The Securities and Exchange Board of India (Sebi) has extended the suspension on derivatives trading of seven commodities for one more year till December 20, 2023. The ban was on paddy (non-basmati), wheat, chana, mustard seeds, soyabean, crude palm oil and moong.
The industry had hoped the ban would be relaxed as retail inflation as measured by the consumer price index came in at 5.9% for November, which was the lowest in 11 months.
Industry sources said the decision was without any rationale. In the past, Sebi had banned futures trade in a single commodity, but banning seven commodity futures at one go was unprecedented and devoid of any logic, except pandering to populism keeping in mind the never-ending elections.
Derivatives on several commodities have been banned/suspended as many as 19 times in the last two decades, with some facing multiple suspensions. The latest was the year-long futures trading ban on seven agri-commodities on December 20, 2021.
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A September report by NCDEX said the suspension of futures contracts in the past have not resulted in the desired impact of controlling the prices. At best, there have been minor corrections in the short term.
The extension of the ban will hit the NCDEX badly as these seven commodities contributed nearly 54% of the total deposits between April 2021 and July 2021, with chana being the highest with 40% of the total deposits.