A Study On Investors' Preference in Indian Commodities Market

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European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1

www.ejcmr.org January 2013



9

A Study on Investors Preference in Indian
Commodities Market

Sivarethinamohan
Dean-Faculty of Management
Disha Technical Campus
Raipur. India
[email protected]
P. Aranganathan
Associate Professor & Head
MIET Engineering College
Trichy, India

Abstract Every financial scheme and plan is having its
own pros and cons and the investors have their own
preferences for different schemes and plans. The major
areas of investments available for Indian Investors include
Equity Market, Derivatives, Bonds, Debentures,
Commodity market etc. Indian investors choose different
areas according to their perception and attitudes. Some of
them are successful with their investments and some
cannot enjoy the fruit in time due to several reasons of
their investment products. Today commodity market
proves to be a very major avenue of investment. Hence the
authors decided to conduct a research on the customer
preference of commodity market with respect to various
investment avenues in around Trichy district, Tamilnadu.
It was observed from the statistical analysis that there was
a significant association between the respondents age and
the various factors such as Terms, conditions& Benefits,
Easy transactions. Also there was a significant association
between the respondents Profession and factors such as
Awareness & knowledge, tax exemptions, Affordable
brokerages. As a result of Anova test there was
significance among Areas of Investment and tax
exemption. Also there was a high significance between way
of investment decision reached and factors such as
Awareness & knowledge, Terms, conditions& Benefits,
Tax exemption

I ndex Terms arbitrageurs, speculators, Brokerages,
Commodity, etc
I. INTRODUCTION
In this growing mixed economic system in developing
countries like ours, production and operation gets increased
every year due to liberalization, privatization and
globalization concepts. Globalization provides big
platform, more opportunities to extend the domestic
business throughout the world and this create plenty of job
opportunities in India both in manufacturing and service
sector. Hence Indian individual income is getting increased
and they search best investment avenues to invest their
surplus money for their future needs. Indian financial
system contains various financial institutions to accept the
public savings under various financial schemes and plans.
Every financial scheme and plan is having its own pros and
cons and the investors have their own preferences for
different schemes and plans. The major areas of
investments available for Indian Investors include Equity
Market, Derivatives, Bonds, Debentures, Commodity
market etc. Indian investors choose different areas
according to their perception and attitudes. Some of them
are successful with their investments and some cannot
enjoy the fruit in time due to several reasons of their
investment products. Today commodity market proves to
be a very major avenue of investment. Commodity markets
are markets where raw or primary products are exchanged.
These raw commodities are traded on regulated
commodities exchanges, in which they are bought and sold
in standardized contracts. Commodity market is a place
where trading in commodities takes place. It is similar to an
equity market, but instead of buying or selling shares one
buys or sells commodities. The researcher likes to study
about the investors preference in various Investment
Avenues of commodity market products and also to identify
the relationship between the various factors influencing the
investors decisions on commodity market.

II. REVIEW OF LITERATURE

According to N.R. Institute of management Ahmadabad,
Investors consider factor like global economy, availability of
commodity and others things during investing in commodity
and earn money by doing technical and fundamental analysis
from their brokers.

Media and friends are powerful communicating networks for
expansion. It has been that, respondents are investing their
income in diversified portfolio and less risky assets. There has
been seen that coffee, wheat and cotton are more dealing
commodity and investor believe that commodity market have
good opportunist market in future and most of investor invest
when there is favorable price in market. The commodity
futures markets are experiencing a good growth in the recent
past.
European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

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A. Sathish Kumar (2003) after almost two years that
commodity trading is finding favor with Indian investors and
is been seen as a separate asset class with good growth
opportunities. For diversification of portfolio beyond shares,
fixed deposits and mutual funds, commodity trading offers a
good option for long-term investors and arbitrageurs and
speculators. And, now, with daily global volumes in
commodity trading touching three times that of equities,
trading in commodities cannot be ignored by Indian investors.

