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Commodity futures volumes in India, the world's biggest buyer of gold, fell 11% on year in April due to a decline in bullion volumes, but a rollback in excise duty could bring jewellers back to the market, arresting the fall in hedging bets this month.
Volumes in April fell to Rs 1,152,000 crore from Rs1,295,000 crore a year ago, a statement from the regulator said.
The value of trade in bullion fell 35.8% to Rs 532,000 crore in April. Trade in metals other than bullion rose 36% to Rs 268,000 crore in April.
Jewellers stayed away from hedging on futures platform in April as they struck work after the government imposed an excise duty of 0.3% on unbranded jewellery on March 17 and the rupee depreciated against the dollar.
"MCX volumes will get a boost if prices remain stable now... No one was ready to hedge or place arbitrage positions especially after the import and excise duty was implemented," said Prithviraj Kothari, president of the Bombay Bullion Association.
Early this month, Finance Minister Pranab Mukherjee withdrew the excise duty on branded and unbranded jewellery, which may prompt jewellers to return to hedging.
"Gold traders are also reluctant to trade because of the rupee, which has spoiled parity with the global markets," said Aurobinda Prasad, head of research, Karvy Comtrade.
The rupee, which depreciated more than 6% against the dollar since February, plays an important role in determining the landed cost of the dollar-quoted yellow metal.
Gold imports by India had hit a new record high of 950 tonnes in 2011.
India, which allowed futures trading in commodities in 2003, has 21 commodity bourses, including six operating at the national level. It had banned futures trade in guar in late March.
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