High margins leave chilli cold in futures market, volume down 90% since August

MUMBAI: Trade in Chilli futures at NCDEX has dropped by over 90% since August. In value terms, it has fell from Rs 1,630 crore in August to Rs 106 crore in November. Exchange officials said volumes have come down in other commodities as well because of high margins. NCDEX’s Sanvali Kaushik said volumes are low because of high margins. "Volumes are low in other commodities as well and with similar kind of margins one prefers to trade in metals," said Ms Kaushik. She added that in case of chilli there can also be lack of price view.

Traders said the futures price has not reflected the physical market prices. The spot market price at Guntur for the NCDEX-traded variety has come down by Rs 1,000 per quintal since past one month to Rs 3,000- 3,500 per quintal in loose. In futures market, though the price has started to come down for the February contract, for the November contract the prices are still high.

Chilli trader Ashok Dattani said traders have lost confidence trading on the exchange. "Last year, NCDEX accepted low quality chillies on its exchanges and prices went down despite a firm spot market. This year, the exchange is not accepting even good quality stocks and that kept the prices high for the November contract though the spot market prices were low," Mr Dattani said.

On November 1, while the November contract on NCDEX closed at Rs 4,476 per quintal, the price in Guntur was Rs 3,800 to Rs 4,200 for the loose quality. On November 12, the spot prices were further down to Rs 3,600-4,100 while the November contract closed at Rs 4,389. On November 15, the contract closed at Rs 4,342 while spot at Guntur was at Rs 3,400-3,900.

A Guntur-based trader said price view could not be there for the February, March and April contracts but for the November contract spot prices were available and despite bearish spot market the futures market was moving up.

Kotak Commodity’s Faiyaz Hudani said volumes were overall down on NCDEX but in case of chilli there was no cash and futures arbitrage opportunity as there were no stocks of NCDEX quality. "Stock had been an issue in lowering the volumes," said Mr Hudani.