Commodity Research Report 14 December 2015 Ways2Capital

✍ MCX DAILY LEVELS DAILY

R2

R1

PP

S1

S2

S3

S4

101.55

100.75

100.20

99.40

98.85

97.50

96.15

339

328

323.40

317

312.40

306.10

295.10

284.20

18 DEC 2015 2665 2583

2501

2452

2419

2370

2337

2255

2173

GOLD

05 FEB 2016 2688 26442 6

25998

25838

25554

25394

25110

24666

24222

LEAD

31 DEC 2015 122. 119.95 10

117.70

116.95

115.50

114.75

113.30

111.10

108.95

NATURAL GAS 28 DEC 2015 145. 141.50 30

137.70

136

133.90

132.20

130.10

126.30

122.50

602

595.50

585.50

579

569

552.50

534

ALUMINIUM COPPER CRUDE OIL

EXPIRY

R4

R3

DATE 31 DEC 2015 104. 102.90 25 29 FEB 2016 349.

90

NICKEL

31 DEC 2015

SILVER

04 MAR 2016 3596 35299 5

34633

34308

33967

33642

33301

32635

31969

31 DEC 2015

105.50

104.60

103.40

102.40

101.20

99.10

96.95

R2

R1

PP

S1

S2

S3

S4

98.15

96.35

92.90

89.45

299.90 284.30

268.70

ZINC

635 618.50

10 107.70 9.80

✍ MCX WEEKLY LEVELS WEEKLY

EXPIRY

R4

R3

ALUMINIUM

31 DEC 2015 110.15 106.70

103.25

101.60

99.80

COPPER

29 FEB 2016 362.30 346.70

331.10

324.90

315.50 309.30

3031

2757

2580

2483

2306

2209

1935

1661

GOLD

05 FEB 2016 26996 26519

26042

25860

25565

25383

25088

24611

24134

LEAD

31 DEC 2015 129.45 124.50

119.55

117.85

114.60 112.90

109.65 104.70

99.75

151

142.70

137.20 128.70

123.40 109.60

95.80

CRUDE OIL

18 DEC 2015 3305

NATURAL GAS 28 DEC 2015 178.60 164.80 NICKEL

31 DEC 2015

709 669.40

629.80

609.40

590.20 569.80

550.60

511

471.40

SILVER

04 MAR 2016 39521 37788

36055

35019

34322

33286

32589

30856

29123

31 DEC 2015

107.30

105.45

102.75

101

98.30

93.80

89.30

ZINC

116. 111.75 30

WEEKLY MCX CALL BUY GOLD FEB ABOVE 25750 TGT 25900 SL 25594 SELL ZINC DEC BELOW 102.20 TGT 100.20 SL 104.60

PREVIOUS WEEK CALL SELL ZINC DEC BELOW 102 TGT 100 SL 104 - MADE LOW OF 100.10

✍ FOREX DAILY LEVELS DAILY USDINR

EXPIRY

R4

R3

DATE 26 DEC 2015 67.5 67.35 0

R2

R1

PP

S1

S2

S3

S4

67.20

67.10

67

66.95

66.85

66.70

66.55

GBPINR

26 DEC 2015 74.6 5

74.20

73.80

73.70

73.40

73.25

73

72.60

72.20

EURINR

26 DEC 2015 102. 102.10 40

101.80

101.65

101.45

101.30

101.15

100.80

100.50

JPYINR

26 DEC 2015 55.1 0

54.90

54.80

54.70

54.55

54.45

54.30

54.15

R2

R1

PP

S1

S2

S3

S4

67.35

67.20

67

66.85

66.65

66.30

65.95

55

✍ FOREX WEEKLY LEVELS DAILY USDINR

EXPIRY

R4

R3

DATE 26 DEC 2015 68.0 67.70 5

GBPINR

26 DEC 2015 78.1 76.45 0

74.85

74.20

73.20

72.60

71.60

70

68.40

EURINR

26 DEC 2015 105. 103.80 10

102.50

102

101.25

100.75

100

98.70

97.40

JPYINR

26 DEC 2015 58.1 0

55.95

55.60

54.90

54.50

53.80

52.75

51.70

57

WEEKLY FOREX CALL SELL GBPINR DEC BELOW 101.80 TGT 101 SL 103.10 SELL JPYINR DEC BELOW 55.30 TGT 55 SL 54.05 PREVIOUS WEEK CALL SELL EURINR DEC BELOW 72.50 TGT 71.50 SL 73.50 - NOT EXECUTED

