Unveiling the Lead-Lag Relationship Among Metal Derivatives in the Multi Commodity Exchange (MCX) of India: A Comprehensive Analysis

Abstract

This research paper delves into the substantial impact of commodity exchanges in India on the economy, specifically focusing on the areas of improved price discovery and the facilitation of systematic derivatives trading. Market participants, including hedgers and traders, effectively utilize futures contracts as strategic tools to control prices and capitalize on market volatility. Both agricultural and non-agricultural products are actively traded in the spot and futures markets, with metals emerging as the dominant category on the Multi Commodity Exchange (MCX). The process of price discovery within financial markets is a pivotal factor that ensures sustainable trading practices. Through an extensive study analyzing the relationship between spot and futures prices of seven metal derivatives traded on the MCX over a decade-long period, significant correlations have been identified across all cases.