The new exchange had kicked off futures trading last Monday. The move, probably a first in illegal speculation, assumes great significance as it clearly shows that the hitherto united broking fraternity has been divided.Irrespective of the effect the new exchange would have on the existing futures, official futures traded at Ahmedabad and Rajkot castor bourses would get benefited. Coincidentally, volume in the official castor futures traded at the Ahmedabad Commodity Exchange (ACE) is rising and has reached 50,000 tonnes in the September contract. ACE, the leading castor bourse could turn this development into a good growth opportunity, said a director with ACE.

The new exchange, which has started it's marketing campaign in a bid to widen the participation from diverse audience, has identified five mandies as delivery centers.

Traders holding outstanding positons in the new exchange could make or take delivery from Bhabhar and other four centers Dhanera, Deesa, Thara and Patan. In the old futures exchange, the delivery center was only Bhabhar. Hence it was dominated by the leading local brokers and there was enough room for manipulation, said an analyst. However, it remains to be seen whether the new exchange is insulated from such menace, he addedThe new exchange known as the new ring has almost identical terms and conditions for the futures. Benchmark prices for the contract have been fixed at Rs 337, whereas price limits are Rs 20 from the either side, ie Rs 317 would be a floor, while Rs 367 would be a cap.

Maturity date for both futures, the old and new is same while there is a difference of Re one between the two. The new futures is being quoted lower by a rupee, which seems uncommon. While it may provide an opportunity to arbitrage between the two exchanges, squaring off their positions, especially in the maturing contracts may become difficult. Whether one could commit a delivery based business is yet to be clear, the new futures will surely create a confidence.

The new exchange has been founded by a duo. Membership fee is being fixed competitive at Rs 20,000, while Rs 500 would be levied as an admisson fee. The board of directors of the new exchange will have the discretionary power to grant membership rights.

Being a new entrant, to bring volume at the new exchange will be a big challenge. As most of the brokers have adopted wait and watch policy, according to some independent observers, ``Two parallel futures in the same basis variety in a same location is probably an unusual phenomena. It is quite possible that new exchange might soon face a closure. Normally futures traders are conservative in their nature and hardly adopt the changes. Given the current outlook, in which volumes are falling and overheads are rising, it would be difficult to survive for both. It is most likely that the volume will be divided between the exchanges and eventually both will have to shutdown''.

The supporters of the official futures trade argue that what the Forward Market Commison (FMC) should have done might be done by the new exchange. ``Kanta se kanta nikle, zahar ki dava zaher,''quipped a leading analyst.Bears pull down futures; September future hit the contract lowSeptember futures of castors hit the contract low as nervous bulls liquidated their long positions in the June and September futures. Fall in the futures prompted stockists to offload their inventory in physical goods which also aggravated the downfall. The future which opened at Rs 1,870 tumbled to Rs 1,725.50 a quintal on last Friday. June future is nominally quoted at Rs 1,663 a quintal. Timely arrival of south west monsoon at Kerala also dampened the sentiment.

Spot price fell to Rs 329 for 20 kg from the month's high of Rs 350 for 20 kg. Sentiments turned bearish thanks to various factors like ample stock, dismal export perforamance, large crop at Brazil and liquidity crunch. The fundamentals are bearish as inventory around three million bags is lying with private traders and cooperatives", said a leading broker. However technical traders say that futures are grossly oversold and a knee jerk upward reaction is likely. Among momentum oscillators, 14 day RSI and 10 day ROC are highly oversold. A bullish divergence has been noticed in the RSI. A retest of Rs 1,760 is likely in the Septemeber futures, feel technical analysts.

(The author works for e mecklai.com, the views expressed here are his own and not of the organisation, he works for)