that has been set by the futures exchange it trades on. Each contract has fix delivery month. Date of expiry has to do with delivering the actual commodity The contract will expire after the designated date in the delivery month. Continue reading

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How can you tackle sideways Market?

Sideways Trend, as the name suggests, is sideways- absence of any clear directional bias in the market.

Such horizontal price movement occurs when the  forces of supply and demand (of the underlying)  are nearly equal. Generally, sideways trend is a period of consolidation before the price  continues in the direction of the previous move. Sideways price action is also known as “horizontal trend”.

Moving on to today’s discussion: “how to tackle sideways markets”, there are two distinct trading philosophies:

  1. Buy low, sell high (for Sideways markets, i.e. MCX wheat prices right now)
  2. Buy high, sell higher (for trending markets, i.e. Indian stock indices right now)

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Blame it on the Wall Street Movies?

Be it a myth or a reality, but whenever a movie on Wall Street is released markets have reacted in a negative way as if it was a signal for all the investors to book profits and exit before the release. Do they really track markets and release a movie whenever its time up for investors or are these movies being considered as a bad omen for investors?

Let us have a look what the data has to say:

The first two Wall Street movies came out in 1929, the first one in January and second one in December 1929; while the Black Tuesday struck in October of the same year, followed by the Great Depression. The third Wall Street movie came out in 1987, released in December, after the October Black Tuesday crash. The production had however started before the crash. Boiler Room, another movie on the stock markets was released in mid-February 2000, and the Dot-com bubble peaked in mid-March 2000.

Wall Street Movies and Market Crashes

If history repeats – and history has a funny way of doing that – then the release of Martin Scorsese’s “The Wolf of Wall Street” should warn investors of an impending market crash.

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YTD (July’14) Performance Review

The Indian equity market was marginally positive in July 2014 with Nifty moving up another 1.4%. Pharma and FMCG stocks were winner of the month as they moved higher by 9.5% and 7.7%, respectively. On the other hand, Realty and Energy stocks were worst performer with indices moving down by 8.4% and 4.6%, respectively.Small cap stocks also lost ground in July’14 as they moved lower by 6.1% after 5 months of consecutive gain.

Chart1: July’14 Performance 

July PerformanceSource: NSE

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Compounding: 8th wonder of the world?

India is a country where everyone wants a little extra for their money and we Indians are obsessed with savings. Well rightly so, but then what to do with our savings, do we know?

Let’s check what happens when you invest your savings at 4%, 9%, 14% and 20%.  Let’s say you save Rs100 each year and invest them at the above rates. The table shows the cumulative amount at the end of each period at different investment rates.

Cumulative amount of your wealth by Compounding

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May be out of my Budget!

Was the Union Budget 2014 a showstopper? Needless to say it’s a special event and has a unique reason every year. It was BJP’s promises at stake and they have saved it to some extent. For the first time in many years, the budget promised as much as can be delivered by the Mr. Modi led government. Mr. Arun Jaitley, the current finance minister, was realistic in his approach of pointing out the mess that the financial condition of this country is in and the jeopardy if it doesn’t get out of it.

Watching a budget session is nothing more than watching a thrilling movie with lot of twists and turns, moreover we had an interval too this time! Mr. Arun Jaitley the protagonist of the movie has rightly identified soaring fiscal deficit and has set passionate target to bring it down. I use the word passionate here, as he is expecting India’s GDP to expand by spending less. May be the government is asking its people to work hard, increase efficiency and curb the leisure expense.

Work Hard Party Less!

Cigarettes and tobacco products have had their share of limelight in the past and this time was no exception as the excise duty was increased from 11% to 72%. Increasing their price every year has helped in reducing the consumption but it has reached a point where cigarette smoking is now considered as a leisure activity and a status symbol. He can afford a car if he is able to blow up a pack of cigarettes every-day.

Impact on Smoking/Cigarettes by Budget 2014Source: Politickle by Manjul

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