India‘s inflation fell to near zero levels although it may take some time for it to get reflected in the

prices of essential commodities. Even as the BSE Sensex is moving in a narrow range unable to
break the 9000 mark, India‘s largest commodity bourse created a record by as its turnover touched Rs
32016 crore on a single day the previous highest being Rs 29,887 crore in September 18, 2008.
Angel Commodities, one of the leading commodity brokerages also announced the crossing of a
major milestone of Rs 1000 crore turnover. What ever gains in BSE in recent days
has been attributed to growth in commodity stocks.
Commodity market regulator, Forward Markets Commission (FMC) will install at least 180 display
boards at locations such as rural post offices, Krishi Vigyan Kendras and APMCs across the country
in the next 10 days to provide prices of farm com modity futures to farmers. Meanwhile gold and
crude oil continue to generate more volumes in India‘s commodity bourses. 9.1- Precious Metals
Gold prices recovered strongly from its lows during last week and almost touched a high of $970/oz.,
as the Federal Reserve's plans to purchase as much as $1.15 trillion in U.S. bonds and mortgage-
backed securities sparked worries of inflation ahead, raising gold's appeal as a hedge against rising
prices. This is the most aggressive plan taken by Fed since the early 1960. Demand from gold ETF
also increased during this week. Holdings in SPDR Gold Trust, world‘s largest gold ETF, touched an
all time high of 1103.29 tons.
The volatility in prices in the Bullion pack has increased greatly over the past few months with 19
March being a highly volatile trading day. Spot Gold is finding excellent support in the zone of $880-
$890 levels which is viewed as value buying zone by investors. Whereas major resistance zone is
seen between $960-$970. The demand for the safe-haven asset is still prevalent with the USD
weakening consistently over the past few trading sessions. Also, the increased volatility in the Rupee
is playing its role in determining domestic bullion prices. In coming weeks & months, the state of the
overall global economic scenario will play a key role in determining bullion prices as investors
evaluate various asset classes to channel their funds. Still gold remains the best bet under current
market scenario. MCX April Gold can face resistance around Rs.15600 levels, whereas support is
seen at Rs. 14850 per 10 gram S t e v e n s B u s i n e s s S c h o o l ( 2 0 0 9 - 2 0 1 1 ) Page 32
9.2- Crude Oil
Crude Oil prices traded higher amidst high amount of volatility in the last week. Oil prices surged to
a three month high on account of weak dollar and rally in global equity markets. Despite bearish
inventory data, prices rebounded from its lows, after US Federal Reserve decided to buy Treasury
bonds worth $300bn to ease credit market. Steps taken by Fed rekindled hopes for economic
recovery and rise in energy demand. Crude Oil prices have increased by more than 20% this year, on
account of strict implementation of production cuts by OPEC to reduce excess supply and weak
dollar against major currencies. Volatility in oil prices has increased sharply in past few trading
sessions. We expect that oil prices can witness fierce tussle between bulls and bears in coming
weeks. Factors like falling demand and weak economic data are favoring bears, but weak dollar, rise
in risk appetite amidst strong equity markets are giving bulls a reason to come back in to market.
After last week‘s rally, oil prices can witness profit booking. During this week, NYMEX May Crude
Oil prices are expected to trade in the range of $42.50 and $53.50.
9.3- Rubber
Rubber prices in domestic and global markets were on a recovery mode this week. In the weekend
covering groups lifted the prices to further highs driven by possibly a speculative interest. However,
2009 as predicted by many analysts is not going to be a good year for rubber with consumption to fall
5.5 percent across the globe mainly due to falling automobile sales. Rubber prices have slumped 50
percent in a year as the global recession slashed tire demand. Europe‘s car market shrank 7.8 percent
in 2008, while U.S. sales contracted 18 percent to a 16
percent year low.
