According to leading speculators, ACE September futures tumbled to Rs 1,670 before settling at Rs 1,679 in the last week. Prices would have fallen much had there not been heavy margins on the castor futures.

At present September futures attract Rs 26,500 margin per 10 tonnes, while margin at Rajkot is lower as a result selling pressure has been diverted toward Rajkot castor exchange. This has widened the arbitrage between Ahmedabad and Rajkot to Rs 20 from the level to level.

Rajkot futures fell to Rs 1,645.50 before settling at Rs 1,659 on last week. The parallel futures traded at Bhabhar fell to Rs 322 a 20 kg.

According to a leading trader a delay in the monsoon will be a blessing in disguise for castor, those farmers who are unable to sow groundnut and cotton would prefer to sow castor gram and sesame due to remunerative prices and typical weather conditions.

Though the arrivals in the spot seed has been fallen to 10,000-12,000 bags of 70 kg each, marketmen are discounting the arrivals and paying more attention to inventories of seeds as well as oil.

Accroding to private trade sources, stock with farmers, cooperatives and traders has been estimated around 25 lakh bags. Moreover castor oil is being sold as low as Rs 342 a 10 kg.

Basis between spot and September is Rs 80-100 a quintal preventing bulls to go aggressively.

According to a leading speculator, current fall seems overdone. As the new arrivals of seed would not arrive before November, any adverse developments could spark buying in the futures.

Though the supply is still around 25 lakh bags, season may witness a supply deficit in the fag and of the season.

Spot prices fell across the board. Prices at various Agree Produce Market Committees are quoted around Rs 310-315 a quintal.

Castor oil prices are quoting at Rs 342 a 10 kg.

Arrivals are barley 10,000 bags, out of which most of the seeds are comprised from old stock, which indicates that supply concerns might be exaggerated.

Punters say that a good monsoon and ample supply are already factored into prices. Monsoon fears are likely to discount soon and prices may witness a sharp spurt.

Technical analysis
The ACE castor futures fell to Rs 1,670 before settling at Rs 1,680 a quintal on last week. The future has posted two doji in a row, ie on Friday and Saturday.

Though the doji has been considered an important trend reversal signal, which should be considered bullish as these dojis appeared on the downmove.However Steev Nesson, the candlestick guru, has noticed that dojis are more confirmed signal on the top instead of fall. More over the stiff margins on the ACE September futures also influenced the trading.

Prices need to close above Rs 1,680 for next couple of trading sessions to gauge the underlying technical trend. However a sharp upward reaction cannot be ruled out.

Stochastic oscillators are indicating an oversold condition. 10 day ROC and 11 day CCI also indicate that futures are oversold. Though the MACD and Parabolic SAR as well as 5 and 20 day moving averages are signaling bearishness, a short term trend reversal is likely.

The author works with e-mecklai.com. The views expressed here are his own