The Hindu Business Line : NCDEX hikes margin on guar seed deals

THE National Commodity and Derivatives Exchange (NCDEX) has decided to impose an additional margin of 10 per cent on open position in all guar seed contracts effective from Friday.

With this, the total margin on guar seed contacts will be 22 per cent.

The existing applicable initial margin is 12 per cent on such contracts.

However, initial margin on guar gum contracts will remain at 15 per cent on open position, an exchange official said.

"Volume of trades may reduce a bit. Also, some members may be forced to square off their positions," an exchange official said.

Traders feel that speculative activity may reduce, as transaction cost would increase.

"The step to impose 10 per cent additional margin can restrict excessive speculative trading but majority of trading volume is done by day traders. They are mostly squaring off their positions at the end of the day," a Jodhpur-based processor and exporter told Business Line.

At the exchange, open interest position of November contracts is 81,260 tonnes as on October 6, which increased sharply from just 3,380 tonnes as on August 21.

At present, overall demand in the domestic and export market is dull because of price disparity in the market.

"As a result of high volatility and increase in seed prices, our processing cost has gone up by 10-20 per cent.

About 20 per cent seed processing units in the western region of Rajasthan are closed. Export enquiries are poor, he said.

"Guar seed November contracts prices have gone down by about 13 per cent in just two weeks time but spot prices at the Jodhpur market have reacted by only 7 per cent due to sluggish demand for export and domestic users. Exports was down last month," a leading trader said.

Guar seed November contracts prices declined to Rs 1,877 per quintal from Rs 2,164 closed on September 20 while spot prices at the Jodhpur market also fell to Rs 1,703 on Thursday from Rs 1,850 quoted on September 20, on sluggish demand and increased fresh inflows.

"Spot prices are expected to rule lower as new arrivals will increase in the mid-October period. Also, current stocks position is relatively comfortable to current demand," another trader said.