✍ NCDEX DAILY LEVELS DAILY

EXPIRY

R4

R3

R2

R1

PP

S1

S2

S3

S4

DATE SYOREFIDR

20 JAN 2015

653

646

639

636

632

629

625

618

611

SYBEANIDR

20 JAN 2015

3900

3846

3792

3767

3738

3713

3684

3630

3576

RMSEED

20 JAN 2015

4953

4860

4767

4713

4674

4620

4581

4488

4395

JEERAUNJHA

20 JAN 2015

16213 15908

15603

15436

15298 15131 14993 14688

14383

CHANA

20 JAN 2015

5071

4970

4869

4827

4768

4726

4667

4566

4465

CASTORSEED

20 JAN 2015

4106

4020

3934

3904

3848

3818

3762

3676

3590

R4

R3

R2

R1

PP

S1

S2

S3

S4

✍ NCDEX WEEKLY LEVELS WEEKLY

EXPIRY DATE

SYOREFIDR

20 JAN 2015

688

670

652

642

634

624

616

598

580

SYBEANIDR

20 JAN 2015

4211

4062

3913

3827

3764

3678

3615

3466

3317

RMSEED

20 JAN 2015

5472

5221

4970

4803

4719

4552

4468

4217

3966

JEERAUNJHA

20 JAN 2015

18243 17303

16363

15816

15423 14876 14483 13543

12603

CHANA

20 JAN 2015

5173

5041

4909

4847

4777

4715

4645

4513

4381

CASTORSEED

20 JAN 2015

4923

4550

4177

4026

3804

3653

3431

3058

2685

WEEKLY NCDEX CALL SELL TMC APR BELOW 10300 TGT 9950 SL 10502 BUY RM SEED JAN ABOVE 4756 TGT 4860 SL 4652 PREVIOUS WEEK CALL SELL TMC APR BELOW 10050 TGT 9750 SL 10350

MCX - WEEKLY NEWS LETTERS INTERNATIONAL NEWS ✍ PRECIOUS METAL ✍ Gold Gold drifted lower on Friday and was headed for the seventh weekly drop in eight weeks as investors positioned for a looming US rate hike. A strong US nonfarm payrolls report last week cemented expectations of a rate hike at the Federal Reserve's policy meeting on December 1516. The first hike in nearly a decade is expected to dent demand for gold, a non-interest paying asset. Spot gold fell 0.4% to $1,067.20 an ounce by 0331 GMT, after closing flat over the last two sessions. For the week, bullion is down nearly 2%. "The path of the euro-dollar may be the most visible influence on gold, at least until the Fed meeting," said HSBC analyst James Steel.

"If the Fed raises rates, gold may be in for a knee-jerk reaction lower," said Steel, adding that the metal will be range bound until next week's meeting. A robust dollar was limiting interest in gold. The greenback rose for a second session on Friday, extending a rebound from a onemonth low on expectations of a rate hike. A higher dollar makes greenback-denominated gold more expensive for holders of other currencies.Weakness in oil was also hurting bullion. A slide in oil could trigger fears of deflation, a bearish factor for gold, which is often used as a hedge against oil-led inflation. U.S. crude prices remained near 2009 lows in early Asian trading on Friday as oil output in the Middle East continued to rise despite an existing global glut. The outlook for gold looked bearish Short positions in COMEX gold futures and options are at record highs, while assets in SPDR Gold Trust, the top bullion exchange traded fund, are at their lowest since September 2008. Investors have boosted bets that the gold price will soon drop to $1,000 an ounce, options data show. Gold, on track for a third straight annual decline, has lost 9.8% of its value this year. The technical picture for gold looks neutral in the $1,064$1,084 range, but a break below $1,064 could take the metal to a near-six-year low of $1,045.85, according to Reuters technical analyst Wang Tao. Among other precious metals, silver and platinum were also headed for a seventh weekly loss in eight weeks, with declines of more than 3%.

