On a fortnightly basis, the global equity markets traded on a positive note owing to number of global developments that prompted the traders to place risky bets. From the US front, the Federal Reserve announcement heightened expectation about interest hike by next month. This development acted as a negative factor for the emerging markets. Moreover, recent the terror attacks and bombings in Paris have sent shock waves around the world and hurt market risk sentiment in the process. This boosted the demand for safe haven assets including the greenback.
The Indian Rupee depreciated by 1.55 percent in the last fortnight owing to the month end dollar demand from both importers and banks. Moreover, foreign institutional investors have been net sellers of over Rs 5,000 crores worth equities so far this month. Disappointing corporate earnings in the July-September quarter along with short coverings on the last day of F&O expiry acted as a negative factor for the Indian Rupee. The Finance Minister stated that India's economic growth is expected to exceed 7.3 per cent in the current financial year and go higher still in the next one. The growth would come despite rural demand been impacted by lower rains in the last two years.
In the past fortnight, spot gold prices traded lower by 2.29 percent to close at $1058.41 while MCX gold prices declined by 1.23 percent to close at Rs.25059 per 10 gms. Gold had rallied last month on speculation that the softness in the global economy could prompt the Fed to delay raising rates until next year. But the U.S. Central bank's hawkish tone last fortnight triggered a fresh sell-off in bullion. The euro fell on expectations that the European Central Bank will ramp up its monetary stimulus next month in turn stronger dollar and lower gold prices.
International silver prices declined by 1.26 percent while MCX silver prices declined by 0.43 percent in the past fortnight. Price decline is in tandem with falling gold prices. Strengthening dollar index by around 1 percent and fall in the base metals complex also acted as a negative factor for silver.
LME Copper prices plunged by 4.8 percent in the last fortnight as strength in the DX after latest FOMC meeting minutes showed that most participants felt that economic conditions to allow a rate rise could be met by the time of the next meeting exerted pressure on the metal. Moreover, acts of terrorism in Paris in the earlier part of fortnight triggered doubt about the possible effects on the global economy, thereby pushing investors away from riskier assets. Also, Chile's Codelco, the world's biggest copper producer, reports say has cut its 2016 premium to China for the refined metal by more than a quarter to a three-year low. Further, Codelco has chosen to remain a part of the problem, proclaiming that it would rather restrain its costs than cut output. However, sharp losses were cushioned as several media reports suggest that the Chinese government may buy large quantities of nickel, zinc and aluminum for its own reserves and to alleviate a domestic oversupply. MCX copper prices declined by 4.7 percent in the last fifteen days in line with international trends.
In the past fortnight, WTI oil prices rose by around 2.38 percent while MCX crude oil prices rose by 4.91 percent. The downing of a Russian jet by Turkey on Monday helped push up oil prices last week on the risk that rising geopolitical tension could hit Middle East supplies, however, those concerns were receding and had done little to shake the belief that global production will stay high even as stockpiles rise. However, concerns that escalating tension in the Middle East could disrupt supply faded, and the focus returned to a persistent market glut. Prices were see-sawed by volatility as Saudi Arabia pledged to work toward oil price stability but traders worried about a global supply glut and signs of rising U.S. stockpiles.
Low investment demand as seen in the outflows from the SPDR gold trust, stronger dollar and hopes of rate hike by the US Federal Reserve will exert downside pressure on the yellow metal in the coming fortnight.
The glut in the oil markets continue to create bearish sentiment while the recent escalation of geo-political tensions between Russia and Turkey raised bets on crude oil. Price trajectory from hereon will be dependent on how the oil outputs are adjusted by the OPEC as well as Non-OPEC nations.
We expect base metal prices to trade lower as serious demand concerns from the major consumer, China following string of weak economic data continue to bother metals. Besides, investors are keeping an eye on the ECB's policy decision on 3rd December, with growing expectations that the ECB could cut interest rates by 20 basis points.
In the current Rabi season, sowing coarse cereals is encouraging as acreage during current season is higher by 18.5 per cent compared to last year. This might be due to due to lower soil moisture. Overall acreage in Rabi has declined by more than 14 per cent from a year ago period. Wheat and oilseed sowing has affected this rabi. As per the latest sowing data, Rabi crops had been sown on 318 lakh hectares, less by almost 54 lakh hectares compared to last year sowing in the same period.
The most active NCDEX Chana Dec contract moved higher and touched Rs. 5,400 per quintal during the first half and then slumped about 7.4 % to close at Rs. 5,000 levels last fortnight. Chana price slump due on expectation of increased supplies in the spot market as government is planning to start auction the seized pulses coupled with lower demand at higher prices. As per data release by Agriculture Ministry, pulses planted on 90.91 lakh ha, lower by 7 per cent compared to last year acreage as on Nov 27. The acreage under Chana in Rajasthan reported at 12.56 lakh ha down by 5.3 per cent compared to last year while Maharashtra the area is higher by almost 41 per cent at 9.3 lakh hac.
