New Delhi: Panic-stricken investors have started selling off their long positions in agricultural commodities in futures market on fear that the government may ban trading in some more commodities to curb rising inflation.

"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 per cent while that of non-food items went up by 0.6 per cent.

"With the rise in inflation, the last year's sentiments have returned to the market," Hiremath said, adding that the government delisted futures trading in wheat, rice, urad and tur in early 2007.

As inflation has hit 13-month high this time, many traders speculate that the government may take similar steps and ban futures trading in some more commodities such as chana, he said.

"Since chana comes under essential commodities, certainly it derives attention of the government," he added.

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.

Open interest in chana slipped to 31,600 from 33,250, sugar to 45,000 from 45,310 and guarseed also slumped to 62,240 from 64,120.

Meanwhile, the futures prices of agri commodities remained weak today. At 1500 hours, prices of April delivery of chana at NCDEX counter was down by 0.65 per cent to Rs 2,900 a quintal, soybean by 1.66 per cent to Rs 2,202 a quintal while sugar slipped by 1.02 per cent to Rs 1,560 a quintal.

Source : PTI