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  No ban on cardamom futures, says Khatua
http://www.economictimes.indiatimes.com Tuesday, July 13, 2010
MUMBAI: A heavy inflow of cash into cardamom futures has raised open interest and prices to a new high. But quashing market speculation on a likely
ban on trading, Forward Markets Commission (FMC) chairman BC Khatua said there was “absolutely no truth” in the rumours.

The excessive heating in the cardamom counter is borne by the rise in open interest — outstanding buy/sell positions — from May 7 despite a 15% margin being imposed on the buy side. The aggregate OI of the front month contract rose from 3,214 contracts on May 7 to 6,727 contracts intraday on Monday even as the price rose from Rs 1,409 to Rs 1,850 over the same period. Rising OI with rising price indicates buying interest.

“It looks like people are floating rumours because of the high prices, but prices have been high for quite a while now. You are aware there was some correction when we imposed additional margin.... in fact, the margin to trade on the long side (buy) is upwards of 30-32% and anyway delivery for contract is three days away. We are watching the situation but there is no need for any drastic action,” Mr Khatua told ET.

The price of the front month contract was Rs 1,850 per kilo at the time of going to press while the August futures traded at a discount of Rs 148 to the July contract. The high price has been because of greater exports of the 2009-10 crop (10,000 tonnes) in the light of a lower-than-expected crop from the world’s largest producer Guatemala.

Normally 90% of the crop is consumed locally and the rest is exported but a higher export demand has raised the price in the local market.

“The rumours (of a ban on trading) have been spread by cartels in Kerala and Mumbai,” said a south-based broker. “Being a narrow commodity, cardamom can be easily manipulated and it seems the rumours have been rife in the light of the fact that the rally has been overdone, there being three over the past 4-5 months.”

Delisting of a commodity normally leads to a collapse in prices as existing positions can only be squared off and no fresh positions can be initiated.

“The bullishness on the counter has started from October last year when the price was ruling at around Rs 700 levels a kilo to a high of Rs 2,097 on June 13. I think the rally has been overdone, considering the way the price has moved,” said Harish Galipelli, head of research at Kochi-based JRG Wealth Management. “Such a rate of price rise is not justified despite the increase in export demand. Having said that cardamom futures have benefited the planters the most as in the case of rubber and pepper. So, it’s good that the contract is not going to be delisted.”

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