During the last fortnight, soybean price gain due to good demand from the stockists as domestic meal demand is increasing. However, limited demand at higher prices capped further gains. The active NCDEX Soybean Dec'15 closed higher by about 2 per cent at Rs 3,946 per quintal after touching high of Rs. 4,001 level. Similarly, in CBOT, the soybean gain about 1.6 per cent during the fortnight to close at $8.730 per bushels due robust export sales from the US. Soybeans gains were also lead by higher soyoil prices on hopes of increased biofuel demand. Further, there are reports that the Argentine president-elect Mauricio Macri may take some more time before taking any decision on cutting export taxes on crops including soybeans.
The most active RMseed Dec'15 contract on NCDEX gain about 1 per cent to close at Rs. 4,685 per quintal during last fortnight. Rm seed prices have recovered from the lower levels on diminishing supplies and expectation of lower acreage this year in Rajasthan. As per the Department of Agriculture, Rajasthan, the area under Rape & Mustard is pegged at 24.34 lakh hac as on 26th Nov, 2015 lower slightly by 3.5 per cent compared to last years' area during same time. This year the target of sowing in Rajasthan is 27 lakh ha against five years average of 25.48 lakh ha.
During the last fortnight, Ref. Soy oil price for Dec'15 delivery on NCDEX, increased by 2.4 per cent from to close at 616.2 per 10 kgs. The prices increased on recovering International soyoil prices due to expectation of good demand for biofuel in the US coupled with encouraging export data. In CBOT, the soyoil prices for the most active Jan'16 contract surged about 6.44 per cent during the fortnight to close at 29.08 cents per pound.
The CPO prices fall by 2.6 per cent to close at Rs. 381.3 per 10 kg last fortnight on lower than expected demand and ample supplies in the domestic market. However, Malaysian Feb'16 palm-oil futures gain about 3.2 per cent to close at 2,362 Ringgit / tonne on reports of lower supplies in coming months as wet season arrived in south Asian countries. Moreover, export tax for crude palm oil for top producer Indonesia in December will remain at zero, unchanged from November.
Among softs, cotton and kapas traded higher on anticipation of better demand from the mills for good quality cotton. MCX Dec'15 contract closed higher by 2.4 cent during the last fortnight at Rs. 16,060 per bale. Similarly, NCDEX Kapas gain 2.6 per cent to close at Rs. 860 per 20 kg. Similarly, ICE cotton traded higher on positive export data and slow harvesting from the US. Due to strong US cotton export demand traders have rolled their long positions forward to the March contract.. Earlier, USDA data forecasts decrease in world cotton production and consumption for 2015/16.
The NCDEX Dec delivery Sugar gain 1.2 per cent to close at Rs 2,774 per quintal due to some positive moves by government to help sugar industry by paying Rs. 45 per tonnes directly into farmers account. Moreover, good export demand for the Indian white sugar keeping the prices higher. However, ICE raw sugar Mar'16 fall by 0.47 per cent during last fortnight pressured by the strong dollar and expectation of higher Indian import prospects due to better support from the government..
During the last fortnight, spices complex traded on positive. Cardamom surged about 13.8 per cent during the last fortnight exporters were seen active due to arrivals of good quality cardamom. Similarly, Coriander too surged by more than 11 per cent due to lower supplies, diminishing stocks and good export demand. Jeera and Turmeric too gain 6.8 per cent and 5.1 per cent respectively on revival of demand in the spot market. For jeera, there are reports on lower sowing and concern over production keeping the prices high as the new crop will only come during the next year. While Turmeric prices are surging due to good upcountry demand and anticipation of lower production new year.
Chana price may trade sideways on reports on good sowing progress and expectation of increased supplies of seized pulses. However, lower than expected arrivals with good demand is driving the spot prices.
We expect Soybean prices to trade sideways to down on expectation of higher arrivals and limited demand from oil millers and export demand for meal. However, lower production estimates may be little positive for prices.
We expect CPO prices to trade sideways to higher due to expectation of lower production in Malaysia and Indonesia in coming months due to wet weather. However, higher inventory level in the country may pressurize the prices in domestic market.
We expect cotton prices to trade sideways to higher during next fortnight as ginners are buying good quality cotton due to improved exports this year compared to previous year. Moreover, reports crop damage and lower production may stabilize prices in long run.
Among spices, turmeric may trade sideways to higher on upcountry demand and good quality turmeric. However, higher arrivals may pressurize the prices. Similarly, Jeera and cardamom may trade sideways to higher on good export demand. Coriander may trade higher on concern over supply and diminishing stocks in domestic market.
(Naveen Mathur is Associate Director, Commodities and Currencies, Angel Broking, gives a fortnightly trend outlook for commodities)