Volatile futures takes sheen off rubber

The natural rubber market has witnessed an unprecedented plummeting of prices on account of highly volatile futures trading. The price of benchmark grade, RSS-4, which had peaked to Rs 115 a kg four days ago was today quoting at Rs 105, shedding Rs 10 a kg in just a few days.

In fact, RSS-4 plunged to the level of Rs 100 intra-day before bouncing back in the fag end of trading to settle at a higher level.

While prices of many other varieties slumped below the Rs 100 mark to quote at around Rs 95 at the end of the day, RSS-5 and ISNR-20 grades were selling at Rs 102 and Rs 100, respectively.

In the current bearish mood in the domestic market, selling pressure is of the highest order. That the heavy rains stopped during the last week has also increased the chances of higher production.

In fact, the market had shown signals of a bearish sentiment on May 30 and the price scenario became worse today as the futures market became highly volatile.

A leading city-based trader alleged there was an artificial move to demolish the market by way of slashing prices in futures trading, thereby getting higher margins on their earlier commitments to major companies, especially tyre manufacturers.

He further claimed that a large number of traders had taken supply orders in the price range of Rs 117-118 and are now sabotaging spot prices in order to buy at lower rates.

The tumbling of prices has made growers and stockists shrug off the stock immediately as there was apprehensions in the market that the prices might fall further.

The plummeting of global prices, especially in Tokyo Commodity Exchange (Tocom), has offered an advantage to domestic operators.

At Tocom, the price for the June futures contract plummeted to Rs 117-118 from the peak level of Rs 124 a couple of days back. All the market parameters "� global and domestic "� indicate that the return of a bull phase in the immediate future is unlikely, though the long-term undertone is bullish.

Market experts attribute the fall in prices at Tocom mainly to a technical correction on account of profit booking.

They said the positions in futures trading were technically overbought and prices were overstretched and this has paved the way for the correction. But most traders expected this to happen above the level Rs 120 in spot trading.

Earlier, in the last couple of weeks, intense speculation and short supply had made the market hot and highly volatile. Stocking of rubber in anticipation of a further surge in prices also had its impact on the market.

At NMCE, the June contract price was quoting at Rs 121 on May 27, which had created a lot of enthusiasm in rubber-growing areas in Kerala. Also, early monsoon ensured that production came to a standstill.