Vayda Bazaar May II Issue

VAYDA
BAZAAR
MAY 2010
Commodities
Dear Friends.
Trading in commodity markets have become much tougher in the past few sessions, with increased
volatility in the currency markets, concerns over the growth of global economy, major central banks &
governments across the world trying taking all measure to sustain their economy from getting into
troubles.
However, Agro commodities in the Indian markets have not been much affected due to global financial
crisis. The demand-supply equation has remained the crucial factor behind the bullishness
/bearishness in agro commodity prices.
In the last expiry, we have seen some of the commodities like Pepper, Turmeric & Cardamom,
witnessing a strong bull rally, while certain commodities like oil-seed complex traded pretty much within a range.
The outlook for the next kharif crop looks good as sowing activity at most of the place have started,
while forecast of normal monsoon this season has given further boosts to the outlook over current
sowing season.
Rakesh Sharma
Head - Commodities
MCX V/S NYMEX : CRUDE OIL
The above chart indicates the long term trend in Crude Oil prices in International and Indian markets.
The prices in both the markets have moved in tandem with each other.
The correlation between the prices of both the markets is of 0.969. The slight difference of 0.031 is seen
due to volatility in the currency market & cost of carry.
To arrive at MCX prices we need to multiply NYMEX Crude oil prices with Indian Rupee (INR).
All price quoted in Rs per barrel.
VAYDA
BAZAAR
MAY 2010
Commodities
FUNDAMENTAL VIEW
TURMERIC
If we think of investing in commodities… the first thing that
comes to our mind is Gold, the yellowish precious metal,
but here we are not going to discuss gold despite the color
of the commodity being yellow... It's the yellow spice and
that's TURMERIC (Haldi).
The commodity price today is 5.8-times what it was 3years back, 4-times what it was 2-years back and 2.5times what it was 1-year back.
Before, the bull rally started in the beginning of 2008;
prices were trading in the range of Rs1700-3000 per
quintal… but since then prices have touched highs of
Rs15900 at spot & futures market.
MAJOR PRICE DRIVERS
Lower Crops:
Crop output had declined in 2007-08 for the first time in
last 5-years. Mainly due to lower prices of the commodity
in the previous years while other commodities like chilli,
cotton, etc provided good returns to farmers. Majority of
the farmers across major regions had diverted to
alternative crops.
Haldi Flower
EXPORTS
The crop Yield in 2008-09 & last year 2009-10 declined
significantly due to diversification into
other crop and due to adverse weather condition like low
rainfall across growing regions, while some regions
received heavy rainfall due to which majority of the crop
was destroyed.
Turmeric exports have seen strong growth over the year as can
be seen in the given chart below. We have been exporting over
43,000 tons every year since 2004-05. Last year turmeric
exports were at their higher in nearly 2 decades in terms of
volume & value, we exported about 52,500 tons, valued at
Rs24.85mn in 2008-09 as against 49,250 tons valued
Rs15.7mn in the previous year.
The major buyers are UAE (5,910 tons), Iran (5,335 tons),
Bangladesh (4,595 tons), Malaysia (4,825 tons), and Japan
(3,090 tons).
India is the largest supplier of turmeric in the world market. The
other major suppliers are Vietnam, Indonesia and Myanmar.
VAYDA
BAZAAR
MAY 2010
Commodities
DOMESTIC CONSUMPTION & CARRYOVER
STOCKS
As per Spices Boards estimates, the area under turmeric
crop might push up production in 2009-10 by 25%. The
report estimates the new turmeric crop at 380,000 tons,
almost 75,000 tons more than 2008-09 output of 305,000
tons.
Sowing Period: - June, July, August
Harvesting Period:- January, February, March
Peak Arrivals:- April
PRICE TREND
The total turmeric availability in the current financial year
was estimated to be around 395,000 tons and the
carryover stocks are seen at 15,000 tons. Carryover
stock in 2008-09 was estimated to be around 60,000
Before, the bull rally started in the beginning of 2008; prices
were trading in the range of Rs1700-3000 per quintal… but
since then prices have touched highs of Rs15600 at spot &
Rs15900 on futures counter.
TURMERIC BACKGROUND
Turmeric is a spice with warm and mellow flavor, which is
a boiled, dried, cleaned and polished rhizome known as
Curcuma longa. The plant is an herbaceous perennial,
60-90 cm high, with a short stem and tufted leaf. It is used
for varied purposes specifically for use in drug and
cosmetic industries.
Some Fundamental studies show's that there exists a
five-year cyclic behavior of turmeric prices and 2007 was
the end of the declining trend….
IT’S APPLICATION
It finds a place in offerings on religious and ceremonial
occasions. A type of starch can also be extracted from a
particular type of turmeric. The dried, powdered rhizome
is used in curry powder, some types of pickles, and
prepared mustard, and is used as a natural food coloring.
