Ndex Internship 1o6e1e

Chapter One INTRODUCTION

1.0 Background of the Study

As per the requirement of Faculty of Management (FOM) of International American University the students of fourth semester were supposed to undergo internship in any organization for minimum of eight weeks for the partial fulfillment of Masters in Business istration (MBA) program. For the internship the internee got the opportunity to do internship in Nepal Derivative Exchange (NDEX) Tinkune, Kathmandu, Nepal

An internship is a unique aspect of education that integrates theoretical study with the planned and supervised career related work experiences. So, internship program is included as the part of MBA curriculum to make students more practical and make them aware of real corporate world.

Derivative sector is one of the crucial sectors in any economy. Providing risk management services to people is the main aim of derivative and it emphasizes on portfolio investment service.

This report is completely based on the personal experience and knowledge gained while working as an internee in NDEX. The whole duration of internship was completed in research and development and marketing department. This report includes all the aspects of R&D department and marketing department

It was great experience to work as an internee in NDEX. This experience gave an opportunity to gain practical knowledge on working in an organization and utilize conceptual knowledge in specific area of the study.

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1.1 Objectives of the Study

The main objective of the internship report is to explore the practical experience gained about the functioning of NDEX during internship. The other objectives of this study are as follows: 

To understand about derivative and commodity market.



To get acquainted with performance of NDEX.



To know about the broker’s responses towards the services provided by the exchange.



To acquire the general idea on the NDEX trading software



To develop interpersonal skills and the skills of networking in the real work environment.

1.2 Study Methodology

A research methodology defines what the activity of research is, how to proceed, how to measure progress, and what constitutes success. It can be defined as "a particular procedure or set of procedures”. The following methodology is used in this study and the preparation of this project report.

1.3 Organization Selection

The internship program has been made an essential part of academic program in MBA, which aims to expose the students to business management sector as well as industrial sector. It gives students opportunity to apply theoretical knowledge they have gained so far into real, practical world. NDEX was selected for the internship program as it is proved to be the good platform for career development and growth.

1.4 Placement 2

The internee was appointed and placed in R&D department and marketing department, under the supervision of Mr. Ram Saran Upreti. The internee got an opportunity to learn a lot about the activities carried out in derivative exchange. It was a great platform to familiarize oneself with the corporate culture.

1.5 Duration The internee completed Eight weeks of Internship (two months) from 17th October, 2011 to 21st December, 2011 as the partial fulfillment of requirement of Masters in Business istration (MBA) of International American University (IAU). The whole internship period was spent on the R&D Department and marketing department of NDEX, and worked as a full time internee.

1.6 Data Collection

All the information needed for the research study have been collected from different authentic sources and have been categorized them as primary and secondary data. They are briefly discussed below:

1.7 Primary Data Primary data are raw and first hand data collected by the personal experience and observations. In this internship report primary data were obtained by the internee from the experience, day to day observation of operation, directions of supervisor and in depth interview with the NDEX staffs.

1.8 Secondary Data Secondary data are those data which are already used and published. The secondary data for the making of this report has been collected from the, brochure, website and other published documents.

1.9 Limitations 3

The internship period was completed gaining lots of knowledge and experiences but there were some restrictions which somehow restricted or limited the comprehensive study. Those limitations are listed below: 

The deep analysis could not be done due to time constraint.



Some information was confidential in nature so it cannot be presented in the report.



Interpretation and conclusion were drawn within the limitation of individuals’ knowledge and the judgmental abilities.

1.10 Activities Performed in NDEX

The internee got an opportunity to learn and perform various activities in the R&D department of NDEX. Various activities were assigned to the market analysis reason for market taking bullish trend and reason for trending bearish trend. Visiting to the broker and doing research of the current status of the commodity market of Nepal.

1.11 Organization of Study

This study has been organized into five chapters. The contents of each chapter of this study are briefly explained below:

Chapter One: It deals with background, objectives, methodology, selection placement, duration, data collection, limitations, activities performed in NDEX and organization of study.

