Published Online:October 2024
Product Name:The IUP Journal of Accounting Research & Audit Practices
Product Type:Article
Product Code:IJARA121024
Author Name:Yashmin Khatun, Sabat Kumar Digal and Dushyant Ashok Mahadik
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:271-301
The study assesses the efficiency of commodities futures market in India using 12 commodities from four commodity classes—base metals, agriculture, gold and energy— traded on the Multi Commodity Exchange (MCX) of India from January 2010 to February 2020. To verify efficiency and unbiasedness, the combined hypothesis of a, b = 0, 1 was evaluated against the long-term linkage between spot and futures markets, along with Johansen cointegration test, Granger causality test and vector error correction model (VECM). Using the theory of value investing, the study suggests potential investment avenues based on the VECM result. Although the result shows a long-term linkage between both the markets for all commodities, the market is determined to be inefficient and unbiased for agriculture commodities. As for mentha oil, cardamom and gold, the study found that spot market leads in information transmission, while futures market leads in base metals, energy, silver and CPO. The study includes only a subset of the broader Indian futures market. Among commodities listed on different exchanges, this study is restricted to commodities traded on MCX, a major participant in the Indian commodities futures. The study offers sufficient scope for undertaking further research on related issues.
Commodity markets are as old as human civilization. Commodities have always played a crucial role in influencing a country’s economy. Since commodities meet people’s basic needs, all countries make special efforts to boost their productivity.