SEBI Suspends Futures Trading of 5 Agri Commodities

Market regulator Securities and Exchange Board of India (SEBI) had banned futures trading in five more commodities on Monday. The derivative contracts in paddy (non-basmati), wheat, soya bean and its derivatives (complex), crude palm oil and moong were suspended with immediate effect, as per the SEBI notification.

Also, no new contract shall be launched in the running contracts of the suspended commodities, till further notice. Sentiments in agri markets, especially in the oil complex basket as a result. SEBI had already suspended futures trading Chana and RM seed, on August 16, 2021 and October 08, 2021, respectively. The government may have a specific reason for the suspension but viewing fundamentally, soybean prices are unlikely to continue with a downward trend for a longer period as sellers do not prefer selling in the open market, in light of relatively lower prices when compared with the previous year.

Edible oil like CPO and Soya oil prices, in addition to soybean, have fallen sharply after the suspension. But in case physical demand improves in the next few days then the downward journey will halt for a while.

In context to the edible oil segment, the global markets do not reflect any grim situation as of now and prices will tend to remain higher in the coming weeks considering the existing demand and supply situation.

At the same time crushing will halt for a while due to the disparity between soybean and soya oil prices resulting in temporary supply constraints in the open market. This implies that CPO and soya oil shall tend to attempt for a recovery in near future.

As most of the global and domestic market participants will be away ahead of Christmas holidays, we do not expect any major trigger in the agri markets since consumption will not improve for next few weeks.  Overall, most of the price direction will be depending on the domestic trade situation till the end of December.