Chapter two: It deals with the corporate profile of NDEX. It includes core philosophy of NDEX, Board of Directors, managerial aspects, organizational structure of NDEX, products and services offered by NDEX, SWOT analysis and Porter’s five forces model analysis of NDEX.

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Chapter Three: It deals with analysis of activities done at R&D department of NDEX. It includes introduction of R&D Department and activities performed, and problem identified and problem solved.

Chapter Four: It includes lesson learnt, conclusion and recommendations.

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Chapter Two INTRODUCTION OF THE ORGANIZATION

2.1 Nepal Derivative Exchange (NDEX) Nepal Derivative Exchange (NDEX) is the third derivative exchange to be established in Nepal. Although it was established November 2008 but it was officially it started from 4th January 2010. Just like other two commodities exchanges of Nepal it introduced commodities derivative. It offered precious metal such as exposure gold, regular gold, mini gold, small gold, regular platinum, regular platinum, regular silver, mini silver and exposure silver, industrial metals such as regular copper, mini copper and exposure copper, energy product such as regular crude oil, exposure crude oil, mini crude oil, heating oil and natural gas, agro product such as corn, soybean, soybean oil and wheat, soft agro product such as coffee and fiber product such as cotton.

It is located in Tinkune, Subhidanagar Kathmandu. Nepal investment bank private limited is its official banking partner. It means if any investor want to invest in commodities through NDEX then they should have bank in Nepal investment Bank limited.

Nepal Derivative Exchange (NDEX) is a state of art online commodity and derivative exchange operating in Nepal. In the world of increasing volatility, NDEX is the best platform to manage risk across the major commodities from precious metals to base metals, from agro commodities to energies. It is one of the best and most diverse derivative exchanges encoming the widest range of benchmarked product available. It brings buyers and sellers together on the electronic trading floor of NDEX. It provides you with the tools you need to meet your objectives and achieve financial goals . NDEX, professionally managed by a team of young Nepal based entrepreneurs, was incorporated on November 20, 2008 under the Company Act, 2063 of Nepal. It is committed towards revolutionizing the commodity derivative market in Nepal. Our aim is to empower the market participants, stakeholders, investors through innovative product offering, technology and risk assessment, forecasting and managing tools. We are here to transform Nepalese economy to 6

more vibrant, transparent and accessible marketplace to farmers, producers, traders, financers and government.

2.2 Value proposition 

Trading commodities are standardized contracts and participants are antonymous ensuring that the benchmark price is extracted through the electronic trading system.



NDEX enables sellers and buyers to protect price risk of the commodity from the adverse effects of price volatility in the market.



NDEX is equipped with modern banking facilities available in Nepal, which includes online fund transfer, instant deposit and withdrawal in co-operation with our banking partner.



Opportunity to profit in a wide variety of commodities available around the world.



Opportunity to diversify investment portfolio.



Opportunity of Margin Trading



Opportunity to participate in trading round the clock trading



Genuine and transparent price discovery mechanism.



Variety of contract size and period available as per the necessity and capacity of traders /investors.

2.3 visions Become a Nepal based g-local brand for complete financial ecosystem.

2.4 Mission Achieve excellence in commodities and derivative trading with focus on customer delight and satisfaction through NDEX. Bring new and creative ideas to operate both in our local product offering and for larger marketplace. 

Create harmonious environment for derivative trading with the enforcement of regulatory regime where we are working.

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

Develop proper market education and research system.



Set up complete commodity derivative eco-system in Nepal in 5 years time



Enforce zero tolerance policy towards unethical trade practices.

