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NISM Certifications · NISM-Series-XV: Research Analyst · Fundamental Analysis of Commodities

For agricultural commodities such as wheat and pulses in India, which factor is generally most important in determining the floor level of domestic prices?

The Minimum Support Price announced by the government is the key floor for domestic agricultural prices, because the government procures notified crops at that price. Exchange volumes, margin rates and company dividends do not create a price floor.

  1. AMinimum Support Price announced by the governmentCorrect
  2. BDaily volume traded on the exchange
  3. CMargin rates set by the clearing corporation
  4. DDividend yield of agri-companies

Explanation

The government announces Minimum Support Price for notified crops and procures at that level, which acts as a floor for market prices. Exchange volumes, margins and dividend yields do not set a price floor.

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