FMC measures fail to stall rise in guarseed, gum futures

The continuous upward surge in guarseed and gum futures has prompted a series of measures from the commodity markets' regulator, Forward Markets Commission (FMC).

But these measures have failed to stall the sustained rise.

Guarseed and gum futures on the National Commodity and Derivatives Exchange have been hitting the 4 per cent upper price limit almost daily.

“There is nothing wrong in prices rising but there should be no trading irregularities. We are trying to see what more we can do on this matter,” Mr Ramesh Abhishek, Chairman, FMC, told Business Line .

The last action taken by FMC was to issue showcause notices to five members after it found irregularities in guar futures trade following a probe conducted by its team.

FMC also asked 30 other entities to produce additional documents to show proof of sourcing of funds.

Exchanges are also keeping an eye for any irregularities, Mr Abhishek said.

Fundamentals are supportive for the rise in prices of guar complex but not to this extent, said Mr Badruddin Khan, Associate Vice-President, Angel Commodities.

At present, 40 per cent margins have been imposed on the buy side of guar futures. The price movement on guar futures is reflective of the physical trade of the underlying, said Mr Vijay Kumar, Chief Business Officer, NCDEX.

“Fundamentals are very strong, demand is high,” he said adding that the demand for guar gum is largely inelastic. Also, there are no substitutes for guar gum, he said.

This year guarseed production is estimated at 11.5 lakh tonnes, down from last year's 15 lakh tonnes.

Today, both guarseed and guar gum futures hit 4 per cent upper circuit in early trade but eased thereafter.

Current factors are supportive of price rise and these include lower arrivals in the mandis and strong export demand for guar gum from the US, said Ms Vimla Reddy, Analyst, KarvyComtrade.

STRONG DEMAND

“The peak arrival season has ended. Also, farmers are not bringing in stocks because of cold weather. The market is anyway open only for a short while,” she said.

Internationally, demand for guar gum is very strong, said Mr Sagar Doshi, Analyst, AnandRathi Commodities. India is a major producer of guar gum, which is used in a number of industrial applications.

But a correction in prices of guar complex is overdue, said Mr Khan.

Guarseed futures for January delivery on NCDEX may face major resistance at Rs 8,960 for 100 kg and guar gum at Rs 29,900 for 100 kg, Mr Tarang Parmar, Technical Analyst, KarvyComtrade, said.

At mid-session today, January guarseed was being traded in the range of Rs 8,630-8,878 for 100 kg.

January guar gum was in the range of Rs 28,500-29,383 for 100 kg.

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