From the commodities market's perspective, the Union Budget was not in line with expectations. Some crucial announcements, such as amendment to the Foreign Contract Regulation Act, a cut in the commodity transaction tax and a reduction in gold import duty, were not announced. An allotment of Rs 5,000 crore for warehousing development will help increase capacity for increasing the shelf life of agriculture goods. The initiative would benefit not only the farmers but also banks, financial institutions, commodity exchanges and insurance firms.
However, there needs to be more clarity on how this will be executed. Market participants were expecting financial institutions, such as banks, would be allowed to participate in the commodities segment. However, the same could not find place in the Budget. Prior to the Budget, there were hopes gold's import duty would be reduced and some kind of relaxation steps would be announced to the 80:20 import norms. However, with no changes being introduced, heavy short covering ensued, which lifted MCX prices about 2.5 per cent. With local gold premiums having fallen sharply over the past several days on hopes of policy relaxation, we might see premiums starting to climb again, which is likely to benefit domestic gold prices further.
Executive director, Anand Rathi Commodities