Important Varieties of Turmeric used in India
'- Alleppey Finger' (Kerela)
- Erode and Salem Turmeric (Tamil Nadu)
- Rajapore and Sangli Turmeric (Maharashtra)
- Nizamabad Bulb (Andra Pradesh)
OUTLOOK
CROPPING SEASON
Turmeric is a tropical crop; it grows in light black, black
clayey loams and red soils in irrigated and rainfed
conditions. The crop cannot stand water logging or
alkalinity.
Turmeric is a seasonal product which is available in the
market mainly in two seasons, commencing in mid
February to May and second season is mid August to
October.
Research studies conducted by various organizations
including Tamil Nadu Agricultural University, reveals that there
exists a five-year cyclic behavior of turmeric prices, which
started at beginning of 2008 & is expected to continue till 2013.
We have seen a very strong bull rally in turmeric prices in the
past 4-months and the same is expected to continue in the
longer term, however in the very near (short-term) the price
are expected to give a correction of about 10-12% from
around 15500 levels, while the expected trading range is seen
at 13,500-16,000.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental
TECHNICALView
OUTLOOK: EDIBLE OILS
SOYA BEAN
Soya bean prices have been consolidating with-in a range with upside capped around 2005-2010 levels on the futures
counter. In the current June futures, we expect prices to trade in the range of 1950-2007, till we get a break-out above
/below the given levels.
Any break-out above the Resistance of 2010, we can go Long for Targets of 2055, 2110 and 2150, with Stop-loss
below 1970. A break-out below 1950 will push down prices to 1910, 1875 levels in the near term.
SOYA OIL
Refined Soya oil prices have trading in a range of 440-456, since about 2-month now. This is seen due to supplydemand fundamentals in the domestic market.
In the current June future, we expect prices to trade with the given range. However, only sustained a break-out above
the given range can pull prices till 462-466 levels in the near term.
Also, another indicator of the near-term price range is seen in the technical indicator in the form of Bollinger Bands
(with-in which the prices are trading), while other indicators like RSI & stochastic are in over-bought region, indicating
correction in prices in the near term.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental
MUSTARD
SEEDView
Mustard seed prices have given a strong break-out from a falling wedge; we have seen prices consolidating in a
range that was narrowing since 1-month. The break-out is supported by good volumes & rise in Open Interest, as
can be inferred from the given technical chart.
We recommend Buying in the range of 500-505, Targeting 525, 540, Stop loss below 495. In the current June future,
we expect prices to trade in the range of 500-540.
TECHNICAL OUTLOOK - SPICES
PEPPER
Pepper prices have given a good break-out from a triangular pattern formed between 15836-17570 levels. The price
trend for pepper remains up for short to medium term. Prices are likely to take support on the intermediate trend line at
16700 levels & on the medium term trend line at 16200 levels.
Technical indicator RSI too has shown positive divergence with break-out in prices, as can be inferred from the given
technical chart.
In the current June futures, we expect prices to trade firmly for higher targets of 17570, 18000 in the near term.
However, Buying is recommended only on corrections up-to 16800 levels.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental
TECHNICALView
OUTLOOK - SPICES
JEERA
Jeera prices have already shown a sharp recovery after recent sell-off on the futures counter. We expect this upside
momentum to continue for Targets of 12750, 13,400 in the near term. It is also advised to initiate fresh positions on
corrections, as supports levels are seen at 11950 & 11890.
On the technical indicators of Moving Average (MA) cross over, the 9-day MA has breached 18-day MA from down,
showing positive signs towards prices.
In the current June future we expect prices to trade in the range of 11950-13500 levels.
CHILLI
Chilli prices have witnessed a good correction since the month of March, falling by about 20% from highs of 5500. We
have seen prices giving strong break-out above 4488 levels with strong volumes, indicating that long positions were
initiated above the given level.
In the current June future, prices have formed a short-term Bottom at 4390-4407 levels. It is advised to buy on
corrections up-to 4450-4500 levels, Targeting 4800, 4990, maintaining Stop loss at 4370.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental
TECHNICALView
OUTLOOK - ENERGY SEGEMENT
CRUDE OIL
Crude oil prices have witnessed a long consolidation period after recovering from its lows of 1629 levels. The
consolidation or the sideways-up range has marked in between the support-resistance levels on the weekly chart.
The technical indicator RSI, has shown negative divergence, with every higher-highs in the consolidation period is
followed by a lower high on the RSI.
In the current June expiry, we expect this down trend to continue as prices have breached almost all support levels.
We advise selling on rises with down-side potential seen till 3130 and 2880 in the near term.
TECHNICAL OUTLOOK - GUAR
GUAR SEEDS
Prices are expected to consolidate with-in a range of 300 i.e. from 2270-2580 in the near term. It is advised to initiate
fresh Long/ Short positions around the higher/ lower range as given above and have also been marked on the
technical chart.