In TOCOM and Shanghai, benchmark natural rubber futures climbed to the highest in more than two
weeks as producers restated proposed output cuts and on speculation China, the world‘s largest
consumer, is adding the commodity to state stockpiles. S t e v e n s B u s i n e s s S c h o o l ( 2 0 0 9 -
2 0 1 1 ) Page 33
Spot rubber flared up on Friday. Sheet rubber RSS 4 moved up to Rs 76.50 from Rs.75.50 a kg,
while the market made all-round improvement even in the absence of enquires from the major
manufacturers. The volumes were comparatively better. The April futures for RSS 4 firmed up to Rs
77.99 (Rs 77.50), May to Rs 79 (Rs 78.56), June to Rs 79.99 (Rs 79.67) and July to Rs 79.95 (Rs
79.80) a kg on National Multi Commodity
Exchange (NMCE).
Towards weekend in global markets, RSS 3 slipped further to Rs 73.37 (Rs 73.81) a kg on Singapore
Commodity Exchange. The grade‘s spot weakened to Rs 73.68 (Rs 74.43) a kg at Bangkok. The
physical rubber rates were: RSS-4: 76.50 (75.50), RSS-5: 75 (74), Ungraded: 73.50 (73), ISNR 20:
74 (73.50), and Latex 60%: 57.50 (57).
Meanwhile, India‘s Rubber Board has raised alarm against the rapid growth in tyre imports mainly
from China. A steady trend with an slight upward bias could be expected for rubber next week. 9.4-
Base metals
Base metal prices are moving higher on the back of a weaker dollar and stable equities as both these
factors have improved market sentiments. A weaker dollar makes base metals look attractive for
holders of other currencies. This is providing a strong support to base metal prices but the upside
could be capped as LME inventories have touched a 15-year high. The base metals market is in an
oversupply situation and fundamentals look bearish. However, the current rise in base metal prices is
mainly due to technical buying and short-covering. In the coming week, base metal prices are
expected to remain volatile as the US is expected to announce
economic data like existing home sales, new home sales, 4Q GDP, personal income and spending. S t
e v e n s B u s i n e s s S c h o o l ( 2 0 0 9 - 2 0 1 1 ) Page 34
9.5- Soybean
Refined soy oil futures fell sharply during the last week as government of India scrapped import duty
on soy oil to reduce premium over palm oil. Government of India extended ban on exports of edible
oil. Last year, Govt. of India had banned export soy oil in March to control rise in price. According to
the Solvent Extractor‘s Association of India, India‗s import of edible oil increased to 7,30,094 metric
tonnes in February, 2009, up 69.40% as compared to last year during the same period. Edible oil
imports in the first four months of oil marketing year (November to February) was 28,24,941 metric
tonnes, up 87% as compared to 15,12,695 metric tonnes during the same period last year. PEC Ltd.
has floated two separate tenders for the local sales of 3161 metric tonnes of crude soy oil. PEC is
authorized by the government of India to import edible oils and sales the local market. Global
vegetable oil prices may still fall due to ample global supply. In the coming week, prices are
expected to move lower on account of higher import of edible oil and scrapped import duty on
soybean oil. NCDEX April Refined Soy Oil has support at 430/422
and resistance is seen at 452/460 levels in this week.
9.6- Other Edible Oil
India‘s edible oil and oilseeds Futures recovered from their lower level tracking the global markets.
The Bursa Malaysia Derivative making decent gains in the past few days and CBOT‘s projection
aided market sentiments. It was a firm trend in crude palm oil that lends support to the oil seeds
complex. The June Contract closed at 1985 a gain of 74. Nynex Crude Oil has support at US $51 per
barrel. Mustard Seed and castor seed tracked the gains in soybean and ended on a mixed to higher
note in physical, Futures markets S t e v e n s B u s i n e s s S c h o o l ( 2 0 0 9 - 2 0 1 1 ) Page 35
9.7- Turmeric
Spot prices at Erode and Nizamabad over the past couple of days are being quoted at higher rates due
to better off takes at the domestic market. Prices in the previous week were quoted in the range of Rs.
