Price Discovery in Emerging Commodity Markets: Spot and Futures Relationship in Indian Commodity Futures Market

The price discovery role of the Indian commodity futures markets is investigated through return and volatility spillovers between spot and futures prices.For agricultural commodities, the price discovery takes place in both spot and futures markets.However, in the harvest period, when the futures trading volume is high, the futures market leads the spot market whereas in the lean period both markets jointly perform a price discovery.For the precious metals and energy commodities, the futures markets lead the price discovery role.In the case of industrial metals, LME spot prices (which are taken as spot prices for settlement by Indian exchanges) play a significant role in the price discovery process in the Indian market.