Volatility in Indian Commodity Markets: 2013–2015

Assets prices are a function of factors and developments in global markets. Commodities are raw materials used in the specific production process. Commodity prices are influenced by a multitude of demand and supply-side factors. Domestic as well as global developments play a key role in prices of agricultural commodities. Volatility in prices, i.e. sharp upward or downward movement in prices is a key issue associated with prices of commodities. Volatility in prices of crude can have a debilitating impact on currency, production and also can create serious payments problems for the country as in the case of India in the early 1990s. The aim of the paper is to examine the volatility in the commodity markets in the last two years in terms of returns on index and understand the reasons for the recent trends of trade and returns on the commodity bourses. Descriptive statistics are used on data from MCXCOMDEX in two time periods 2013–14 and 2014–15 to examine the volatility in the returns. It is found that not only have returns reduced but volatility has increased in 2014–15 however the decline value traded has reduced. Given the importance of commodity markets and efficient price discovery, this may be the time for the regulators to strengthen the commodity markets.