"The active June contract is expected to touch Rs 5,800-6,000 a quintal before its expiry," said Rajlakshmi Amand, analyst, Karvy Comtrade. This is in sharp contrast to the Rs 4,728 a quintal quoted for the June contract on Friday before the fire.
While chilli futures were passing through a technical correction phase with a bullish undercurrent, the fire has further fuelled a firm trend on the commodity, she said.
Consequently, chilli futures hit the 4 per cent upper circuit on Saturday as well as Monday, and even on Tuesday they opened at the first upper price limit of 2 per cent.
However, imposition of 5 per cent special margin on all long positions of June contract by NCDEX on Tuesday, has slightly weakened market sentiments, said a Mumbai-based analyst.
According to Faiyaz Hudani, analyst, Kotak Commodities, "Imposition of special margin won't make much difference in the long run."
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Spot prices are seen moving up by Rs 5 a kg when trade resumes after a few days but gains will be limited as the market will soon after that observe a month's summer recess. However, the date of the break is not yet decided,traders said.
Earlier, unseasonal rainfall in Andhra had damaged the standing chilli crop.
"Rains had damaged almost 20 per cent of the total crop due to which production is likely to be nearly same as that of last year," Amand said. This year, due to the rise in acreage, the market had been anticipating higher output but now it is seen at 1.2 million tonnes, largely unchanged from the previous year, analysts said.
Availability of good quality chilli had already shrunk due to crop damage and the fire has further eroded stocks.
Also, firm export demand from Pakistan and Singapore is likely to keep chilli prices firm, analysts said.
Likely lower output in Pakistan and China, other major chilli exporting countries, will enhance India's export prospects, Amand said.
SPOT PRICES
The main Guntur spot market will remain closed for a few days as the fire has caused a lot of destruction in the mandi and after it opens, prices are likely to be about Rs 5 a kg than the current level, said Vinaykant, a Guntur-based trader.
On Saturday, before the fire broke out, chilli prices in Guntur were in the band of around Rs 30-40 a kg depending on quality.
"However, prices may stabilize within two-three days after the opening of the spot market, as the likely loss of 300,000 bags in the fire is a very small part of the total production," Vinaykant said.
Guntur mandi remains closed for a month during summer, as the heat is unbearable amid heaps of the hot spice, traders said.
Prices of chilli in Indore spot market may also rise Rs 5 from around Rs 52 a kg currently, said Kishore Rathod, an Indore-based trader.
FIRE FURY
The extent of damage to the commodity from the fire is yet to be assessed but traders have estimated the loss at Rs 2-2.5 billion, while initial government estimates have put the loss at Rs 800 million.
In volume terms, the fire has destroyed around 250,000-300,000 bags of chilli, said Vinaykant.
A five-member committee headed by Andhra Pradesh Finance Minister K Rosaiah, set up to study the cause of the fire and assess the losses, is expected to submit its report to Chief Minister Y S Rajasekhara Reddy on Thursday.