A sustained break-out below support level of 2270, the Bear trend will resume towards targets of 2190, 2100 levels,
therefore Stop-loss below support levels is necessary.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental
TECHNICALView
OUTLOOK - PULSES
CHANNA
Chana prices have corrected more than 15% since the beginning of April; the same trend is continued on the futures
counter as well. However, prices are up 2% after hitting recent lows, and are consolidating in a narrow range.
On the technical indicators, of Exponential Moving Average (EMA), the 9-day EMA is trading well below the 18-day
EMA, showing signs of bearishness in prices at current levels.
In the current June future, we expect price trend to remain sideways with a negative bias. The expected trading is seen
between 2070-2290.
VAYDA
BAZAAR
MAY 2010
Commodities
Fundamental View
FOR MORE DETAILS CONTACT
Chennai: 09841033153 / 09381952233, Gujarat & Madhya Pradesh: 09016420377,Jaipur: 09314623310,
Maharashtra / Goa: 09970853138, Mumbai: 09321525906, Udaipur: 09414156299
DISCLAIMER
The document is for general information for its clients and does not solicit any action based on the material contained herein, the information
provided herein should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither
this document nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever.
Though disseminated to all clients simultaneously, not all of them may receive at the same time. In addition to this, by virtue of receiving this
document, it will not treat the recipient as its clients.
The, projections and forecasts, technical analysis, described/presented in this document are based upon information available to the public and
sources, believed to be reliable. The, estimates and assumptions based on projections and forecasts are inherently subject to significant
uncertainties and contingencies, one or more of the estimates will not materialize or will vary significantly from actual results, and such variances
will likely increase over time. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in
projections. Inclusion of contents described herein should not be construed as a representation or warranty by or on behalf of the Mangal Keshav
Group and it will not accept any liabilities for any loss or damage of any kind arising out of the use of this document.
This document will not take into account the particular investment objectives, financial situations, or needs of individual clients. The information
relating to the securities discussed in this report may not be suitable for all the investors and may not be eligible for sale in all jurisdictions or to all
categories of investors. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and
objectives. Recipients of this document should consider and independently evaluate whether it is suitable for his/ her/their particular
circumstances and, if necessary, seek professional/financial advice before making any investment decisions. Any such person shall be
responsible for conducting his/her/their own analysis of the information contained or referred to in this document and of evaluating the merits and
risks involved in the securities forming the subject matter of this document. Mangal Kehav Group, its directors, employees, agents nor
representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including loss of revenue or profits
that may arise from or in connection with the use of the information.
Mangal Keshav Group its officers, directors and employees, including the analysts, research professionals and others involved in the preparation
or issuance of this material and their dependants, may on the date of this document or from, time to time have "long" or "short" positions in, act as
principal in, and buy or sell the securities or derivatives thereof of companies mentioned herein. We may have earlier issued or may issue in future
reports/ material on the companies covered herein with recommendations/ information different those made in this report. Mangal Keshav Group
may rely on information barriers, such as "Chinese Walls" to control the flow of information contained in one or more areas within the Group
Certain transactions including those involving futures, options, and other derivatives as well as non-investment-grade securities give rise to
substantial risk and are not suitable for all investors. Please ensure that you have read and understood the current risk disclosure documents
before entering into any derivative transactions.
The document is for the use and consumption of the recipient only. This publication may not be distributed to the public used by the public media
without the express written consent of Mangal Keshav Group. This document or any portion hereof may not be printed, sold or distributed without
the written consent of Mangal Keshav Group. The distribution, in other jurisdictions may be restricted by law, and persons into whose possession
this document comes should inform if they observe any such restrictions.
The opinions expressed in this document/material are subject to change without notice and have no obligation to tell you when opinions or
information in this report change. While we endeavor to update on a reasonable basis the information discussed in this material, there may be
regulatory, compliance, or other reasons that prevent us from doing so.
Mangal Keshav Securities Ltd.
Member BSE (Cash & Derivatives): SEBI Regn. No. INB 010977431 & INF 010977431
Member NSE (Cash & Derivatives): SEBI Regn. No. INB 230977432 & INF230977432
NSDL: SEBI Regn. No. IN – DP – NSDL – 229 – 2002
CDSL: SEBI Regn. No. IN – DP – CDSL – 153 – 2001
AMFI Regn. No. ARN 2397
SEBI PMS. Regn. INP000002650
MK Commodity Brokers Ltd.
Member MCX (Regn No. 12620, FMC Code: MCX/TCM/CORP/0700)
Member NCDEX (Regn. No. 00042, FMC Code: NCDEX/TCM/CORP/0134)
Mangal Keshav Insurance Brokers Ltd.
IRDA License No. DB/188/03
Mangal Keshav Distributions Ltd.
AMFI Regn. No. ARN 22771
MK Capital Ltd.
N – 13.01824
Registered Office Address
501, Heritage Plaza, J. P. Road, Opp. Indian Oil Colony, Andheri - (West), Mumbai- 400053
Tel. No. : +91 - 22 - 30687999. Fax: +91-22 - 66790535 Email: [email protected]
www.mangalkeshav.com