Traders said a number of investors have been booking profits by using the futures market to purchase silver and offload it in the physical market.

This has resulted in a decline in spot prices of silver. Spot silver price has declined by Rs 1,420 between June 5 and July 5, from Rs 18,910 per kg, to Rs 17,490.

In the futures market, the July contract on the Multi Commodity Exchange, which traded at Rs 19,138 per kg - higher by Rs 228 than the spot price on the same day - moved lower to Rs 17,024 on July 5, on the expiry of the contract.

This price was about Rs 450 lower than the futures price.

This offered an opportunity for cash and carry arbitrage. MCX has recorded the highest deliveries in its July contract worth Rs 97.09 crore (Rs 970.9 million). MCX on Wednesday recorded the highest-ever delivery of 57,030 kgs of silver valued at in its July 2007 contract.

The previous high of 50,040 kgs, valued at Rs 51.67 crore (Rs 516.7 million), was witnessed in May 2005.

As with all MCX commodities contracts, silver contracts too are tailor-made largely for the physical commodity users so that they may plan their hedging strategy better.

The popularity of the contracts on the exchange platform can be gauged by the fact that MCX is the world's largest bourse for silver, in terms of contracts traded.

Traders said in a cash and carry arbitrage investors who chose to buy on the futures exchange, took deliveries and sold it for a profit in the physical market.

According to Harmesh Arora of Bombay Bullion Association, bullish days are ahead for silver. "Investors are attracted by the excellent cash and carry arbitrage opportunity in silver," he pointed out.