Mumbai: The Union Government's decision to ban futures trading in rubber, soya oil, potato and chana for four months, in a bid to tame spiralling inflation, is unfortunate and may hit market sentiments badly, industry players said on Thursday.

"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 Sr Vice President, Dharmesh Pandya, said.

The four commodities have a combined daily turnover of about Rs 1,200 crore 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 (CTT), analysts said.

The decision to ban agri-commodities was very bad for the market, both in terms of volumes and sentiments, Religare's Head, Commodities Business, Jayant Manglik, said.

The ban came just a day after Union Finance Minister, P Chidambaram, announced that the government was planning to ban futures trading in food commodities, as it struggles to curb soaring inflation and the rising cost of food.

Chidambaram had said that governments across Asia share its worries over speculation in the commodities markets.

In fact, the government-appointed panel, chaired by economist Abhijit Sen, in its report, had observed that there is no link between the futures market and volatility in prices.

India's inflation shot up to 7.57 per cent in the week ended April 19.

Trading in other commodities, was, however, normal on Thursday and there were no panic-like conditions, despite the ban in the four commodities.

In fact, soyaben futures' May delivery contract shot up by Rs 34 to Rs 2,271 on global cues. Mustard seed and guarseed contracts also ruled firm today, traders added.

Source : PTI