Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)

Abstract

Futures Market Hedging in Indian Commodities Market- A Comparative Study on Spot and Futures Price

Author(s): R. Sugirtha, M. Babu, S. Srinivasan, J. Gayathri, G. Indhumathi

Over the years, the prices of commodities have been moving in an upward direction and hence Commodities Investment is considered an attractive portfolio diversification. Risk is a part of all investments and investors need to use a mechanism which can help them to minimize their risk in investment. One of the derivatives namely futures contracts are used as a tool to effectively manage the risks involved in investments. The present study evaluates the pricing behaviour of Indian Commodities Markets and assesses the hedging effectiveness of futures contract for selected sample commodities, traded at Multi Commodity Exchange India Limited. The major results of the study indicate that the future price of commodities determines the spot price for majority of sample commodities and natural gas future contracts provided a higher hedging effectiveness when compared to other sample commodities.

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