2.5 Board of Directors (BOD) Name

Title

Mr. Santosh Pradhan

Chairman

Mr. Ashok Kumar Pradhan

Non-Execute Director

Mr. Ajay Gachhadar

Non-Execute Director

Mr. Santosh Pyakurel

Independent team

2.6 Management Team Name

Title

Mr. Sailesh Jha

Sr. vice President, Head compliance and surveillance

Mr. Bishowjan Thapa Shrestha

Vice president and head HR

Samita Basnet

istration and client service

2.7 Organization structure of NDEX

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Nepal Derivative Exchange (NDEX)

Kastamandap clearing house (Clearing house)

Non Clearing House (Broker)

Client

2.8 Types of Member of NDEX Generally there are three types of hip that NDEX offer namely:

Trading Member (TM)



Trading Cum Clearing Member



Institutional Trading Cum Clearing Member



Professional Clearing Member

2.8.1Trading Member Trading hip entitles the only to trade on his own as well as on of his clients. These do not have any right to clear or settle such trades. These must be associated with any one of the Institutional Trading-cum-Clearing Member (ITCM) or Professional Clearing Member (PCM) having clearing rights of the Exchange. They are the brokers of NDEX. The broker lists of NDEX are as follow:

Sl No

Brokers

1

ABC Commodities and Portfolio 9

Management Pvt. Ltd. 2

ABC Derivative & Commodities Exchange Pvt. Ltd.

3

A.D.X. Investment Services Pvt. Ltd.

4

Agrawal Merchant Company Pvt. Ltd

5

Ascent Commodity Consultant Pvt. Ltd.

6

Asia Commodities & Securities Exchange Pvt. Ltd.

7

Asian commodities Enterprise Pvt. Ltd.

8

Avenues Investment Company Pvt. Ltd

9

Bloomberg Investment Company Pvt. Ltd

10

BRAM Bulls Pvt. Ltd.

11

Butwal Investment & Empowering Pvt. Ltd.

12

Bulls & Bears Investment Company Pvt Ltd

13

Creative Commodities Pvt Ltd

14

Capital Venture Investment Pvt. Ltd.

15

Dakshina Multipurpose Company Pvt. Ltd

16

Derivative Guru Pvt. Ltd.

17

D.S.M Investment Pvt. Ltd

18

Derivative Futures Trading Pvt. Ltd

19

D.J.S.M Investment Pvt. Ltd.

20

Eleven Rays Broking Solution Pvt. Ltd

21

Emerging South Asia Pvt. Ltd

22

e-Zone commodities Market Pvt. Ltd

23

Farwest Share & Investment Market Pvt.Ltd.

24

Focus Invt Pvt. Ltd.

25

Future Friends Investment Company Pvt Ltd

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26

Future View Commodities Pvt. Ltd

27

Futures focus Pvt. Ltd.

28

Global Derivatives Pvt. Ltd.

29

Haatemalo Bulls Investment and Research Pvt. Ltd.

30

Himalayan Derivative Traders Pvt. Ltd.

31

I.D.L Commodities Pvt. LTd.

32

Jai Shreenath Investment Pvt Ltd

33

Katrina Trade and Investment Pvt. Ltd.

34

Kasti Trading Solution Pvt. Ltd

35

Lisnu Investment Pvt. Ltd.

36

Mass Capitals Pvt. Ltd.

37

MCX Nepal Pvt. Ltd.

38

MorningStar Investment Services Pvt Ltd

39

Najir Investment & Brokerage Com. Pvt. Ltd

40

Nakashtra International Incorporated Pvt Ltd

41

Nisha Investment Pvt. Ltd

42

Ocean Investment Com.Pvt. Ltd

43

Ojaswi Investment Pvt. Ltd.

44

Option Derivative & Commodities Market Pvt. Ltd

45

Panchharatna Investment Pvt. Ltd.

46

Pips Invt. Pvt. Ltd.

47

Premier Commodity & Services Pvt. Ltd

48

Prime Derivative & Future Market Pvt Ltd

49

Pritam Investment Service Pvt. Ltd

50

Radius Commodities and Investment Pvt Ltd

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51

Rational Investment Pvt Ltd

52

Real Life Concept Nepal Pvt Ltd

53

Red Partners Pvt. Ltd.

