Chana To Trade Bullish In The Long-Term: April 25, 2012

Chana prices are expected to remain sideways as demand from the local stockiest may support the upside, while fears that government might step up to curb rising prices may restrict sharp gains.

According to Angel Commodities, Chana May contract to trade in the range of Rs 3650 and Rs 3880 per qtl levels in short term. Long term fundamentals remain supportive for Chana prices on the back of supply concerns caused by lower output and growing consumption.

Arrivals in Rajasthan has begun since the beginning of April, however, the pace is very slow on account of sharp drop in yields and thereby output in Rajasthan, the second largest Chana producing state.

Chana prices witnessed mixed trades throughout the day owing to peak arrivals in the domestic market and fears of government intervention in MP to curb hoarding of stocks on one hand and lower crop output estimates in the current season on the other. Prices settled 0.52% lower in the spot market.

As per the NCDEX circular dated 11th April, Initial Margin(IM) of 10 % of the value of contract or VaR based margin whichever is higher will be imposed on all contracts and yet to be launched contracts of Chana with effect from beginning of the day Thursday April 12, 2012. To curb excess volatility in prices, government has also imposed special margin on Chana and has cut position limits last week.

Chana production is expected to decline by 6.8% to 7.66 mln tonnes as compared to 8.22 million tonnes in the last year. As output is likely to decline, India's pulses imports in 2011-12 (Apr-Mar) may rise nearly 10% from 2.75 mln tn in the previous year. India's consumption of pulses is on the rise with an annual growth of around 5% but production is seen lower, which may lead to increase in imports this year.

Potato may show some downward revision

In NCDEX, Potato May Futures Rs/qtl support is 955-966 while resistance is at 1000-1010. In case of MCX the support is1045-1054 and resistance 1077-1090

Potato prices may trade downwards in the intraday due to comfortable supplies in the domestic markets may cap sharp gains on the other had demand in the domestic markets may support prices at lower levels.

In the medium term, Potato prices may take cues from the final estimates from the horticulture department which may show some downward revision in the output owing to reports of late blight disease.

Yesterday there was some correction in the initial part of the day but covered towards the end of the day supported by demand at lower levels. Potato Spot as well as Futures settled 0.24% and 1.04% lower.

At NCDEX, a minimum initial margin of 10% of the value of the contract or VaR based margin whichever is higher will be imposed on all running contracts and yet to be launched contracts of Potato with effect from beginning of trading day Thursday, April 12, 2012. 

However, markets are expecting further decline in output due to late blight disease by 20%. The output in UP and West Bengal, the two biggest potato growing states is expected to be lower at 12.8 mn tn (13.6 mn tn in 2011) and 10-15% (13.3 mn tn in 2011) respectively. 

What to expect for Energy, Precious and Base Metals this evening

Investors will keep an eye on a US Federal Reserve policy meeting. The Federal Reserve’s approach towards monetary policy has been a crucial factor behind the fluctuation of gold prices in recent months.

If the Fed drops any clue on monetary easing at the meeting then this may lead to further upside in gold prices. According to Angel Commodities, bullion could trade higher today on account of weakness in the US dollar index and upbeat market sentiments.

Silver prices will also take cues from movement in base metals pack. However, precious metals on the MCX are expected to trade lower on account of appreciation in the Indian currency.

According to Angel, crude oil prices may trade with a sideways bias on the back of expected rise in US crude oil inventories but on the other hand weakness in the US dollar index coupled with upbeat global market sentiments will provide support to oil prices.

MCX crude oil prices are expected to trade on mild bearish note on account of a stronger Rupee.

The US Energy Department (EIA) is scheduled to release it weekly inventories report today at 8:00pm IST and US crude oil inventories are expected to rise by 2.7 million barrels for the week ending on 20th April 2012.

Yesterday, US crude oil inventories declined unexpectedly by 985,000 barrels for the week ending on 20th April 2012. Gasoline inventories declined by 3.64 million barrels and whereas distillate inventories also dropped by 3.56 million barrels for the same week.

Base metals are likely to to trade higher today on account of weakness in the US dollar index

If the Fed drops any clue on monetary easing at the meeting then this may lead to upside in metal prices. However, appreciation in the Indian Rupee may hold gains on the MCX.