India's commodity futures turnover posted its first-ever drop in the two weeks to April 15, as traders took to the sidelines fearing more bans after guar trade was suspended and as striking jewelers stayed away from hedging.
The turnover dropped 13.5 percent from a year earlier to 5.13 trillion rupees ($97.21 billion) during April 1-15, the commodities market regulator Forward Markets Commission (FMC) said.
Bullion trade in the world's top buyer of gold fell 27.3 percent to 2.39 trillion rupees, while turnover in agri commodities rose 20 percent compared with the previous fortnightly rise of 75 percent, the FMC said.
"The confidence of holding positions has declined on apprehensions of banning more agri commodities," said Shikha Mittal, an analyst with Karvy Comtrade.
India allowed futures trading in commodities in 2003 and has 21 commodity bourses, including six operating at the national level.
It banned futures trade in guar in late March on allegations of excessive price volatility.
"In the last seven years that I have been associated as a participant, this is the first time that I have noticed that rupee has played such a negative role," said Gnanasekar Thiagarajan, director of Commtrendz Research.
"Making money in MCX (Multi Commodity Exchange) lately has become very difficult because of the rupee factor," he said.
The rupee plays a vital role in determining the cost of dollar-quoted base and precious metal.
The local currency has depreciated 6.2 percent since February, keeping the gains in metals capped.
Volumes in metals were steady at 1.13 trillion rupees, while energy volumes fell 8.25 percent to 830 billion rupees from April 1-15.
Jewellers across India called off a three-week long strike on April 7 after assurances from Finance Minister Pranab Mukherjee that the government would consider scrapping plans for an excise duty on unbranded jewellery.
Analysts expect the futures market turnover to recover after the government issued a statement saying it does not consider banning futures trade in agri commodities as a solution to check price volatility.
The FMC had also cut positions on chana and oilseeds futures to curb excessive speculation.
"Volumes will not fall much on the assurance given by the government," said Karvy's Mittal.