Chilli futures hit a record Rs 11,224 a quintal on April 23 for June contracts on the National Commodities and Derivatives Exchange. Since then, they have dropped, and on Wednesday closed at Rs 8,770.

“Bearish sentiments are prevailing due to short-covering. Also, on Wednesday a hike in the margin money for pepper affected chilli,” said Mr Anand James, Chief Analyst, Geojit ComTrade Ltd.

In Bowenpally in Andhra Pradesh, quality grade chilli was quoted at Rs 8,600 a quintal, though the modal price or rates at which most trade took place was Rs 6,600.

Guntur, the main market for chilli that sets the trend for the rest of the country, is closed for summer until June 5.

“Prices will begin steadying after June 15. Also, the price movement will depend on how the crop in Madhya Pradesh shapes up,” said Mr Alapati Srinivasa Rao, a trader in Guntur.

This is because the Andhra Pradesh crop has been sold out. “Almost 90 per cent has been sold out,” Mr Rao said.

Traders in Guntur are holding 45 lakh bags (45 kg each) with them in warehouses.

“Prices could flare up if the Madhya Pradesh crop faces any problem,” Mr Rao said.

“Heavy arrivals also led to fall in prices in the last few weeks. Things are bound to be this way in the short-term,” said Mr James.

The rupee is seen as a key factor in exports. A weak rupee could boost exports. “Export demand is good,” said Mr Rao.

But Mr James said: “Not much export demand is visible. It is one of the reasons why the domestic market intelligence cell has asked growers to hold back chilli.” Movement in the price of pepper could continue to influence chilli, said Mr James.

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