Downturn in rubber mart to continue

With the downtrend in natural rubber prices in the domestic market continuing, the spot price of RSS-4 on Thursday touched a three-month low at Rs 88 a kg.

According to city-based traders, the benchmark grade, however, bounced back to close at Rs 90 a kg today.

In tandem, the rate of ISNR-20 dropped to Rs 87.50 and RSS -5 to Rs 86.50 a kg.

Volatility in the futures market also impacts the spot prices, and today's rise was mainly due to an appreciation in the futures prices, especially in the August contract.

Although the market does not want another crash, both internal and external indicators seem to be suggesting a continuation of the bearish trend.

The current downturn in the domestic market has mainly been in line with the continuous decline in global prices, chiefly in Tocom futures.

In just 10 days, domestic prices have lost Rs 12 (a kg), while prices in the international market have seen a fall of Rs 8. The local market closed below the Rs 100 mark on July 18 and since then it has been a free fall in both the Kochi and Kottayam markets.

Tocom futures on Thursday closed at Rs 107 "� the lowest level in recent times. Today, it closed slightly higher at Rs 108.50.

Experts, however, do not attribute the downturn in the domestic market only to the fall of prices in the global market, they also hold the low buying trend responsible for the same.

A section of local traders said industrial buyers, primarily tyre manufacturers, are keeping away from the market on account of the ongoing slump in prices. Market sources also anticipate a steep increase in production during the main production season (October-December). So, a further dip in prices is expected in the coming weeks.

Exporters, because of non-refund of VAT for the last six months, are not in a position to buy rubber, and even this has hit the price line badly. For the same reason, a local trader said, exports too had been hit during the last two-three weeks.

He pointed out "exporters had to get at least Rs 10 crore by way of refund and this had blocked the flow of money into the natural rubber market. However, the trader said, the government had agreed to release the amount quickly, which would hopefully solve the liquidity crunch.

With all the factors hinting at a further fall in prices, the main stay for in the natural rubber market would be the movement of prices in futures trading "� in both the domestic and the global markets.