A sharp increase in inflation has created panic in the market and traders who had taken long positions in agricultural commodities have started squaring them off, Karvy Comtrade analyst Veeresh Hiremath said.
Inflation rose to 6.68 per cent in the week ended March 15 compared to 5.92 per cent in the previous week. Market experts said the investors are liquidating positions fearing that the government may take stringent steps such as banning a few commodities in the forward market to arrest the rising prices of domestic food items.
The wholesale price index for food articles rose by 0.2 % while that of non-food items went up by 0.6 per cent. With the rise in inflation, the last years sentiments have returned to the market, Hiremath said, adding that the With the clearing off of the long-held positions in some of the commodities, the total number of outstanding contracts (open interest) held by market participants began to slip.