Sugar futures' suspension may hit NCDEX turnover

The suspension of sugar futures trading is likely to hit the National Commodity & Derivatives Exchange (NCDEX), the country’s second largest commodity exchange, as the commodity was highly liquid on this platform.

Unupom Kausik, chief business officer of the exchange, however, denied much impact on daily turnover of the bourse. But, the decision would send a wrong signal to the global market, according to Kausik.

The Forward Markets Commission (FMC), the commodity markets regulator, put a curb on Tuesday on the launch of new sugar contracts but allowed squaring off the position in existing ones. It has also suspended the creation of fresh position in existing contacts.

Sugar M200 was the seventh largest liquid commodity traded on NCDEX, generating an average daily turnover of around Rs 100-200 crore. As per the latest fortnightly report at the FMC Website, the exchange generated a turnover of Rs 1,746.6 crore between May 1 and 15. While the turnover during the previous fortnight stood at Rs 2,571.3 crore, averaging Rs 171.4 crore daily.

During the first fortnight of the current financial year, the turnover was Rs 2,409.15 crore, registering the contract as the sixth largest revenue maker for the exchange. However, the commodity remained almost illiquid on other exchanges.

Meanwhile, sugar prices in both the spot and derivatives markets declined by two per cent on Tuesday on the government action.

In Mumbai, prices of sugar S30 and M30 for mill delivery declined by Rs 30-40 a quintal, to Rs 2,180-2,200 and Rs 2,215-2,225, respectively. For naka delivery, these declined by Rs 40 to Rs 2,260-2,270 and Rs 2,300-2,310, respectively.

Prices are likely to decline further by Rs 50 on the apprehension of further measures by the government, said Rajendra Shah, partner of Hitendra Kumar Thakarshi & Co, a Vashi-based trader.

Shah said the decision was expected as prices were rising abnormally. Sugar futures on NCDEX in April rose to the highest since trading began in 2003, on forecast of lower output. A decline in sugar production for the second year has forced India to become a net importer for the first time since 2006, and fueled a 33 per cent rally this year in raw sugar prices.