✍ Silver Taking weak cues from overseas markets, silver prices fell by Rs 114 to Rs 34,518 per kg in

futures trade today, as participants trimmed positions. In futures trading at the Multi Commodity Exchange, silver for delivery in far-month May next year shed Rs 114 or 0.33% to Rs 34,518 per kg in a business turnover of 7 lots.Similarly, the white metal for delivery in March declined by Rs 100 or 0.29% to Rs 34,115 per kg in a business volume of 297 lots. In the international market, silver fell 0.35% to $14.05 an ounce in Singapore today. Marketmen attributed the fall in silver prices at futures trade was largely in line with a weak trend in precious metals in global markets.

� Crude oil Crude oil prices remained at levels not seen since early 2009 on Friday as output in the Middle East continued to rise despite an already huge global glut, with analysts saying the price outlook for the rest of the year and into 2016 remained weak. Brent crude futures were down 29 cents at $39.44 a barrel at 0551 GMT, a touch above a near-seven-year low hit earlier in the session at $39.38 a barrel.US crude futures were at $36.52 per barrel, down 24 cents and just above Thursday's bottom of $36.38 - the benchmark's lowest mark since February 2009. "The next quarter is going to be particularly tough as we go from a high-demand to a low-demand quarter," said Richard Gorry, director of consultancy JBC Energy Asia. "Can you rule out $20 per barrel? No, you can't," he said, although adding that prices would not likely fall that far.

Gorry said he expected a slow rebalancing of the market towards the end of next year, with production remaining stubbornly high despite low benchmark prices. "A lot of producers are trying to maintain positive cash-flows and that means maximising output, and Iranian barrels are also coming back to the market," he said. The price rout is a result of a huge overhang in production that is fast filling onshore storage sites, which some analysts expect to run out in early 2016. ANZ bank said on Friday that "crude oil markets will remain subdued in 2016, though prospects for a recovery look better in the second half of the year." Jefferies bank said that an "inventory overhang is likely to expand significantly through the first half of 2016 and will likely suppress oil prices in the near-term.

� Zinc Taking positive cues from global market and pick up in domestic demand, zinc futures edged higher by 0.49 per cent to Rs 103.55 per kg today as speculators indulged in creating positions.

In futures trading at Multi Commodity Exchange, zinc for delivery in January 2016 was up 50 paise, or 0.49 per cent, to Rs 103.55 per kg in a business turnover of 13 lots. Also, the metal for

delivery this month was trading 45 paise, or 0.44 per cent higher at Rs 102.50 per kg in a business volume of 495 lots. Zinc prices strengthened on pick up in demand at domestic spot markets and a firm trend in the base metals pack at London Metal Exchange, market analysts said.

� Nickle Nickel prices rose by 0.68 per cent to Rs 590.30 per kg in futures market today as participants enlarged bets tracking rising demand from alloy makers in the spot market. However, nickel retreated 0.3 per cent at the London Metal Exchange and capped the gains.Nickel for delivery in January contracts gained Rs 4 or 0.68 per cent to Rs 590.30 per kg in a business turnover of 27 lots at Multi Commodity Exchange. The current month contract rose Rs 3.60 or 0.68 per cent to Rs 584.20 per kg in 617 lots. Analysts said increased domestic demand from alloy makers and other consuming industries in the spot markets, influenced nickel futures here.

� Aluminium Aluminium prices were up by 0.46 per cent to Rs 99.15 per kg in futures trade today, largely in tune with a firming trend in base metals at the London Metal Exchange (LME). Besides, increased demand at domestic spot markets also influenced prices. At Multi Commodity Exchange, aluminium for delivery this month rose 45 paise or 0.46 per cent to Rs 99.15 per kg in a business turnover of 274 lots. Metal for delivery in January also rose by 40 paise or 0.40 per cent to trade at Rs 100.05 per kg in two lots. Globally, aluminum added 0.1 per cent at the LME. Analysts said the rise in aluminium prices in futures trade was mostly in line with a firming trend in base metals at the LME after China's consumer inflation increased more than estimated, signaling demand in the world's second-largest economy may be stabilising after accelerated fiscal stimulus and a year of interest rate cuts.

