FMC seeks details on spurt in guar prices

The Forward Markets Commission (FMC), the commodities market regulator, has asked the National Commodity and Derivatives Exchange (NCDEX) to submit a report on the sudden and sharp movement of the October guarseed contract. Trading in the October contract was volatile on September 11.

"On September 11, the guarseed spot price on the NCDEX shot up from Rs 1,716 a quintal to Rs 1,776. The October guarseed futures contract also surged from Rs 1,763 to Rs 1,815 a quintal," said Mohan Surana, a Bikaner-based trader and vice-chairman of Bikaner APMC.

Traders from Bikaner and Jodhpur were surprised by the fluctuation in prices in a few hours. "Minutes after we (traders) called them (the NCDEX), the spot price was brought back to Rs 1,716 a quintal. The October futures price too slipped from Rs 1,815 to Rs 1,780. This was a sudden fall of 3.80 per cent," said Surana.

"We are aware of the matter and we have already asked the NCDEX to submit a report on this issue. They are supposed to file the report within a day or two," said FMC Director Rajiv Agarwal.

It is learnt that the spot prices were uploaded directly by the polling agency that polls prices on behalf of the NCDEX. It is understood that the exchange has relaxed the norms for direct uploading of prices by a polling agency.

Polling refers to random collection of prices across spot markets to derive at an average price. Commodity exchanges appoint agencies to poll prices on their behalf.

The NCDEX officers attributed the fluctuation to "a human, technical error", said Surana, questioning, "How can a literate person make a mistake of writing Rs 1,763 as Rs 1,815? It can be understood if a person writes 63 as 36." Analysts said volumes of the October contract spurted from 80,000 tonnes to 2 lakh tonnes on September 11 as prices went up. The spot price rose by 3.49 per cent and the futures price went up by 2.94 per cent on that day.Market sources added that volumes of the October contract dipped later and were 29,920 tonnes as of September 13.

Until September 11, guarseed prices were bearish as arrivals had begun across Rajasthan's markets since the first week of September. Analysts said the sharp fluctuation went against the market fundamentals, which dictate that prices fall during the harvest season and rise when there is a supply disruption.