Way 2 Wealth Commodities Pvt. Ltd.

Way2Wealth Commodities Pvt. Ltd. Commodity Markets July 2010 making investing simpler, more understandable and profitable

Index • Definition • Commodity – As Asset Class • Commodity – Uniqueness • Classification of Commodities • Indian Commodity Market Size • Commodities Offered for Trading • Why Commodities • How to Invest • Commodities @ Way2Wealth

Commodity - Definition A commodity is any good or service produced by human labour and offered as a product for general sale on the market - Karl Max • Characteristics • Commodity is anything movable (a good) that has following characteristics • Fungible, i.e. the same no matter who produces it • Derivatives, i.e. involves further processing into number of products • Economic cost, i.e. production of it involves some cost

Commodities – in Real Life • Wheat in your bread • Petrol in your vehicle • Coffee on your table • Sugar in your sweets • Chana in your chhole • Gold in your necklace • ……… and so on ……. • Commodities are everywhere

Commodity – As Asset Class • In financial parlance, assets are economic resources that is capable of being owned or controlled to produce value • Commodity too has gained importance currently as independent asset class • Commodity, being the natural goods are independent of other asset classes • Assets Classes • Equities : Performer during economic expansion & an out performer over very long term… • Fixed Income: Performs at the later stage of recession… • Real Estate : Performs during early expansion… • Commodities : Performance spread evenly over the economic cycle…

Commodity – Unique points of diversification 1. Seasonality A major force in the commodities markets 2. Correlation Unlike other asset class, commodities are positively and negatively correlated within & outside the group which is unique to commodities only Weather No other asset class are so much influenced by weather patterns Hedge Provides natural hedge against war, inflation, other asset portfolios, recessions etc. example -GOLD

Commodity – Performance

Contribution in global landscape Global Vs. India • Global commodity has relatively long history • Size is 9 times larger than India India • Commodity futures, though active since 19th century was banned later in 1970’s • Commodity volumes shoots up significantly after re-launch in 2003 • MCX emerged as world’s Sixth largest exchange • Volumes on Indian exchanges are increasing at CAGR of 73.7 percent Commodity Trading ( Value in Million USD) 2009 2008 Global 14831317 11712611 India 1469673 1067984 Source:FMC,Way2Wealth Research

Global growth in Commodities 2004-09 Share of Asia has jumped more than 5 times

Global growth in Commodities 2008-09 Chinese exchanges has seen two fold increase in volume

Classification of Commodities

Commodity – Indian Structure FMC – The Regulator Commodity Exchanges National Exchanges Regional Exchanges NCDEX MCX NMCE NBOT 20 Other Regional Exchanges Leadership position with >90% share

700 600 500 400 300 200 100 0 2004 2005 2006 2007 2008 2009 2010 MCX NCDEX TOTAL Source:FMC,Way2Wealth Research Indian Growth so far Volume Growth in Indian Exchanges Significant rise in volume since launch of exchanges in 2003 > 65% CAGR Growth MCX Leader in Metals & Energy Segment wise % Share of Commodities NCDEX Leader in Agri 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 Bullion and other metals 31.5 36.1 57.9 64.6 56.7 40.8 Other than bullion metals - 23.2 - - - - Agriculture 68.2 55.3 35.8 23.1 11.9 15.7 Energy 0.3 8.4 6.3 12.3 20.3 - Others 0.0 0.1 0.0 0.0 31.4 0.0 Source:FMC,Way2Wealth Research * 2008-09 other segment includes energy& other metals

Indian Growth during 2004-09

Returns in Indian commodities • Almost 45 commodities are available for trading in both NCDEX & MCX • Though few have been de-listed during high inflation times, re-listing also has happened • Bullion, Base metals, energy & Agri are the major contributors in terms of volumes

Why Invest in Commodities • Commodity provides true diversification in financial portfolio • Commodity act as hedge against risks involved in business • Rising income will ensure Inflation which in turn will ensure bull market in commodites • Explosion of population and shriking agricultural land would leave commodity scarce • Returns chasing funds & investors (traders, investor &HNI) will make it vibrant • Consumption / Spending in infrastructure / GDP growth will lead to depletion of metals • Secular bull market in commodities is likely to continue

Who Can Invest • Hedgers : Risk Management • Consumers – Refineries, food processing companies • Traders, exporters, importers • Producers – farmers, Integrated producers • Speculators: High Volatility Higher Leverage • Retail investors, Commodity spot trader • Institutional, Corporate & proprietary traders • Arbitrageurs : Safe Opportunist • Spot future arbitrage • Spread Strategies • Intra and inter market arbitrage • Investors: Portfolio diversifier • Individuals, Pension & Mutual Funds • Corporate bodies

How to Invest Procedure for Trading in Commodities • Open Demat & Trading A/C (Way2Wealth) • Filling KYC (Know Your Customer) • Documents required : Pan Card, Address Proof, Networth, Cancelled cheque (MICR), Photo etc • To get familiar with this asset class, start reading research reports and monitor advisory and execution • Acquire full knowledge of risk involved in futures • Mark to Market • Daily Pay-in & pay-out • Margin requirements • Contract expiry & rollover • Leverage, profit & loss etc

Research @ Way2Wealth • Methodology - Analysis • Fundamental • Supply-n-demand, crop survey, climatic changes, policies, logistics, specifications, delivery stocks, physical market linkages, Cartel move, etc • Technical • Chart patterns, indicators etc • Derivative • Volume and Open Interest Change, Contract duration, rollover, Relative analysis with other markets etc • Statistical • Arima modelling, Correlation & regression study, Deviation, Time series, Seasonality, Ratio study etc.

Research Products @ Way2Wealth • Products • Strategies • Arbitrage / Spreads • Hedging – All commodities • Trading / Investment advisory • Reports • Daily • Weekly • Special • Events • Commodity Profiles • Special Support • Need based special coverage of non futures commodities like Coal, Chemicals, Naptha, Freight, Carbon credits etc. (on cost basis)

Products @ Way2Wealth • Trading Products • Based on Fundamental / Technical / Derivatives & Algorithm • Plain vanilla Trading • Customised Trading • Investing Products • Algorithm or statistical based • Trend chasing, Money management principle, premium brokerage • Strong execution skills

The People @ Way2Wealth • Sunil Ramrakhiani - COO • More than 15 years in industry. Founder member – NCDEX, Member of product committee, Regular speaker in various forum • Vinay Tiwary - Sales Head More than 8 years in industry. Have worked with prominent exchange as product head for bullions. • Shantanu Bhardwaj - Head Business Analytics & Product Development More than 8 years in industry. Conceptualise & Launched pulses & Guarseed contracts in NCDEX. Have worked as Regional Manager –west in IL&FS Investsmart. • Brajendra Talesara - Head Dealing & Arbitrage desk More than 12 years experience in industry. Strong execution skills. Have worked in Anand Rathi, Investsmart etc.

The People @ Way2Wealth • K N Rahaman - Research Head • More than 10 years in Industry. Former Research Head in Agriwatch & Investsmart. Consultancy Projects done for ADB, JBIC, ICICI, OXFAM, DUPONT etc. Member of All India crop forecasting committee (industry) for pulses & oilseeds. • Prasad MSR - Research Analyst More than 6 years in industry as Research analyst for various commodities. Have worked with IL&FS Investsmart, Transgraph etc • Krishna Reddy - Research Analyst More than 6 years in industry as Research Analyst for various commodities. Have worked in IL&FS investsmart

Thank you Team Commodities

Way 2 Wealth Commodities Pvt. Ltd.