Nervous near-month castorseed contract hits upper circuit

Suresh P Iyengar Mumbai | Updated on October 08, 2019


After falling continuously for the last six sessions, the castor-seed contract on NCDEX was up four per cent at ₹4,280 a quintal, yielding to various measures implemented by the exchange and launch of similar contract by BSE.

The November contract was also up four per cent at ₹4,560 a quintal. The far month contract was even locked up at the higher circuit. Though the traders were confused on prices reversing its downward trend, they hope the exchange move to square off the open position of defaulting members in the October contract has come at the right time to avoid a settlement crisis.

Prices of castor-seed has rallied one-way to touch ₹6,000 a quintal on September 20 and fell sharply to ₹4,276 on October 4, sending both the spot and futures markets in a tizzy.

On Monday, the near month October contract hit the four per cent upper circuit at ₹4,450. Commodity derivatives market was closed on Tuesday.

Last Friday, NCDEX had compulsorily squared off castorseed contracts worth ₹735 crore of the defaulted clients using the contract tear-up option for the first time ever. The exchange had also auctioned 370 tonnes of buy position at the reserve price of ₹4,650 crore to avoid potential default during October contract settlement which will begin from October 11.

The exchange will levy compensation of 8 per cent and a penalty of five per cent on defaulting clearing members. The compensation will be paid to the members who have given consent to voluntary tear up their sell positions, it said.

The exchange had stored up 138,570 tonnes, including the open position of current defaulting members and allocated it to the sell position on a pro-rata basis.

Published on October 08, 2019

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