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Markets witnessed a buoyant week as the turnover perked up due to bullishness in the markets. As expected, the geo political tensions in the Middle East resulted in a flurry of buying activity in gold. The strength in the US dollar impaired a breakout past the $900 per ounce, which may be elusive in the absolute near term.

Markets will continue to watch the Middle East for signs of near-term trend determination. The MCX witnessed a 32% jump in traded volumes on a week-on-week basis as the participation levels improved over the prior week.

The turnover gainers were aluminium, copper, crude, gold, natural gas, nickel, potato, silver and zinc. The open interest gainers were gold, potato, refined soya oil and silver.
Agri-commodities

Chana has shown a smart rebound and made the Rs 2,000 level the near-term base support. As long as this floor holds, I expect the outlook to remain positive. A consistent trade above the Rs 2150 levels will imbibe bullish confidence on this counter. Market internals indicate a 5% decline in open interest as higher levels attracted some profit sales from short-term players.

Mentha oil has bounced from lower levels and is likely to witness support at the Rs 512 levels in the coming sessions. The possibility of overhead supply capping gains is not ruled out and consolidation may be seen in the coming week. Watch the Rs 610 level as a resistance point for the markets. Market internals indicate a 15% decline in turnover and a 24% decline in open interest.

Refined soya oil is showing signs of slowing down after a month of strength. The Rs 480 level may prove to be a hurdle that the bulls will have to overcome forcefully to maintain the upward tempo. Market internals indicate a 5% decline in turnover and a 3% increase in open interest.

Metals
Aluminium has shown signs of making a bottom at the Rs 68 levels and a minor resistance exists at the Rs 75 mark. As and when the metal trades above this hurdle consistently, the possibility of a rally driven by a bear squeeze is not ruled out. Traded volumes have spiked and that is a sign of optimism. Market internals indicate a 69% increase in turnover and a 45% decline in open interest.

Copper too has effectively bottomed out in the near term and unless the Rs 138 level is violated, the bulls will have an upper hand. This is a barometer of the base metals outlook and indicates a pullback rally in some/most of the metals counters. Watch the Rs 165 hurdle this week. Market internals indicate a 36% increase in turnover and a 16% decline in open interest.

Gold has proved its supremacy as the choice of international investors as a store of value and safety of capital. The precious metal has attempted to breach the Rs 13750 hurdle that is a strong congestion zone in the near/medium term. Though the closing remains below this threshold, the outlook is positive. Should the US dollar turn volatile, gold can rally again. Market internals indicate a 25% increase in turnover and a 4% increase in open interest.

Nickel has rallied the most within the base metals segment and may consolidate mildly before proceeding higher. The traded volumes have ballooned and that indicates a cushion on declines in the coming weeks. Buying should be attempted on dips this week in small lots. Market internals indicate a 180% increase in turnover and a 2% decline in open interest.

Silver has finally rallied in tandem with gold as it was relatively lethargic last week. The Rs 17,750 level will be a threshold that momentum traders will watch this week for signs of support.

As long as the metal stays above this threshold, expect the upmove to continue. Market internals indicate a 48% increase in turnover and a 1% increase in open interest.
Zinc was advocated as a dark horse in the metals segment and has lived up to its promise. The Rs 64-65 bands will provide a minor hurdle as the overhead supply may impact the bullish tempo mildly. Bulls may hold their longs but should be ready for bouts of profit-taking as well. Market internals indicate a 45% increase in turnover and a 19% decline in open interest as the December series expired.
Energy

Crude oil finally snapped its declining streak and displayed a conclusive swing reversal after a quarter of weakness. The conflict in the Middle East had a lot to do with this rally and will continue to be the driving force for the near-term traders. As long as the commodity stays above the Rs 2,115 levels with higher volumes and open interest expansion, I expect the outlook to remain optimistic. Volatility is expected to be high and trades must be initiated on smaller ticket size. Market internals indicate a 33% increase in turnover and a 38% decline in open interest.

Natural gas has rallied for the second week in a row and is likely to remain buoyant as the problems in Russia continue to hound the sentiments. Gazprom is a major player in the global gas sweepstakes and any supply disruption perceived by the markets may drive prices higher towards the Rs 310-315 per mmbtu levels in the near term. Market internals indicate a 3% increase in turnover and a 33% decline in open interest.

The author is a Mumbai-based investment consultant and invites feedback at vijay@BSPLindia.com Disclosure: The analyst has noexposure to any commodities
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