The extreme volatility in futures kept hedgers at bay. It's a typical bull spiral with the rising spot markets fuelling the futures and vice versa.

Despite the bumper castor crop, prices witnessed a sharp upswing. With the price rise, farmers and stockists are holding back stocks to make a killing in the rally, traders said.

Seed prices shot up by Rs 200 at Rs 1,800 last week. A few private financiers purchased seeds for higher returns. According to a market grapevine, a city based group is holding 500,000 odd bags. It's a unique feature, said a leading future broker. ``The market is chaotic and the spot market is wild. On Thursday, seed prices opened at Rs 345 per 20 kg than rose to Rs 365 before settling to Rs 350, such a wild swing indicates that speculators are active,'' said a trader.

Reflecting the mood, castor futures swung Rs 45 to50 a day on heavy speculation. Owing to daily clearing and position limits, daily volume plummeted to 2,000 tonnes from the average 15,000 tonnes in the official futures, while volume in parallel markets like Bhabher and Surendarangar noticed sharp rise, as there are no restrictions like margins, position limits etc. The deal could be made on cash basis called kachha, to evade taxes.

Even exporters are believed to be speculating in such parallel markets. The authorities like the Forward Markets Commission (FMC) turned a nelson's eye, alleged an official source. In an another salvo he said, FMC imposes several restrictions on the futures exchanges in the name of surveillance, it also interferes in the exchange's routine affairs, while it doesn't take any concrete steps to curb parallel trading.

Is the FMC encouraging parallel futures markets at the cost of official exchanges? he asked.

Parallel trade

The volume in the official market fell due to restrictions like daily clearing and positionslimit and this in turn encouraged parallel trading in futures.

Since the last month, at least six such markets known as dabba emerged in Surendranagar and adjoining areas. Volumes at Bhabhar, the nerve centre of castorseed speculation, posted record volumes. Current open positions is believed to be 30 lakh maund or 20 kg, while of Surendarangar its around 20 lakh maunds. The minimum market lot is 500 maunds or 10 tonnes, every movement of a rupee translates into gain or loss of Rs 500 per lot. At present daily volume is very low because of price limits. The committee has set limit of Rs 20 from the benchmark price of Rs 306, hence all the positions are deemed at Rs 286 and Rs 326. At present Bhabhar June future quoted Rs 325, against spot price of Rs 340, as there is a ceiling of Rs 326. The future will terminate on 30 June.

There is no price limit in futures traded at Surendranagar's parallel markets. These are over-the-counter markets, as such there are no trading pits or rings. Such shops requires asmall office, two or three back up clerks and minimum two telephones. The shop owner or it's men takes order verbally or by telephone.