Dealing Room Check: Guar in the grip of volatility

Guar in the grip of volatility

Guar complex futures were volatile last week on the back of a change in the short-term fundamentals. Guar futures were up for the sixth consecutive week. Improved domestic as well as overseas buying against limited supply supported prices.

Speculative buying was seen at the futures platform on heightening concern over crop failure in some parts of western Rajasthan due to uneven distribution of monsoon rainfall. However, profit booking was seen during the later part of the week triggered by improved monsoon progress in major guar growing districts in western Rajasthan. Besides, lower buying interest at higher levels also led to a sharp fall in prices by the end of the week.

Guar complex futures are likely to trade sideways to lower in the coming week on extended profit booking. Prices may track cues from weakening export enquires of gum from the US as drilling activities in the US are likely to be impacted adversely due to hurricane Harvey.

However, losses could be limited as fresh buying can be seen at lower levels in view of weaker supply outlook. The gap between supply and demand is likely to widen on limited carry-over stock amid smaller crop size, which may further provide strength to prices.

The guar market, which witnessed huge offloading of stocks during July, is now likely to face supply shortage in the coming months due to smaller crop size for the upcoming season. Moreover, better export outlook of guar gum and reports of crop failure in western Rajasthan may help prices to recover in the coming days. Despite higher acreage in Rajasthan and Gujarat, production is likely to be lower due to severe yield loss caused by uneven rainfall in major guar growing regions.

The writer is Head-Commodity Research, Karvy Comtrade

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