54

Sai Share and Commodity Service Pvt Ltd

55

Secured Life Investment Pvt. Ltd.

56

Safe Investment Pvt. Ltd.

57

Securities Research Center & Services Pvt. Ltd.

58

Service First Pvt. Ltd.

59

Serving In Derivative Exchange Pvt Ltd

60

Sevenseas Commodity & Trading Pvt. Ltd

61

ShakyaMuni Commodities Traders Pvt. Ltd.

62

Source Investment Pvt Ltd

63

Subha Mangal Investment Company Pvt. Ltd.

64

Swabalamban Bikash Company Pvt. Ltd

65

Synergy Securities and Investment Pvt Ltd

66

United Rising Star Pvt Ltd

67

Upgrade Management Group Pvt. Ltd.

68

Wealth & Investment Management Pvt Ltd

69

West Kathmandu Business Investment Pvt Ltd

70

White Solders Nepal Pvt. Ltd

Source ndex.com.np

As we have already discussed earlier broker charge certain percentage of commission to its investor who want to trade from them so following table will make us clear about the commission charge by NDEX brokers:Commodities

Commission per lot

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Exposure gold

Rs 1200+vat

Regular gold

Rs 1200+vat

Mini Gold

Rs 700+vat

Small gold

Rs 700+vat

Gold

Rs 50+vat

Palladium

Rs 1200+vat

Platinum

Rs 1200+vat

Exposure Silver

Rs 1200+vat

Mini Silver

Rs 300+vat

Regular Silver

Rs 1200+vat

Crude oil Regular

Rs 1200+vat

Crude oil Mini

Rs 700+vat

Crude oil exposure

Rs 1200+vat

Heating oil

Rs 1200+vat

Natural gas

Rs 1200+vat

Corn

Rs 1000+vat

Soybean

Rs 750+vat

Soybean oil

Rs 1200+vat

wheat

Rs 750+vat

Cotton

Rs 1200+vat

Copper regular

Rs 1200+vat

Mini copper

Rs 300+vat

Exposure copper

Rs 1200+vat

Coffee

Rs 750+vat

2.8.2 Trading Cum Clearing Member (TCM) Trading-cum-Clearing hip entitles the to trade and clear, both for themselves and/ or on behalf of their clients. Kastamandap clearing house acts as the 13

clearing house of Nepal Derivative Exchange. Recently Morningstar investment service one of the broker of Nepal Derivative Exchange have taken the license of trading cum clearing member.

2.8.3 Institutional Trading Cum Clearing Member Institutional Trading-cum-Clearing hip entitles the in addition to the existing rights and responsibilities as TCM shall be also entitled to and liable to settle and clear the trades/transactions done by the Trading d with them

2.8.4 Professional Clearing Member Professional Clearing hip entitles the only to clear and settle s the trades executed by their clients. Kastamandap Clearing House is located in Baluwatar Kathmandu.

2.8.5 Who can be the ? 

Corporate



Investment Companies



Private Limited Companies.



ed Partnership firms and



Cooperative societies

2.8.6 Some of the document to be submitted by the member to the Exchange 

Dully filled Application form.



Curriculum Vita of the applicant( Authorized person of firm)



Must have at least bachelor degree.



Must have past experienced regarding this market.



Attested copies of Company registration certificate.



Attested copies of Memorandum of articles & certificate of commencement of business for corporate / institutions



Attested copy of the board resolution authorizing the application for hip for corporate & institutions.



Company minute with authorize signature. 14



Attested copies of citizenship.



Attested copy of PAN or VAT Registration certificate.



Agreement Clearing Member and Trading Member



TM undertaking.



In case of partnership firm, copy of Firm Registration Certificate, Copy of ed Partnership agreement, undertaking from all partners authorizing the managing partner to do the required agreements and other works.



Bank reference letter.



port sized photo of the signatories to be paste on the application form.



Minimum paid up capital of firm 10 Lakhs



Authorized capital above 50 lakhs.