4,200-4,350/qtl. Even though the arrivals are more off takes are equally better due to domestic
buying. Arrivals on an average in the previous week were around 25,000 bags daily in both the major
mandis of Nizamabad and Erode. Fear of lower availability of Turmeric in 2009 is supporting the
prices to strengthen. Demand from the domestic market especially from local stockiest is present but
the overseas demand has reduced as the prices are at higher levels. Farmers are hoarding the stocks
and not bringing in fresh turmeric to the market in good quantity in order to reap maximum profits.
Turmeric Futures April 09 contract touched a high of Rs.5,090/qtl tracking spot prices. Prices are
ruling at higher levels thus cautious trading is advisable at futures. Prices have initial support at
Rs.4,840/qtl and thereafter at Rs.4,700/qtl. Resistance could be seen at Rs.5,205/qtl and thereafter at
Rs. 5,395/qtl.
9.8- Sugar
Sugar market declined sharply by 15% in the last 3-4 weeks as the Indian government has adopted
various measures to curb spiraling Sugar prices. Besides imposition of stock limits and duty free
impost of Raw Sugar, Government is now considering a proposal to let state-run trading companies
import refined sugar at zero duty to bridge the widening gap between demand and supply. Final
decision by the cabinet regarding the duty free imports of refined Sugar is expected in the coming
week.
India will have to import 3 million tonnes of Sugar to meet its domestic consumption of 22.5-23
million tonne. But imported sugar is much more expensive than local sweeteners at present, making
the imports unviable. Thus, despite government‘s effort to ease import norms, we don‘t expect
imports to take place in the coming months. Any significant decline in the prices should be treated as
a good buying opportunity as Overall, fundamentals remain supportive for the prices with lower
output forecast in India and a global deficit of more than 4.3 million tonnes. S t e v e n s B u s i n e s s
S c h o o l ( 2 0 0 9 - 2 0 1 1 ) Page 36
April Sugar futures are currently trading at around Rs. 2035 levels. Prices are having initial support
at Rs. 1995 and then 1953. Resistance could be seen at Rs. 2080/qtl and thereafter Rs. 2120/qtl. 9.9-
Black Pepper
The undertone in the Black Pepper spot and futures counter this week was steady due to increased
buying interest and aided by a tight supply position. Indian parity in the international market was at
$2,225-2,325 a tonne (c&f) as the rupee has strengthened against the dollar on Wednesday.
Overseas reports on Wednesday said that Brazil was firmer and exporters appeared to reluctant to
offer. B Asta was said to have been offered at $2,000 a tonne while B1 at $1,900 a tone. Vietnam
was reportedly steady at $1,800 a tonne for faq 500 GL. More buying interest was seen for black
and white pepper from industry albeit for nearby deliveries. Lasta was being offered on
replacement basis at $2,200-2,250 a tonne (fob). New Indonesian crop is said to be lower at 15,000
tonne against an estimated 30,000 tonnes last season. However, some substantial quantity of carry
over stock is reportedly available therein the hands of middlemen and exporters. In the weekend
the physical counter traded steady amidst good underlying buying interest. The domestic as well as
the overseas buyers from Europe were active. The stock availability remained low inducing the
Indian traders to purchase from other cheaper origin like Indonesia at $2100/tonne fob. At the
benchmark Kochi markets berries were offered at Rs.10300/qtl for the ungarbled variety and
10800/qtl for the garbled variety, steady as that of prior trading session. Around 33.5 tonnes were
sold for the arrivals of 25 tonnes. Strengthening rupee against dollar pushed up Indian parity to
$2300/tonne f.o.b while VASTA was offered at $2150/tonne and BASTA at $1950/tonne f.o.b.
Pepper is likely to trade weak during early hours with the possibility of late recovery. S