Impact of commodity futures on spot prices using selected agricultural commodities in India

Commodity Futures Market in India plays a major role in the economic development of the country. India has a long history of trading in commodities and related derivatives. The players in the commodity market have been largely either producers, traders or major users of commodities. Annual growth of commodity Derivative trading in India showed a tremendous growth in terms of number of products on offer, volume of trade and increase in number of participants. The study attempted to examine the interrelationship between spot and future prices in Indian Commodity Market using selected agricultural commodities namely ‘chana’, ‘gaurseed’ and refined soyoil. The daily price information of the selected commodities in spot and futures market for a period of seven years 2005-201 1. For the present study secondary data collected from the website of one of the prominent national commodity exchange, National commodity Derivative Exchange of India Ltd (NCDEX). The results indicate that agricultural commodity prices in India have gone up after the introduction of futures trading. The study-examines the daily price co-integration relationships and price discover/process between spot and futures markets.