2.8.7 hip Process

Sumbission of hip Application form along with all the document and hip charge processing of hip form and document

interaction with hip interview commitee

Approval of hip Commitee

hip

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2.8.8 hip Charge fee and structure

Sl.NO Particulars

Trading

Trading-cum-

Institutional

Professional

Member

Clearing

Trading-cum-

Clearing

Member

Clearing

Member

Member 1

hip Fee

Rs. 4,50,000/- Rs. 5,50,000

Rs. 20,00,000

Rs. 15,00,000

2

Eligibility Net Worth

Rs.

Rs.

Rs.

For hip

10,00,000/-

1,50,00,000

2,00,00,000

Interest Free Security

Rs 2,00,000/-

Rs. 15,00,000

Rs. 1 Crore

Rs. 1 Crore

Deposit

(50% Cash +

(50% Cash +

(50% Cash +

(50% Cash +

(Refundable)

50% Cash

50% Cash

50% Cash

50% Cash

Equivalent

Equivalent)

Equivalent)

Equivalent)

3

Rs. 50,00,000

4

Processing Fee

Rs. 5,000/-

Rs. 5,000

Rs. 10,000

Rs. 10,000

5

Annual Subscription

Rs. 50,000/-

Rs. 1,00,000

Rs. 2,00,000

Rs. 2,00,000

Fee Source: ndex.com.np

2.8.9 Steps for investor to invest through NDEX platform  Go through the broker listed under NDEX  Must have got bank in Nepal Investment bank.  After the documentation process the investor can trade through NDEX.

2.9 Products and contract specification of NDEX

Sl.NO

Product

Code of contract

Initial margin

Contract size

1

Exposure Gold

Exp GOL

Rs 25,000

1 kg (1000gm)

2

Regular Gold

GOL

Rs 75,000

1 kg

3

Gold Mini

GOLM

Rs 45,000

500 gm

16

4

Gold

Gold10

Rs 1000

10 gm

5

Platinum

PLT

Rs 120,000

2 kg (2000gm)

6

Palladium

PAL

Rs 75,000

1 kg (1000gm)

7

Exposure Silver

Exp SIL

Rs 25,000

30 kg

8

Silver mini

SILM

Rs 15,000

5 kg

9

Silver Regular

SIL

Rs 75,000

30 kg

10

Cotton Regular

COT

Rs 90,000

10000 kg

11

Coffee Regular

COF

Rs 40,000

5000 kg

12

Exposure Copper

EXPCOP

Rs 25,000

5000 kg

13

Copper mini

COPM

Rs 15,000

1000 kg

14

Regular copper

COP

Rs 75,000

5000 kg

15

Crude Regular

CRU

Rs 75,000

250 BBL

16

Exposure Crude

EXPCRU

Rs 25,000

250BBL

17

Crude MINI

CRUM

Rs 30,000

50BBL

18

Heating oil

HEA

Rs 75,000

8400 US GALLON

19

Natural Gas

NAG

Rs 75,000

250 MMBTU

2.10 SWOT Analysis

A scan of the internal and external environment is an important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection.

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S

W

O

T

Strengths of NDEX 

Experienced, highly motivated, competent, and well trained employees are the strengths of NDEX



NDEX has been providing wide range of products and services to its broker.



NDEX has a prevalence of a strong corporate culture and well established goodwill and good corporate image in the market..



In context of derivative and commodity market the name NDEX is itself a brand. So, it’s not necessary like other banks to invest huge amount of money in marketing.



Is only the commodity exchange which provide exposure contract to the client.



friendly trading software compared to other exchange..

Weaknesses of NDEX 

Not so good infrastructure compared other exchange such as Mercantile Exchange Nepal.



Don’t have commodities such as zinc, cocoa, wheat, sugar etc

Opportunities of NDEX 

Can introduce new commodities such as agro commodities.



With the use advanced technology performance can be upgraded to capture the competitive market position.

