Chana, a key pulse crop and also one of the top traded agricultural commodity on the National Commodities and Derivatives Exchange (NCDEX), is witnessing a drop in volume.
Prices, however, have been inching up over the last week on supportive fundamentals.
At Rs 3,784 a quintal, the near month contract of chana is ruling six per cent higher from its recent low (April 18) of Rs 3,565.
However, in the coming days as leftover stocks from the current season's harvest come to mandis, prices may soften. In the last five years, prices have always witnessed a small correction in April-May.
The fear over regulatory action in commodity futures may also keep a check on prices in the near term.
What is pressing volumes?
The Forward Market Commission's (FMC) suspension of trading in guar complex and imposition of limit on open positions in some farm commodities following wild price fluctuations has led to fear and scepticism in the mind of traders.
The turnover in agricultural commodity futures as a whole has fallen 28 per cent on the NCDEX.
The regulator has also ordered an investigation into pepper, mentha oil, cardamom, potato, mustard seed, soyabean and chana contracts recently.
In chana, the FMC has cut open position limits allowed to brokers and individual traders. This is in addition to the increase in initial margin and a special margin of 10 per cent on those going long.
The risk of a regulatory action could curtail price increase in chana in the near term. However, it may find support from its fundamentals.
How are fundamentals?
Chana is sown in October and harvested between February and May. The supply of chana in the current season is lower compared with last year.
This is because the year's production is eight per cent lower at 7.66 million tonnes. Lower acreage under chana and rain during the harvest season have played spoilsport.
With chana in short supply and given the need to make higher imports, the farmers are now expecting a higher price for their produce.
Reports are making rounds that many chana farmers in north Rajasthan are holding their stocks waiting for a better price.
Also, with imported chana prices rising on a weak rupee, price of desi chana is also expected to rise going ahead.
The rupee moved from 50.8 against the dollar at the beginning of April to 52.54 now and the outlook on rupee continues to be weak.
On the demand front the situation is promising for chana with traders and millers waiting to take delivery.
The demand-supply mismatch can be expected to drive price of chana futures in the medium term.