| "Just look at the figures. Price fall in the last month (of M-grade May futures ins the National Commodities and Derivatives Exchange) of around Rs 100 per 100 kilograms cannot be termed as volatile," Forward Markets Commission chairman S Sundereshan told CRISIL MarketWire. |
| He said the decline in prices worked out to be barely 5 per cent in one month. |
| Reports of FMC directing deliveries in sugar contracts to be made compulsory at futures exchanges was termed as "baseless" by him. "I have no comments to offer," he said, when asked about his views on the decline in sugar prices. |
| The NCDEX M-grade May futures, which opened at Rs 1,900 per 100 kilograms on January 21 touched a high of Rs 1,997 per 100 kilograms on March 2 but declined to a low of Rs 1,775 on April 22. It was trading at Rs 1,810 at 1600 hrs Monday, down Rs 8 from the previous close. |
| Sugar futures at NCDEX is with sellers' options but that is the way it is with most other contracts as well and even if this factor is taken care of prices will still continue to fall, Mumbai-based market analyst Kishore Narne said. |
| This is because sentiment is very weak and there is no buying interest in the commodity, he said, adding there is scope for further decline in NCDEX M-grade sugar futures by another Rs 100 per 100 kgs. |
| It seems most of the big consumers like those manufacturing soft drinks had already purchased their requirement during the winter months and would not require any sugar for the next three months, he said. |
| Narne, however, agreed that there are instances when those who want delivery, which eventually does not take place, are not adequately compensated under existing rules due to certain ambiguities. "These need to be cleared," he said. |
| Currently, there are hardly any deliveries in sugar futures, he said. |
| Scope to artificially rig the market up or down is very limited because then an opposing arbitrage will come up at the exchange that would help bring trend in futures in line with the spot prices, Jigar Pandit of Sharekhan Commodities brokerage, said. |
| There had been an ample number of long positions, which were built up at the exchange in the past few months when it was felt markets were likely to witness a major bull run, he said. |
| "This did not happen and with the slide downwards as is being seen now, traders are now liquidating their positions helping build up a selling pressure in the market," he pointed out. |
| Traders are of the view it is the right time to be short before the prices fall further, Pandit said. |
| Huge stocks were built up two or three months ago and now stockists are panicking resulting in huge selling pressure, Narne said. |
| Most of the bids currently being received at the exchange are for selling, he added. |
| It is quite possible that those bulk buyers who purchased at higher prices in the spot market are now hedging their positions in the futures exchange, he said. |
| While fresh buying is lacking, many sugar mills are also hedging their sugar at the exchange anticipating further fall in prices in wake of the changed fundamentals. |
| Analysts said in January, there was a perceived tightening of supplies on the back of a lower output during the current October-September season and dwindling of stocks. |
| Things have changed since with reports of a good sugarcane crop due to be harvested in September, forecast of a normal monsoon and estimates of a bounce-back in output to around 17.5 million tonne next season, they said. |
| The open-market sale quota for January-March, initially set at 3.4 million tonne was later hiked by 400,000 tonne, to bring down prices. |
| In sharp contrast, the quota for May, which was likely to be put at 1.3 million tonne has now been actually released for only 1.1 million tonne, lower by a third compared with a year-earlier period to shore up prices. |
| In India, government sets the quantity of sugar that each mill can sell in the market every month. |
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