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Threats of Nepal SBI Bank 

No governing body.



Frequent closures, strikes, power shortages, etc in the nation is also a major threat for retaining growth of this market.



Political instability in the country is another major threat for NDEX as its functioning could not be proper in such a chaotic situation.



Threat from ne derivative exchange.

2.11 The Five- Forces Model The model was originally developed by Michael E. Porter, a Harvard professor and noted authority strategic management. According to Porter (1985) successful managers do more than simply react to the environment. They act in ways that actually shape or change the firm’s environment. Porter’s model is an excellent method for analyzing the competitive environment in order to adapt to or influence the nature of competition.

Relative Power of other Stakeholders

Suppliers

Threat of new Entrants

Competition in an Industry

Substitute Products

Figure No 3.2: Porter’s Five Forces Model

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Customers

The rivalry among firms in an industry: As a first step in understanding the competitive environment, a firm must identify its competitors. The more the firms compete against one another for customers, the lower is the level of industry profits. In intense competition, weaker firms are eliminated and the strong firms survive. When firms compete for the same customers and try to win market share at the other’s expense, all must react to and anticipate their competitors’ actions. The potential for new entry into the industry: The easier it is for firms to enter an industry, the more likely it is for industry prices and therefore industry profits to be low. Thus, the high barrier to entry, the lower is the threat of competition. With fewer competitions, it is easier to obtain customers and keep prices high. The power of suppliers: If there are only a few suppliers of an important input then suppliers can raise the price of that input. An expensive input results in lower profits for the firm. Firms are at disadvantage if they become overly dependent on nay powerful supplier. The power of customers: If only a few large customers are available to buy a firm’s output, they can bargain to reduce the price of that output. As a result, firms make lower profits. Thus, a firm’s ability to identify its main customers and produce goods and services their want is a crucial factor affecting its competitive position. The threat of substitute products: Often, the output of one industry is a substitute for the output of another industry. Firms that produce a product with a known substitute cannot demand high prices for their products. This constraint keeps their profits low. 20

Relative power of other stakeholders: Other stakeholders of the firm like government of the country, political parties, labor unions, etc. also have influence upon the operation and functioning of any firm. Thus, a firm should always try to fulfill all the requirements of these stakeholders to exist and to function competitively in the market place. The Porter’s Five Forces model is a simple tool that s strategic understanding where power lies in a business situation. It also helps to understand both the strength of a firm’s current competitive position, and the strength of a position a company is looking to move into. Despite the fact that the Five Force framework focuses on business concerns rather than public policy, it also emphasizes extended competition for value rather than just competition among existing rivals.

Analysis of NDEX in relation to Five Forces Model This model is applicable in the derivative and commodity sector. Analyzing NDEX through this model is the aim of describing this model. Derivative and commodity market is one of the most developing sectors in Nepal. There are many investment alternatives for the client of the Nepal such as investing in real state, mutual fund, stock market, investing in gold etc. Thus we have already discussed that derivative sectors is also one of the investment opportunity for the client so other investment management companies are the threat it NDEX. There are 4 commodity exchanges in Nepal which offer the similar commodities contract specification to the client. Customers are being king of the market and fulfilling their expectation should be the prime objective of NDEX to retain existing customers and attract new ones. Identifying potential customers and catering to their need to their level of expectation should be main objective of NDEX.

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Substitute product in case derivative sector could be other financial institutions that provide similar kind of services and facilities to customers. For NDEX threat from substitute products could be those well established investment companies who offer high return to customers in deposits and lends high sum of amount The main Stakeholders of NDEX are yet to be formed but talk is going on with Security Board of Nepal (SEBON).

