India suspends futures trading in 4 commodities

Enlarge Photo A farmer selects potatoes at a farm in Kandhai village on the outskirts of Allahabad...

Thu, May 8 01:10 PM

MUMBAI (Reuters) - India has suspended futures trading in four commodities with immediate effect in its latest move to rein in soaring inflation, sending prices of other commodities higher on Thursday as traders switched contracts.

India has taken a series of fiscal measures to bring down prices in recent weeks, and the commodities market regulator said trading in futures contracts in soyoil, potato, chana or chick pea, and rubber had been suspended for four months.

"This is effective from Thursday ... we have informed the exchanges in this regard," said Anupam Mishra, a director with the market regulator, the Forward Markets Commission (FMC).

"There will be no trading from today in these commodities ... All settlements will be based on yesterday's (Wednesday) closing price."

Soyoil and chana were among the most traded commodities on the Indian exchanges.

Pepper, chilli and jeera contracts fell in early trade but volume and prices in commodities such as soybean, rapeseed or mustard seed, guar seed and turmeric picked up as investors switched out of the suspended contracts.

The September soybean contract was up 2.53 percent at 2,152 rupees per 100 kg at 0724 GMT and the July rape seed contract was up 2.43 percent at 581.50 rupees per 20 kg.

"There appears to be some repositioning from soyoil to oilseeds," said Rajini Panicker, head of research at MF Global Commodities India Ltd.

The futures market had been expecting a ban on some food futures trading for several weeks as communist parties, which lend support to the ruling coalition, have demanded action, saying futures trading has stoked rising food prices.

"It won't help in pulling down (spot) prices," said Mumbai-based K.C. Bhartiya, President of the Pulses Importers' Association of India.

"In the long run it will adversely affect farmers and importers who were hedging their risk on the exchange platform."

India's annual inflation rate hit 7.57 percent in mid-April, its highest in more than three years.

The central bank has tightened policy to try to rein in inflation-fuelling excess cash in circulation and the government has banned some exports and lowered duties on some imports.

India banned futures trading in rice, wheat and two pulses in early 2007 and set up an expert committee to find out if futures trading was driving up spot prices.

The committee, which submitted its report in late April, said there was no clear link between commodities futures trading and rising spot prices.

India allowed commodities futures trading in 2003. The combined turnover of 24 commodity exchanges totalled 40.66 trillion rupees ($975 billion) in 2007/08.

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