NCDEX margin cools guargum

Guar seed and guar gum prices cooled off on Tuesday on the National Commodity and Derivatives Exchange of India (NCDEX) after the exchange imposed a fresh 10 per cent margin to curtail the sharp rises in prices.

Traders said deals in the two commodities are likely to be slow in the next few days as the participants wait for prices to stabilise.

The NCDEX imposed a 10 per cent margin on top of a 10-11 per cent existing margin with effect from the end of the trading session on Tuesday as a measure to control the sharp rise in the two commodities.

Towards the end of the trading session, the October futures of guar gum fell to Rs 5,300 per 100 kg, after touching Rs 5,540 per 100 kg at around noon. The October futures of guar seed traded at Rs 1,974 per 100 kg towards close, down from Rs 2,031 per 100 kg during the mid-day trade.

"Trading will come down for some time as the market digests the developments of the last two days," said Nikhil Dedhia, trader at S K Comdex in Mumbai. "However, there is a big short position in the market, so buying will resume," he said.

In the afternoon trade, open positions for the September contract dropped to 18,390 tonne, from 20,510 tonne for guar gum, while guar seed positions fell to 72,460 tonne from 78,840 tonne.

Alex Mathew, senior research analyst at Geojit Commodities Ltd in Kollam, said the recent rally was due to speculation rather than fundamentals, though there is indeed a shortage of guar seed and gum in the market.

"Guar gum is likely to find support at Rs 4,700 per 100 kg and a second major support at Rs 4,559 per kg," Mathew said.

The NCDEX recorded its highest daily trading volume of Rs 71.97 billion on Monday, of which guar accounted for more than half at Rs 40.69 billion, traders said.