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Chapter Three ANALYSIS OF THE ACTIVITES DONE For the internship program, Nepal Derivative Exchange (NDEX) was chosen as the organization for the study, at Tinkune. Duration of the internship was of two months, which started on 18th October 2011 and was successfully completed on 21st December. Due to the keen interest in R & D, a specific concentration was given to the department and decided to spend two months of internship in R &D and few weeks in Marketing department.. The internship program proved to be a great learning experience. The internee was provided with a full and realistic view of workplace culture by the employees at research and developement department, where the internee could get the opportunity to integrate academic skills and knowledge in the practical and professional setting that would help to cope up or deal with the professional challenges. Moreover cooperation and proper assistance provided by the staffs in the operation and research and development department is very much appreciable. In the existence of such a good and helpful environment, knowledge could be gained to the fullest. 3.1 Introduction to Research and development department Research and development, often called R&D, is a phrase that means different things in different applications. In the world of business, research and development is the phase in a product's life that might be considered the product's 'conception'. That is, basic science must exist to the product's viability, and if the science is lacking, it must be discovered - this is considered the research phase. If the science exists, then turning it into a useful product is the development phase. Further terminology refinements might call it engineering to refine production so that the product can be made for a cost that appeals to consumers.

Research and development is an investment in a company's future - companies that do not spend sufficiently in R&D are often said to be 'eating the seed corn'; that is, when their current product lines become outdated and overtaken by their competitors, they will not have viable successors in the pipeline. So how much is reasonable to spend on research and development? That is highly dependent both on the technology area and how fast the market is moving. Two percent of 23

company revenue, not profit, might be enough in a fairly sedate market, but to keep up in rapidly changing markets, companies should expect to spend fifteen percent or more in research and development just to keep up with the rest of the pack. 3.2 Activities done at the Research and Development department of NDEX Under the supervision of operation in charge of NDEX following activities are carried out during the whole internship program: 3.2.1. Market Analysis Since we started from zero level knowledge of commodity and derivative market so after getting the basic knowledge of commodity and derivative market from our intern supervisor sir Mr. Ram Saran Upreti. We got the task of to analyze the market. Generally there are two ways of analyzing the commodity market 

Fundamental market analysis



Technical market analysis

3.2.1.1 Fundamental Market Analysis Fundamental analysis means analysis of facts and figure and predicting weather the market will have a bullish trend or bearish trends. For the fundamental analysis we need to keep a good watch on the news published from Europe and USA business sheets. Following sites were preferred to us by our supervisor for the purpose of fundamental analysis, ibtimes.com, forexfactory.com, oilngold.com, eulse.com, marketwatch.com, Bloomberg.com, cnbc.com etc 3.2.1.2 Technical analysis Technical analysis is also referred to as chart analysis. Technical analysis is based on completely different assumptions. With a technical analysis, the starting premise is that the market is made up of a large group of people. The assumption is that this large group of people will behave in predictable patterns.

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The challenge for technical analysts is to find these patterns in the price movements of the stock. The patterns tend to become obscured in the price trends, since outside events also tend to influence the movement of the stock price. These outside events tend to add “noise” to the patterns that mask or change the price patterns of the stock. Sometimes, outside events interrupt the pattern completely and start a new pattern. An example is an event like the September 11 attack in New York, which had a huge effect on stock prices. Technical analysis uses many tools or techniques. Elliot Wave theory, moving averages, chart analysis, stochastic analysis, trend analysis, and Bollinger bands are just a few of the common ones. However, the goal is always the same: to predict the price movement of the stock. If the prediction is correct, then a profit is made. 3.2.2. Handling NDEX trading software As we have discussed earlier that trading of commodities is done through internet so particular exchange software is required for the purpose of trading. So due to the help of our supervisor we got the good knowledge of NDEX trading software. 3.3 Other Activities I also got a chance to do research of commodity and derivative market by visiting to the number of broker, exchanges and asking them certain queries about the market and the way of improving this market in Nepal. We were provided a certain questionnaire by our supervisor sir which we distributed among the broker and asked them to fill.

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Chapter four LESSONS LEARNT, CONCLUSION AND RECOMMENDATIONS

4.1. Lessons Learnt 

The first and the most important thing learnt throughout the internship period was to deal with the real world situations and how to work and behave in the corporate world.



