Sebi raises upfront payment on chana futures to 95%

Move could force players with long positions to square off as fast as possible

Considering the demand-and-supply gap, as reflected from the price trend in chana, the Securities and Exchange Board of India (Sebi) has tightened the margin (upfront payment) of the only listed pulse due to its huge run-up in the price. Chana price on Monday went up to Rs 7,900 a quintal in the wholesale mandi Bikaner, according to NCDEX data, while futures were quoting at Rs 7,800. With Monday’s margin, the total margin on the buy side has increased to 95 per cent, which could force players with long positions to square off as fast as possible. The regulator had said last month no fresh positions could be built in chana.

The margin is a minimum percentage of the order value that traders are required to deposit with the exchange to trade in the commodity futures.

“The members of the exchange are notified that the special margin of 40 per cent (in cash) on long side (in addition to the existing special cash margin) will be imposed on all the running contracts of chana with effect from July 4,” according to the NCDEX circular that came after the regulatory approval.

With this hike, the total margin will be nearly 95 per cent on chana buyers. This is along with the additional margin of 25 per cent imposed by the NCDEX in April. NCDEX Bikaner warehouse has 373 tonnes of chana in stock. Open positions in chana at the time of Sebi restraining fresh positions in mid-June was 19,030 tonnes, which came down to 5,990 tonnes on Monday.

Considering the supply constraints in the near term, the market regulator had on June 16 suspended chana futures. No new chana contract shall be launched till further orders. In respect of running contracts in chana, no new position will be allowed to be taken. Only squaring up of position will be allowed,” Sebi had said in the order. The suspension came in the wake of a sharp rise in food price inflation, particularly in pulses.

Market players believe that the increase margin will curb speculation. “Restriction of fresh position and increase in margin in order to control the speculative price will help in eliminating non-serious players,” said Ajay Kedia of Kedia Commodities.

He added that chana prices rose by almost 80 per cent since January 2016 as fundamentals have supported the price rise. There is a huge supply shortage of pulses in India. Prices still look firm because of the lack of supply for the next four–five months ahead of the key festival season.

While some section of experts believe that chana dal has become costlier mainly because of a fall in production “The increase in margin, however, will not solve the purpose, as those sitting on long position would continue to book profit. The demand-and-supply mismatch is due to shortage of crops, which is nearly 30 per cent. Besides, the exporters will get the new supply from October onwards. Till then, India need to pay high price for its import,” said Kishore Narne, associate director and business head (commodities & currencies) at Motilal Oswal.

In futures, chana has quoted a premium of Rs 100 compared to spot, indicating the price will remain high.