� Lead Lead prices weakened 0.18 per cent to Rs 113.60 per kg in futures trade today as speculators cut down their bets prompted by subdued demand in the spot market. At Multi Commodity Exchange, lead for delivery in current month was trading down by 20 paise, of 0.18 per cent at Rs 113.60 per kg in a business turnover of 513 lots. Metal for delivery in January 2016

contracts shed 20 paise or 0.17 per cent to trade at Rs 114.25 per kg in 8 lots. Market analysts said apart from slakened demand from battery-makers in the spot markets, metal's weakness at the London Metal Exchange, weighed on lead futures prices here. In the international market, lead fell at least 0.3 per cent at the London Metal Exchange.

✍ NCDEX - WEEKLY NEWS LETTERS Since the start of 2014, the average landed cost of crude imported by Indian refiners has fallen from $ 108.76 to $ 36.65 a barrel. The same period has seen the London Metal Exchange Index that tracks prices of six primary non-ferrous metals — aluminium, copper, zinc, lead, nickel and tin — shed nearly a third of its value, even as benchmark US Midwest hot rolled coil steel rates have collapsed from around $ 680 to $ 365 per tonne.

But it’s not just energy and industrial metals. The same holds true for precious metals and agricultural commodities. Gold on Friday traded in London at $ 1,072.5 per ounce, compared to $ 1,225 in early 2014, and the peak of $ 1,895 reached on September 5, 2011. The UN Food and Agriculture Organisation’s food price index, at 156.7 in November, is also down from its December 2013 level of 206.2, and the all-time-high of 237.7 for February 2011.

There are broadly three reasons for this commodity meltdown, of which two are relatively easy to understand.

The first, of course, is China. The slowdown in the world’s largest manufacturing economy has hit demand for everything from copper, nickel and aluminium to coal and iron ore. Given its share of global consumption, ranging between 50% and 75% in these industrial raw materials, the dragon sneezing has naturally led to Brazil, Australia, Indonesia, Chile and many others catching cold. Worse, the excess steelmaking and aluminium, zinc and copper smelting/refining capacities that came up during the boom have today become a source of dumping, as Chinese producers are increasingly pushing overseas sales to offset stalling local demand growth.

The second is a strengthening US economy, alongside its emergence as a surplus oil producer, courtesy the shale revolution. In October 2013, US crude oil output hit 7.7 million barrels per day (mbpd), surpassing imports of 7.5 mbpd. Since then, its production has gone up further to an average of 9.4 mbpd, while imports have hovered at 7.3-7.4 mbpd. This turnaround in fortunes for a country that consumes a fifth of the world’s oil — in addition to the current hype over solar and wind energy, amidst growing pressure for phasing out fossil fuels — has been a significant contributor to the tumbling of crude prices. Simultaneously, the US economic recovery and the prospect of an imminent Federal Reserve interest rate hike have fostered a

strong dollar, in turn, diminishing gold’s safe-haven appeal.

The third factor is somewhat more complex, having to do with commodities being lumped together as a distinct ‘asset class’. From the early 2000s, commodities became trading vehicles for not just chocolate manufacturers, jewellers or airline companies wanting to hedge against volatility in prices of cocoa beans, bullion or fuel, but even for exchange-traded funds and other ‘pure’ investors having no direct production or dealing interests in them. At the height of the socalled emerging markets boom, the notional value of net ‘long’ or bullish investments in commodity index products monitored by the US Commodity Futures Trading Commission (USCFTC) totaled $ 256 billion in end-April 2011.

That tide has turned in the past two years, though, as index, pension and hedge funds have sharply cut their commodity exposures — the last USCFTC data for October 30 shows net long index positions at only $ 138.3 billion. The mounting selling pressure from funds has aggravated the crisis in commodity markets and also for governments, whether in Russia and Brazil or Argentina and Venezuela (where recent elections have seen seemingly secure socialist regimes being dislodged). Even the apparent rural backlash being faced by the Narendra Modi dispensation can be traced quite a bit to the global commodity crash affecting realizations for sugarcane, cotton, rubber, rice, soyabean or milk producers in India as well.

