Chilli spot prices up on low arrival, firm exports

Spot chilli prices may extend last week's gains during the next seven days due to low arrivals and good export demand, traders said. Lack of pipeline stocks with stockists is also seen supporting prices on the upside, they said.

During the week, spot prices are likely to harden Rs 10-20 per 100 kg. Today, spot chilli prices, polled by NCDEX, were at Rs 4,806 per 100 kg, unchanged from close Tuesday.

March contract on National Commodity and Derivatives Exchange is also seen up monitoring trends in physical markets.The contract is likely to test Rs 4,800 per 100 kg, said Vinayak NV, analyst at Karvy Commtrade, a brokerage house. At 12:30 pm, March contract was Rs 4,769 per 100 kg, up Rs 49 from close Tuesday.

Arrivals in the main spot market of Guntur have dipped following farmers' reluctance to offload their stocks, as they anticipate a further rise in prices. Daily average arrivals in Guntur are around 35,000-40,000 bags (1 bag= 40-45 kg), down from the expected 100,000 bags. "Last year during the same period (March), chilli prices had crossed Rs 5,000 per 100 kg mark. Farmers want a better price and are hence releasing the stocks in limited quantity," a trader in Guntur said.

Arrivals are also on the lower side, as farmers have not yet finished drying chillies, Naresh Sharma, proprietor of Guntur-based Mirnal Exports, said. Sharma, however, expects arrivals to peak after March 15 due to the onset of summer, making the drying process easier in chillies.

Robust export opportunities from West Asian nations are also likely to aid the upswing in chilli prices, Sharma said. According to traders, loss of chilli crop in China, the largest producer, is attracting potential buyers to India.

"Apart from tracking bullish sentiment in the spot markets, March contract could also gain on short covering," Vinayak said. Nil stocks in NCDEX-registered warehouses and tight supplies in spot markets would prompt traders with short positions to cover them due to lower probability of delivery, Vinayak said.

However, he said rise in prices could also be met with some intra-day corrections.Vinayak recommended to a take a buy position in March contract.