Comments
Commodity and stock markets regulator SEBI has cracked down on Rapeseed-Mustard trading on NCDEX by banning fresh position in the contract from Friday. This comes on the heels of the regulator banning new positions in chana (gram) two months ago.
Only squaring of the existing position will be allowed in these contracts, said both the exchange and SEBI in a circular without citing any reason for the ban.
SEBI has also banned the launch of fresh futures and options contracts in rapeseed/mustard till further notice. The adverse action will further drain the exchange’s liquidity, said an analyst.
Slip in daily turnover
The average daily turnover on the exchange has been slipping ever since it hit a new high in April. It has dropped 55 per cent from the high of ₹2,907 crore in April to ₹1,876 crore in September.
NCDEX trades in five monthly contracts of rapeseed/mustard expiring till February 2022. The open interest thesecontracts has also been healthy.
With the futures trading on the exchange fast becoming the benchmark for spot markets, the government targets to curtail spike in agriculture commodity prices by speculative trades on the exchange platform, particularly with inflation on the boil, analyst said.
Avoiding spike in prices
In August, the regulator banned the launch of a new futures contract in chana as a precautionary measure to avert sharp rise in prices.
This led to the average daily turnover on the exchange dipping to ₹1,876 crore in September from ₹2,443 crore in August.
Narinder Wadhwa, President, Commodity Participants Association of India, said the turnover on the exchange will be impacted if SEBI continues with its move of abruptly banning contracts and it will be very difficult to bring back hedgers or traders in the ecosystem once the confidence is lost.
Investors’ confidence will definitely be shaken in agriculture commodities because of recent withdrawals of contracts suddenly, he said.
SEBI’s move comes even after the number of empirical studies in the past have proved that derivatives trade generally do not push up spot prices.
It is fundamentals and demand and supply of underlying commodities which impact the spot prices, said Wadhwa.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.