While the meltdown has impacted commodities across the board, the idea that they can be lumped together as an asset class could, nevertheless, come under challenge in the months ahead. The one distinction that markets may well end up making is between commodities whose prices in the near- to medium-term are largely a function of demand, and those for whom there could be supply-side issues, too. In the former category would be energy, base metals or gold and silver whose production is not amenable to sudden increases or decreases.

It’s safe to assume that their prices would remain under pressure, so long as the Chinese slowdown continues and India does not provide the new fuel for global growth that Modi’s election initially promised.

Agricultural commodities fall in the latter category. In their case — at least for food, even if not for cotton, guar-gum or bio-ethanol demand is stable or unchanging at worst. At the same time, supply is more prone to fluctuations, in response to both weather conditions as well as prices: it may be easier for farmers to expand or contract wheat acreages from season to season than for BHP Billiton, Rio Tinto, Glencore and Vale to open and shut down mines.

It is for this reason that the effects of the current El Niño — already the strongest since 1997-98 and expected to last through the winter and early spring — on the supply of farm produce cannot be written off. In the last three months, global prices of palm oil and sugar have climbed by 12.5% and 25% respectively, while cocoa futures are ruling 17.5 per cent higher over last

year at this time. Dry weather in Indonesia, Australia, West Africa and India is clearly causing supply concerns at least in these commodities.

The world may still be awash in corn, wheat and soyabean, but we still aren’t sure about the extent of drop in rabi plantings and the likely moisture stress to the already-sown crop in India.

By the time the picture becomes clearer towards January-end or so, the markets may start treating agricultural commodities a little differently from the other constituents of a generic, undifferentiated ‘asset class’. ✍ Chana Chana price were down by 0.47% to Rs 5,050 per quintal in futures trade on Friday as traders reduced their positions amid adequate stocks in the spot markets on higher supplies.At the National Commodity and Derivatives Exchange, chana for delivery in December month fell Rs 24, or 0.47% to Rs 5,050 per quintal with an open interest of 35,200 lots.Similarly, the commodity for delivery in far-month January 2016 traded lower by Rs 17, or 0.36% to Rs 4,719 per quintal in 26,930 lots.The fall in chana prices at futures trade to higher supplies in the physical market against subdued demand.3 ✍ Refined soya oil Refined soya oil prices were up by 0.29 per cent to Rs 634.50 per 10 kg in futures trading today as speculators created fresh positions, amid rising domestic demand.At the National Commodity and Derivatives Exchange, refined soya oil for delivery in December edged up by Rs 1.85 or 0.29 per cent to Rs 634.50 per 10 kg with an open interest of 25,840 lots.The January contract traded higher by Rs 1.15 or 0.18 per cent to Rs 635.60 per 10 kg in 85,890 lots.The rise in refined soya oil prices at futures trade to pick up in demand in the spot market against restricted supplies from producing belts. ✍ Jeera Jeera prices dropped by 1.78% to Rs 15,445 per quintal in futures trading on Tuesday as speculators cut down on their bets amid slackened demand in the spot market against ample stocks.At the National Commodity and Derivatives Exchange, jeera for delivery in far-month January 2016 fell by Rs 280, or 1.78% to Rs 15,445 per quintal with an open interest of 7,332 lots.Likewise, the spice for delivery in December contracts traded lower by Rs 270 or 1.74% to Rs 15,275 per quintal in 5,934 lots.Offloading of positions by traders, driven by muted domestic as well as exports demand in the spot market, mainly pulled down jeera prices at futures trade.

� Mustard Seed Mustard Seed prices closed lower by 3.99 per cent on Thursday at the National Commodity & Derivatives Exchange Limited (NCDEX) as a result of the profit booking by the traders on account of the weak crushing and export demand of mustard meal. At the NCDEX, Mustard Seed futures for December 2015 contract closed at Rs. 4,429 per quintal, down by 3.99 per cent, after opening at Rs. 4,594 against the previous closing price of Rs. 4,613. It touched the intra-day low of Rs. 4,429. Sentiment weakened further due to the sluggish export demand as a result of the weak demand for the commodity.

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