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The markets witnessed a lower turnover on a week-on-week basis as trader participation was impaired by the festive season and volatility in prices.

The upsurge in equity prices had a bullish impact on base metals and energy counters as demand expansion was expected. The defensive buying in bullion slowed down considerably and risk appetite favoured riskier bets like copper, nickel and crude oil.

The top open interest gaining counters were crude oil and gold as players turned to the all-time favourites. The market-wide turnover was 35% lower on the MCX and the market-wide open interest was 17% on a commensurate basis. The outlook is guardedly optimistic for base metals and energy this week.

Agri Commodities
Mentha oil has moved up from the anticipated support at the Rs 460 levels and will see some bear squeeze and maybe even fresh longs. The Rs 530-540 band will be the hurdle to watch as resistance will step up as the price approaches this threshold. Market internals indicate a 30% decline in turnover and a 10% decline in open interest.

Metals
Aluminium has bounced higher from the multiple point support of December 2007 at the Rs 92 mark, which must be treated as a base for now. The upsides are likely to see resistance at the Rs 108 levels. Only a sustained trade above this threshold will see a fresh upward impetus.

Market internals indicate a 10% decline in turnover and a 17% decline in open interest due to the expiry of the October series.

Copper has established and activated a support at the Rs 190 levels and immediate floor will be at this level. Upsides will see the Rs 230-235 band being revisited, though heavy volumes and open interest expansion will be needed to sustain the upthrust.

Market internals indicate a 37% decline in turnover and a 23% decline in open interest.
Gold has seen unloading from bulls as the panic-driven buying was seen abating. The festive season is also behind us and selling by big-ticket players is keeping prices under pressure.

The Rs 11,100-11,150 band will be a major support threshold, which if violated, will see a fresh decline. The extent of the fall will be determined by the turnover and open interest on this fall. Market internals indicate a 33% decline in turnover and a 12% increase in open interest as fresh shorts were opened up.

Nickel has seen a strong bounceback as the sustained bear hammering has been followed by an equally strong profit-taking by short sellers. The upmove may last for another 7-10% before encountering selling pressure from the bulls. Market internals indicate a 13% decline in turnover and a 60% decline in open interest as longs were liquidated.

Silver will see the bulls undergoing a litmus test as the all-important support at Rs 16,000 must be defended if the white metal is to bounce back. If the bulls are to return, the Rs 17,750 level must be overcome forcefully. Market internals indicate a 40% decline in turnover and a 7% decline in open interest.

Zinc has taken support at the Rs 52 level and the same must be taken as a near-term support for longs. The upsides will witness the Rs 63 level as a near-term target above which the Rs 69 level will be a possibility. Market internals indicate a 29% decline in turnover and a 20% decline in open interest - indicating bullish unwinding on upthrusts.

Energy
Crude oil may get a fillip if equity markets perk up on better than expected economic numbers. In such a scenario, the demand expansion will drive prices higher and the technical trigger will be the Rs 3450 levels which will be the trend determining the threshold above which the bulls will be in charge.

Market internals indicate a 42% decline in turnover and a 4% increase in open interest as buy and hold bias was seen.

Natural gas is likely to move in tandem with crude oil and the Rs 310 level will act as a short-term floor for now. The Rs 350-355 band will act as a resistance and the upmove must be accompanied by heavy volumes to be sustainable. Market internals indicate a 34% decline in turnover and a 19% decline in open interest.

Mandatory disclosure:
The analyst has exposure to gold futures The author is a Mumbai-based investment consultantand invites feedback at
vijay@bsplindia.com