Learned about the corporate culture.



The exposure to practical environment has increased the experiences of internee and confidence to tackle with the real word problems.



Learned how to behave with the seniors and colleagues and make good relationship with them.



Learned how to speak, function and work in corporate way.



Learned a way of trading in derivative and commodity market..



Importance of time i.e. working within the time constraints is essential in the real world.



Learned the functioning of research and development department.



Practical exposure of marketing and research.



Learnt opening procedures.

4.2 Conclusions The Nepalese Derivative Market is very young. The investors haven’t been able to analyze the situation properly. They are not smart enough to study the situation and take good judgments. There is no regulating body in the Nepalese derivative market. Most of the investors find the derivative market as some sorts of gambling place where people gather together for gambling purpose and try to make out high returns with least investments. But it is very important that one must realize that there is a difference between gambling and speculation and the future markets are not like “gambler” markets. Participants in physical markets use futures market for price discovery and price risk management. In fact, in the absence of futures market, they would be compelled to speculate on prices. Futures market helps them to avoid speculation by entering into hedge contracts. It is 26

however extremely unlikely for every hedger to find a hedger counterparty with matching requirements. The hedgers intend to shift price risk, which they can only if there are participants willing to accept the risk. Speculators are such participants who are willing to take risk of hedgers in the expectation of making profit. Speculators provide liquidity to the market; therefore, it is difficult to imagine a futures market functioning without speculators. So there comes a question like what is the difference between a speculator and a gambler. Speculators are not gamblers, since they do not create risk, but merely accept the risk, which already exists in the market. The speculators are the persons who try to assimilate all the possible price-sensitive information, on the basis of which they can expect to make profit. The speculators therefore contribute in improving the efficiency of price discovery function of the futures market. But it doesn’t mean that the speculation is always good for the economy of a country. Overspeculation needs to be curbed because it can lead to distortion of price signals. For this in case of the Nepalese Derivative Market, the positions held by speculators are subject to certain margins. In the Nepal’s economy, there are various factors that are having a real negative impact on the overall performance of the Nepalese markets. First comes is the power supply problem. With the increasing temperature and drought in the country, the power supply is getting poor. Till the month of Magh-2066, the country is facing 11 hrs of load shedding. Because of this, the manufacturing and other industries are suffering a heavy loss every day. Also, the global economic crisis has forced the industries to cut off the number of employees and thus prevent them from the probable future crisis. The continuous political instability has also hit hard to the market. 4.3 Recommendation All in all the derivatives market in Nepal does not have a longer history and thus seems to be still underdeveloped. Government has prepared some concepts on the derivatives market for risk minimizing for farmers but still the investors are motivated towards earning abnormal profits from speculation. Even though the focus is for agricultural risk management the overall utilization of the market is for speculation. People are utilizing the derivative market for 27

speculating rather than risk hedging. Existing commodities exchanges and the people who take part in the market phenomena should be aware to keep the future of the derivatives market bright. The derivatives market needs to focus on variety of commodities that can manage the risks of that particular commodity. The derivative market on the resources available locally can help develop the derivatives market as well the infrastructures making people as well as the country resourceful. The people should be aware of these markets and the role it can play in their economic elevation. It can bring the stability in the market condition of derivatives in Nepal. It’s solely the effect of role that people can play to balance the derivatives economy. How fast and with what level of ease does the economy overcome the imbalance is what determines the future of the Nepalese Derivative Market

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Appendix

Hierarchy of Nepal Derivative Exchange

Santosh Pradhan Chairman/President

Bishojan Thapa Shrestha Vice president/HR head

Ram Saran Upreti Business development head/intern supervisor

Intern

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BIBLIOGRAPHY

Books

Basic of Commodity market. Monaj Budhathoki

Publication Year book of Nepal Derivative Exchange Private Limited.

Websites

Ndex.com.np Investopedia.com

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