Online commodity exchanges need to revamp certain laws
governing futures in commodities to make the markets more
attractive. The national multi-commodity exchanges have
united proposed to the government that in view of the growth
of the commodities market, foreign institutional investors, too,
should be given the go-ahead to invest in commodity futures
in India.

Commodity trading in India is poised for a big take-off in
India on the back of factors like global economic recovery and
increasing demand from China for commodities.

R. T. Nirmal Kumar (2006) in his study identified that a
perception lies with majority of investors that future trading
will lead to profits and it is not used for other purpose like
hedging. The nature of the derivatives instruments are to
reduce the risk involved in trading but in real time investors
are not taking derivatives trading for reducing their risk
involved in trading and profit making is considered to be an
important factor for the them.

On the other side a number of reforms and initiatives are still
needed in promoting India as a major futures trading hub in
tune to the status of being amongst the top five producers of
most of the commodities.

III. RESEARCH METHODOLOGY
A. Statement of the problem:

In this competitive business world, retaining the customers
and motivating them towards the business is very difficult task
handling by various industries. In this commodity market
provides various investment products to the investors to invest
their surplus money, but studying the investors perception,
expectation, and satisfaction level on their investment avenue
is very difficult, this problem is also handling by VISI
Financial Investment Services to safeguard their interest of
investors and to retain their participation in trading for long
time. Lot of threats, problems will be faced by following
ways:
It becomes difficult to approach customers and
interact with them
Its difficult to speak with customers longtime
Company cannot assess level of all kind of risks
Its difficult to further increase the investment from
existed customers
Its difficult to make understand the investors about
nature of business particularly to the rural
background people.

B. Objectives of study:

To study the Investors preference in commodity
market at VISI Financial Investment
To understand the relationship between the
demographic factors and the various factors
influencing the investors decision regarding the
commodity market
C. Research Design

In the present study, researcher has adopted descriptive cum
diagnostic design.
1) Population
The population size is 200, who had invested in
various financial products in different investment margin from
different places in and around Trichy district, Tamilnadu.
2) Sample size
Among those investors 60 investors who had
invested in commodities market, had been chosen for the
study
3) Sampling method
The sampling method adopted for this study is Non-
Probability Convenient Sampling.

D. Tools of Data Collection

Data requiring for the study is obtained from two sources
namely (i) primary data source and (ii) secondary data source:

a. Primary Data: this type of data is collected directly from
the respondents by the researcher using the questionnaire as an
instrument and personal interview as the communication
medium for collecting it.

The primary data was collected using self prepared
questionnaire consisting of 6 socio-demographic and 29
closed ended questions. Owing to the intrusive nature of the
questions, the researcher was hesitant about the validity of the
response.

Pre testing

The questionnaire was pre tested on 10 investors. However,
the respondents answered the questions without any trouble;
minor changes were made in the questionnaire such as
reducing the number of questions. The questionnaire was then
subjected to approval from academic experts and then
necessary changes were made to convert into a standardized
European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

11

one. Printed questionnaire was given to about 60 investors;
among which 60 completed questionnaires were received and
used for data analysis.

b. secondary data: Secondary data for study have been
extracted from Reference books, Web pages, company
booklets, etc

E. Statistical Tools used

The end result of data collection in the accumulation of raw
data in a quantitative form, such data are then summarized and
subjected to statistical analysis. Data was analyzed
statistically using SPSS (Statistical Package for Social
Science) 16 version. The following statistical tools are used
for the study:
1. Percentage Analysis
2. Chi Square Test
3. Anova
4. Correlation Analysis
IV. ANALYSIS AND INTREPRETATION

Table 4.1: Socio Demographic Variables
1 Gender
Male
64.4%
Female
35.6%
2 Profession
Government
3.3%
Private
63.3%
Business
33.4%
3 Age Group
Below 25
yrs
44.4%
25-30
yrs
40%
31-40
yrs
20%
Above
40 yrs
6.6%
4
Marital
Status
Married
42%
Unmarried
58%
5
Annual
Income(Rs)
Below Rs
2, 00,000
30%

