| Pub. Date | : Jan, 2022 |
|---|---|
| Product Name | : The IUP Journal of Applied Finance |
| Product Type | : Article |
| Product Code | : IJAF50122 |
| Author Name | : Jyothi Shivakumar N M*, Bharath V** and G Kotreshwar*** |
| Availability | : YES |
| Subject/Domain | : Finance |
| Download Format | : PDF Format |
| No. of Pages | : 22 |
The efficiency of a futures market is generally determined based on price volatility and price discovery process. The study involves an empirical analysis of the problems and prospects of Maize Futures Market (MFM) using three parameters: volatility, price discovery, and hedging. MFM failed to measure up to any of these parameters. There exists enough empirical evidence to show the persistence of a high level of volatility in futures prices. As regards the price discovery process, it is found that the MFM is yet to evolve. It needs to be more efficient in terms of capturing and reflecting the new information in its price change, thereby causing and leading the spot market. Certain policy initiatives are imperative for strengthening MFM in India. There is a need to create a greater awareness level amongst the stakeholders, particularly the farming community. There is a greater need to add capacity by creating more maize futures market delivery centers and revision on the part of contract margin and other specifications.
Price stability is a prerequisite for sustained growth of a commodity market like maize. Price stability depends on the effectiveness of the price discovery process and price risk hedging opportunities. Exchange traded futures are an integral part of a modern commodity market to enable price discovery and hedging opportunity. Empirical studies on the price discovery function of agri-commodity markets in India, particularly maize, are very few in number, and most of them are based on commodity indices. As each commodity has its unique set of characteristics, examining the price discovery process specifically at the individual commodity level may bring more insights into the inter-temporal causal relationship between commodity futures and spot prices. Simultaneously, the degree of usefulness of futures for hedging price risk needs to be examined. A study aimed at understanding these issues will have to be based not just on secondary data, but also on primary data involving interaction with stakeholders. Therefore, the present study has identified this research gap and carried out the research work considering both secondary and primary sources of data with an objective to suggest some policy measures for empowering Maize Futures Market (MFM) in India.