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The markets witnessed a lower-turnover week as the higher base effect of the previous week was at play. The market wide turnover on the MCX fell 7% on a week-on-week basis and the open interest gained 2%.

The action returned to the industrials as base metals and energy counters witnessed renewed buying interest. The weakness in global equity sentiments caused a resource shift towards commodities and buoyancy in hard-asset prices. Bullion prices remained subdued as the risk appetite was expanded and safe-haven buying was stagnant.

The week-on-week volume gainers were crude oil, natural gas and potato. Open interest gainers were aluminium, copper, mentha oil, nickel, platinum, silver and zinc.
Traders are advised to exercise caution as the profit-taking bias at higher levels is implying a lack of big ticket buying conviction on upthrusts. The bias may be maintained on the buy side for now.

Agri commodities
Chana has established the Rs 2,075 level as an immediate support and a crossover above the Rs 2,175 level with higher volumes and open interest expansion will indicate a fresh buy. Till then hold back fresh buy decisions. Market internals indicate a 14% decline in open interest as bulls unloaded positions at higher levels.

Mentha oil is witnessing a lacklustre buying interest as the trader activity remains subdued on this commodity. Unless the Rs 565 hurdle is overcome forcefully, fresh buying is not suggested on this counter. Market internals indicate a 13% decline in turnover and a 14% increase in open interest.

Refined soya oil has slid for the third week in a row as the traders continued to shun the counter on the buy side. Unless the Rs 495 swing high is overcome forcefully, expect the overhead supply to remain omnipresent on the counter. Await a breakout before buying afresh on this counter. Market internals indicate a 20% decline in turnover and a 24% decline in open interest.

Metals
Aluminium has made a higher bottom compared wih the previous week but the intra-week high remained below the previous week. A conclusive and forcefully trade above the Rs 80 level with higher volumes and open interest expansion will signal a fresh buy opportunity. Bulls are advised to initiate longs only above the Rs 80 level. Market internals indicate a 38% decline in turnover and a 6% increase in open interest.

Copper is displaying weak optimism as the higher levels are attracting a rash of sell orders. The Rs 245 level in the current month series is proving to be an elusive target as the bulls are unable to push prices beyond this threshold. The price/ volume/ open interest co-relation indicates a negative net field range as longs are not forthcoming at higher levels in large numbers. Lower levels are attracting value buying and therefore the bottoms are higher. Await a conclusive breakout past the Rs 247 level in the August series before initiating buys as the June series is nearing expiry. Market internals indicate a 2% decline in turnover and a 52% increase in open interest.

Gold is displaying a lacklustre pattern as the traders are seeking action on alternate counters. The week-on-week gains are attributed to the weakening rupee rather than any significant buying support. Fresh buying is suggested only if the Rs 14,800 level is overcome forcefully. Market internals indicate a 27% decline in turnover and a 9% decline in open interest.

Nickel has witnessed an “inside” pattern as the weekly range was within the previous week’s range on lower turnover. These are indications of consolidation and mild profit sales as bulls unwound longs to lock in gains. If the Rs 675 level is violated this week, expect weakness and a breakout above the Rs 750 mark with higher volumes will trigger a fresh buy. Market internals indicate a 3% decline in turnover and a 52% increase in open interest as fresh longs were initiated.

Silver has slipped for the third week in a row as the Rs 24,690 swing high has resulted in significant mark-to-market losses for the bulls. Unless the counter clears the Rs 23,200 hurdle with high volumes and open interest addition, avoid fresh buys. Market internals indicate a 15% decline in turnover and a 8% increase in open interest.

Zinc is headed towards the Rs 70 level support which needs watching if the bulls are to have a fighting chance of a revival on this counter. If this threshold is violated downwards, fresh declines may result. Above the Rs 78 level, expect the upward momentum to pick up. Market internals indicate a 10% decline in turnover and a 53% increase in open interest.

Energy
Crude oil has witnessed a tendency towards profit-taking at higher levels in spite of the US non-strategic petroleum reserves falling by 3.9 million barrels to 357.7 million barrels. The marginal strength in the US dollar and concerns over a prolonged economic recovery process triggered a round of profit-taking at higher levels. Only a forceful breakout past the Rs 3,500 level will trigger a fresh buy on this counter. Market internals indicate a 16% increase in turnover and a 6% decline in open interest.

Natural gas has witnessed some profit-taking due to the expiry of the June series and the steep cost of carry to the July series. The impending hurricane season in the US is expected to trigger a fresh buying interest on this counter. A buy confirmation will be a consistent trade above the Rs 205 level on higher volumes and open interest expansion. Till such an indication is received, hold back buy decisions. Market internals indicate a 32% increase in turnover and a 46% decline in open interest.

Mandatory disclosure —The analyst has no exposure to any commodities. The author is a Mumbai-based investment consultant. He invites feedback at vijay@BSPLindia.com