Rs.
2,00,001
to
4,00,000
50%
Above Rs.
4,00,000
20%
SOURCE: Primary Data

From the table 4.1 it is inferred that 44.4% of respondents are
in below 25yrs old, 40% of respondents are in between 26 to
40yrs old, 20% of respondents are in between 41 to 45yrs old,
6.7% of respondents are in between 46 to 50yrs old. is inferred
that 64.4% of respondents are male, remaining 46.7% of
respondents are Female.it is inferred that 4.4% of respondents
are working in Government, 48% of respondents are working
in a private, and 20% of respondents are doing a business. it is
inferred that 30% of respondents earn Below Rs. 1,00,000,
50% of respondents earn between Rs 1, 00,001 to 2,00,000,
20% of respondents earn between Rs. 2, 00,001 to 4, 00,000



Classification of Investment Products

56.7% of respondents have preferred Metals 56.7% of
respondents have preferred Metals, 24.4% of respondents have
preferred Agro products, 4.4% of respondents have preferred
Energy, 16.7% of respondents have preferred Bullions.

Classification of Ways of Investment Decision

44.4% respondents reached their investment decision through
self analysis, 20 % of respondents through Relative/friends,
26.7% of respondents through Tips from experts, 4.4% of
respondents through Newspapers, 16.7% of respondents
through commercial channels.

Table 4.2: Percentage of Investment

Percentage
Frequency Percent
Cumulative
Percent
25%
48 80.0 80.0
50% 10 16.7 96.7
75% 2 4.4 100.0
Total 60 100.0
SOURCE: Primary Data
INFERENCE: From the table 4.2 it is inferred that 80% of
respondents allot 25% of their income for investments 16% of
respondents allot 50% of their income for investments, 4.4%
of respondents allot 75% of their income for investments.

Mean, Standard Deviation and RankoOf Variables

Table 4.3: Mean, Standard Deviation and Rank of Variables
S.No Variables Mean
Std.
Deviation
Rank
1
Knowledge
about
commodity
3.7000 1.16880 15
2
Market study is
important
4.2500 1.01889 2
3
Government
trends make
changes
3.9500 1.15605 7
4 Un certainty 3.3167 .89237 18.5
5 Reasonable risk 3.7667 1.29362 12.5
6 Risk is disclosed 3.6500 .87962 17
European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

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7
High risk in un
organized
trading centers
3.8667 .92913 9
8
reasonable
returns
4.0167 1.09686 6
9
difference in
returns
3.7667 1.19840 12.5
10 Tax exemption 3.2333 1.11030 20
11
Long term
benefits
3.9333 1.20545 8
12 Safety of margin 3.6667 1.27115 16
13
Acceptable
terms and
conditions
4.0333 1.02456 4.5
14
less security
evidence
3.3167 1.04948 18.5
15
Efficient
clearing houses
3.0333 1.05713 22
16
contracts
decided
independently
3.7667 1.19840 12.5
17
Flexible
maturity period
4.0333 .86292 4.5
18 Timely benefits 4.1667 1.23737 3
19
Affordable
brokering
charges
3.1000 1.03662 21
20
Easy mode of
payment
3.8500 .87962 10
21
On time sale of
contracts
4.4333 .87074 1
22
Easy available
loans for
investment
3.7667 1.36998 12.5

Table 4.3 summarizes the mean score value, standard
deviation and relative rank of all the 22 variables used for the
study. The variable On time sale of contracts received the
highest mean score among the other variables and hence it is
ranked first among the other variables. The variables
Efficient clearing houses and Affordable brokering
charges received the lowest mean score among other
variables and hence it is ranked last. The variable
Reasonable risk has got the largest standard deviation
among all the other variables.

