"The ban on agri-commodities will hit market confidence as this has happened for the second time. Earlier, the government had banned futures trading in wheat, rice and tur," Motilal Oswal's Senior Vice president, Dharmesh Pandya, said.
The four commodities have a combined daily turnover of about Rs 1,200 crore (Rs 12 billion) on the Multi Commodity Exchange of India Ltd. and the National Commodities and Derivatives Exchange Ltd., the nation's biggest bourses.
"We hope the government would lift the ban in these four commodities in four months," Pandya said.
"The ban will hit the overall commodity business. The centre is doing its part to control inflation. We have to see whether it helps them," Kotak Commodities' Analyst, Huzefa Rangwala, said.
Analysts opined that the ban will erode farmers' ability to hedge against price volatilities and enable price discovery. The volume on commodity exchanges have already fallen drastically due to likely imposition of commodity transaction tax, analysts said.
According to another report, farmers and traders questioned government decision to ban potato futures.
"There was no reason for the government to ban futures trading in potato as the crop's harvest is bumper, prices are stable and farmers are battling with the problem of plenty," a former Uttar Pradesh MLA and potato grower in Agra region, Pratap Choudhary told PTI.
Potato farmer Rameshwar Dayal of Nithei village, 40 km off Agra, said the ban will create more problems for farmers, who are already battling with a high level of production. He feels there will be no certainty of prices, as "no one will be able to tell us the real price".
"When we knew the MCX price, at least we were able to tell the traders the rates at which they should buy. Now it will be decided at mandis," he said.
MCX is the leading commodity exchange in potato futures where the open interest of Agra variety was 50,000 tons and that of Tarkeshwar (West Bengal) 35,000 tons. Open interest in futures trading is total number of outstanding contracts on a day that have not been liquidated.
