The upward momentum in guar prices appears to be unrelenting despite news of an upward revision in crop estimates and additional curbs on futures trade.

This week, the Rajasthan Government announced revised production estimates for guar seed at 12.1 lakh tonnes from the earlier estimate of 11.4 lakh tonnes. The State is a major producer of the commodity. On the other hand, commodity exchanges revised open position limits on guar complex, in a yet another measure to rein in prices. The new position limits come into effect from January 21.

But the guar complex hit the 4 per cent upper price limited on the National Commodity and Derivatives Exchange in early trade on Thursday.

“There is no chance of a fall in guar prices. Arrivals are low and demand is very strong,” said Mr Rajesh Ghiya, a broker at the Jaipur guar market.

Exporters and other participants have been mopping up all the stock that enters the market, traders said.

But volumes and open interest in guar has been declining on the NCDEX with the rise in prices. For the first three active guar seed futures contract, trade in quantity terms has declined by 38 per cent in the last one month. For the first two active guar gum contracts, the decline in daily trade volume is 27 per cent.

Open interest has also been declining. On December 12, open interest for the first two month guar seed contracts stood at 232,180 tonne. On January 11, it fell to 60,710.

Participants are turning cautious about taking positions in guar complex on fears of a price collapse.

Also, declining trade volumes could impact the strength of the rally, said Mr Faiyaz Hudani, Senior Analyst, Kotak Commodities.

According to him, the current rally in guar is backed by strong fundamentals as demand is quite robust, while arrivals have been dwindling.

“Volumes pick up whenever prices go through a correction. There is buying at lower levels,” said Mr Dharmesh Jain, Executive Agri Research, Ventura Commodities.

The upward revision in guar production is unlikely to have any sobering effect on prices as the revision is quite marginal, said Ms Vedika Narvekar, Senior Research Analyst, Angel Commodities. Last year, guar production was higher at 15 lakh tonnes.

But participants are likely to square off long positions at least two to three days before the new positions come into effect, she said. The new position limits come into effect on January 21. Also, further rise in domestic prices of guar would impact export demand, she said. That, in turn, may cap the gains in prices.

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