Table 4.4: Association between the age of the respondents and
various dimensions of influencing factors

Sl.No: Variable Degree
of
freedom
Pearson
chi
square
significance
value()
1 Awareness
&knowledge
9 =10.855 P=0.286
P>0.05
Not
Significant
2 Terms,
conditions&
Benefits
9 =28.241 P=0.001
P<0.05
Significant*
3 Tax
exemption
9 =9.136 P=0.425
P>0.05
Not
Significant
4 Easy
transactions
9 =40.152 P=0.000
P<0.05
Significant*
5 Affordable
Brokerages
9 =15.86 P=0.198
P>0.05
Not
Significant
Significance at 0.05* Levels
From the table-4.4 it is observed that there is a significant
association between the respondents age and the various
dimensions of influencing factors such as Terms, conditions&
Benefits, Easy transactions. However there is no significant
relationship between the age and other dimensions of
influencing factors.

Table 4.5: Association between the Profession of the
respondents and various dimensions of influencing factors

Sl.No: Variable Degree
of
freedom
Pearson
chi
square
value()
Significance

1
Awareness
&knowledge
6 =21.684 P=0.001
P<0.05
Significant*

2
Terms,
conditions&
Benefits
6 =9.806 P=0.133
P<0.05
Not
Significant

3
Tax
exemption
6 =13.068 P=0.042
P<0.05
Significant*

4
Easy
transactions
6 =11.535 P=0.073
P>0.05
Not
Significant

5
Affordable
Brokerages
6 =7.686 P=0.0465
P<0.05
Significant*
Significance at 0.05* Levels

European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

13

From the table-4.5 it is observed that there is a significant
association between the respondents Profession and the
various dimensions of influencing factors such as Awareness
& knowledge, tax exemptions, Affordable brokerages,
However there is no significant relationship between the
Profession and other dimensions of influencing factors.

ANOVA Test
Anova was conducted to find out the significance between the
Areas of invest with regard to the various dimensions of
influencing factors. The results are summarized in the tables.

Table 4.6: One way Analysis of Variance between area of
invest with regard to various dimension of Investment
Decision
Sources D
f
Me
an
Sq
uar
e
Standard
Deviation
Mea
n
FR
atio
Significa
nce
Awarenes
s
&knowle
dge
Between
Groups
Within
Groups

3
5
6

0.5
95
.78
5

C1=0.891
63
C2=1.027
11
C3=0.000
0
C4=0.210
82


3.58
83
3.85
71
4.00
00
3.73
33

0.75
8

0.523
P>0.05
Not
significa
nt
Terms,
condition
s&
Benefits
Between
Groups
Within
Groups


3
5
6


1.3
24
0.8
25

C1=1.042
76
C2=0.755
93
C3=0.000
0
C4=0.567
65


3.94
12
4.42
86
5.00
00
4.10
000

1.60
5

0.199
P>0.05
Not
significa
nt
Tax
exemptio
n
Between
Groups
Within
Groups

3
5
6

3.0
82
0.8
66

C1=1.008
43
C2=0.916
87
C3=0.000
0
C4=0.666
67


3.79
41
3.92
86
5.00
00
3.00
00

3.55
9

0.020
P<0.05
significa
nt*
Easy
transactio
ns
Between
Groups
Within
Groups

3
5
6

1.0
58
0.6
87



C1=0.854
89
C2=0.892
58
C3=0.000
0
C4=0.666
7


3.76
47
3.78
57
5.00
00
4.00
00

1.54
1

0.214
P>0.05
Not
significa
nt
Affordabl
e
Brokerag
es
Between
Groups
Within
Groups


3
5
6


1.2
78
0.7
66

C1=0.869
88
C2=0.937
61
C3=0.000
0
C4=0.849
84


3.02
94
3.42
84
4.00
00
3.50
00

1.66
8

0.184
P>0.05
Not
significa
nt
Significance at 0.05* Levels

It is inferred the table-4.6 that there is significance among
Area of Investment and the dimension of influential factors
such as tax exemption. However there is no significance
among the Area of Invest and the other dimensions of
influential factors.

