All about chana futures

The National Commodity and Derivatives Exchange (NCDEX) has relaunched chana futures contract (CHANA). It was suspended by SEBI last year when there was a sharp spike in spot prices of chana. The re-launch will help Farmer Producer Companies and other participants across the country hedge against price volatility. The exchange reported that prior to suspension of the contract, about 2,500 farmers from Madhya Pradesh had used chana futures to hedge their risks.

The CHANA contract has started to trade from July 14. Contracts expiring in the months of September 2017, October 2017 and November 2017 are available for trading now.

On its first day of trade, the contract registered a volume of ₹91 crore with 17,380 tonnes being traded.

Contract specifications

The CHANA contract will be traded Monday through Friday between 10 am and 5 pm. As with any other contract, expiry will be on the 20th of the month. One lot of the contract will be 10 tonnes, but price quotation will be on the value for one quintal. The maximum order size allowed is 500 tonnes.

It is a compulsory delivery contract with Bikaner as the basis centre as in the old contract. This time, Ganj Basoda has also been included as a delivery centre. In the new contract, quality specification on the underlying — chana — has also changed. Earlier, it was desi chana, now it is unprocessed whole raw chana (not for direct human consumption).

If you want to take positions in the futures contract, a minimum of 4 per cent as initial margin (on contract value) will be required. A special margin may also be imposed on the buy side or sell side, or both, if the regulator or the exchange finds increased volatility in prices. GST (Goods and Services Tax) will be payable by the traders on the gross amount charged by the commodity exchange. In case one opts to take delivery, he will also be liable to pay GST.

Price drivers

Chickpea or chana is one of the important pulse crops in India and is used for making flour (besan). Factors such as monsoon rains, and prices of other competitive pulses influence price of chana. India accounts for 70 per cent of total chana production in the world.

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