Last week, four leading brokers and traders in the Agricultural Produce Markets Committee (APMC), Vashi (Navi Mumbai) were said to have defaulted on their commitments. The amount total amounting to around Rs 20 crore, thanks to the all-round deflation of the tech stocks bubble.

More such cases of defaults cannot be ruled out during next quarter ending on July 2000, if the current sluggishness in the commodity prices and the bearish trend in the stock markets continue for some more time, said Navi Mumbai traders.

With the worsening drought situations in Gujarat and Rajasthan, and little hope of monsoon, there aren't any signs of an uptrend in the stock prices. This results in little chances for the commodity brokers to recover their lost funds.

It all began with the illegal forward trading in cloves in May 1999. During this period illegal speculation in cloves was said to be rife. In the local market, cloves were available at around Rs 55 per kg. Stock markets being sluggish during this time, it attracted less interest from other markets. Among others, cloves, had began attracting speculative interests which saw its prices more than doubling to around Rs 125 per kg within a short span of 30 days.

This galloping price trend in cloves attracted cash-flush traders from other markets (having nothing to do with the clove business) to the condiments markets. Even traders in chemical market started speculating in cloves.As a result of this, clove prices shot up further to Rs 290 per kg during October 1999 - a jump of almost 450 per cent in just six months.

The speculative buying and galloping prices in cloves fuelled cinnamon prices. In mid-May 1999, cinnamon was quoted at around Rs 83/85 per kg, but with speculators's entry the prices rose to around Rs 140 per kg within short span of few days.

By end-May, the flared cinnamon prices dipped again by Rs 40 per kg to Rs 100 per kg, only to lose further ground to lose another Rs 10. It closed at Rs 90 per kg.

This widespread speculation in two spices extended to around three months to July 1999, without having any impact on the international prices of cinnamon which hovered around $1,100-$1,150 per tonne (CIF) during this period.

With sluggish international prices and galloping local markets, traders hand in glove with speculators in the country, had imported more than double the quantity required annually. This was primarily done to meet their commitments in the speculative markets.

According to a leading APMC trader, India's annual requirement of cinnamon is around 200 containers (2,600 tonnes). Against this, during `1998-99, traders imported around 450 containers (5,850,tonnes). This huge quantity was imported by traders who traded on illegal forward markets to meet their delivery commitments.

Due to heavy imports, the prices of cinnamon in the local markets crashed to around Rs 68 per kg (from a high of Rs 140 per kg in mid-October). This unexpected downtrend forced speculators to reenter the illegal forward trading in cloves market to recover their losses in illegal cinnamon forward markets.

Because of the increase in the number of players in the speculative markets, the clove prices witnessed wild swings during the month of October 1999. The prices jumped to a high of around Rs 290 per kg from a low of Rs 130 per kg on the reports of heavy arrivals from Indonesia to meet speculative commitments.

Facing losses in the condiments markets, these speculators turned their guns to the booming stock markets with a hope of making a fast buck and that this would help them meet the losses in the commodity markets. Fuelled by the tech stock rush, by January 2000 the 30-share BSE sensex had climbed to high of 5518.39 points, from an average of 3780.07 points in May 1999-a jump of 46 per cent.

In February 2000, Sensex breached the historic level of 6,000 points and closed at 6,150.69 on February 14. Smart as they are, speculators on the stock markets used US President's India visit as a ploy to fuel the galloping stock prices further and create an euphoric atmosphere. It was rumoured then that the BSE sensex would cross 7,000 points without any hurdle. This optimism tempted large number of traders from outside the stock markets, including the commodity markets. Large section of traders from various markets poured more money into the stock markets.

But soon after the US president left India, there were no artificial propos left to support Indian stock markets which became rudderless. This was then followed soon by the global tech stock melt-down making the situation all the more worse for the speculators in both the condiments and the stock markets.

Since February this year, although the Sensex may have fallen by 30-32 per cent, but the so called pillars of the tech boom-the IT stocks-have lost 70-80 per cent in their market value.

With stock prices and indices seeking lower levels by the day, the commodity speculators who had ventured in stock markets, had no alternative but to declare themselves as defaulters.

Repeating the story of early '90s, its no secret that over the past more than one year, money had been pouring from various markets to the Dalal Street. The overall impact of this phenomenon - money moving out of the grains, spices and condiments markets to the stock markets - resulted in overall demand in the APMC market (for various products) deflating to around 40 per cent than normal, since early 1999.

While the APMC trading community sources prefer to keep under wraps the names of these defaulters, sources said the defaulters owed the amount to their partners in the low key illegal forward markets in spices and condiments way back in 1998-99.