Table 4.7: One way Analysis of Variance between ways of
Invest decision reached with regard to various dimension of
Investment Decision

Sources D
f
Me
an
Sq
uar
e
Standard
Deviation
Mea
n
FR
atio
Significa
nce
Awarenes
s
&knowle
dge
Between
Groups
Within
Groups

4
5
9

2.0
20
.68
5

W1=0.92
338
W2=1.99
620
W3=0.77
190
W4=0.00
00
W5=0.42
164


3.00
00
3.58
33
4.06
25
4.00
00
4.20
00

2.95
0

0.028
P<0.05
significa
nt*
European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

14

Terms,
condition
s&
Benefits
Between
Groups
Within
Groups


4
5
9


4.8
95
0.5
56

W1=1.00
00
W2=0.71
774
W3=0.62
915
W4=0.00
000
W5=0.00
00


3.50
00
3.83
33
4.43
75
5.00
00
5.00
00

8.79
7

0.000
P<0.05
Highly
significa
nt**
Tax
exemptio
n
Between
Groups
Within
Groups

4
5
9

6.8
82
0.5
49

W1=0.92
338
W2=0.57
735
W3=0.70
415
W4=0.70
711
W5=0.51
640

3.30
000
2.83
33
4.31
25
4.50
00
4.60
00

12.5
32

0.000
P<0.05
Significa
nt*

Easy
transactio
ns
Between
Groups
Within
Groups

4
5
9

2.1
66
0.6
00




W1=0.88
258
W2=1.75
378
W3=0.70
415
W4=0.00
000
W5=0.22
361

3.60
00
3.75
00
3.68
75
5.00
00
4.50
000

3.61
1

0.459
P>0.05
Not
significa
nt
Affordabl
e
Brokerag
es
Between
Groups
Within
Groups


4
5
9


0.7
32
0.7
96

W1=1.07
115
W2=0.88
763
W3=0.65
511
W4=0.00
000
W5=0.87
560

3.10
00
3.66
67
3.18
75
3.00
00
3.10
00

0.91
9

0.184
P>0.05
Not
significa
nt
Significance at 0.05* Levels
Significance at 0.01** Levels

From the table 4.7 it is inferred that there is a high
significance between way of investment decision reached and
the dimension of Awareness &knowledge, Terms,
conditions& Benefits, Tax exemption. However there is no
significance among way of investment decision reached with
other dimensions


Table 4.8: Inter Correlation Matrix
Inter correlation Matrix among Various Dimensions of
influencing Factors

Subject
Dimens
ions
Marke
t
knowle
dge
Risk
s
Retu
rn
Secu
rity
Matu
rity
Liqui
dity
Market
knowle
dge
1
Risks 0.000*
*
1
Return 0.000*
*
0.00
0**
1
Security 0.000*
*
0.00
1**
0.00
0**
1
Maturit
y
0.000*
*
0.00
0**
0.00
0**
0.000
**
1
Liquidit
y
0.000*
*
0.00
0**
0.00
0**
0.000
**
0.000
**
1
**Significance at 0.01 Levels
From the table 4.8, it is inferred that, all the P value are less
than 0.01(P<0.01), hence it conforms high significance
between these 6 variables. all this 6 components such Market
knowledge, Risks, Return, Security, Maturity, Liquidity
factors having inter correlation which influence the investors
to invest on commodities market investments collectively.

V. CONCLUSION
Finally the research conclude with investment behavior of
investors and their attitude towards commodities market
investments, that is the different respondents consider the
different factors to take their investment decisions particularly
in commodities market investments, because it is having more
both risk and return factors, if the company advice the make
the respondents to know the long benefits, they will also turn
their eyes on commodities market. Particularly the Bullions
have more value and being traded in huge volume per day. If
the respondents invest in these products, they can gain more
profit, but the company has to trade and give service
effectively to satisfy the investors investment needs. Long
term investments are highly suggestible than short term
investment, because long term investments give a stable
return for long time also it will make the investors to increase
their knowledge in commodities market products and its trend
and directions.



European Journal of Commerce and Management Research (EJCMR) Vol-2, Issue 1
www.ejcmr.org January 2013

15

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week Edition, page no. 78
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