Comment

The markets saw lower turnover due to the high base effect of the week before last and the deceleration on the bullion counters. Expiry on select commodities, too saw a routine paring of exposure. The week-on-week gainers in turnover were aluminium, crude oil, mentha oil, nickel, platinum, potato, refined soya and zinc.

Open interest gainers were crude oil, gold, mentha oil, natural gas, refined soya and silver. The bullish expectations advocated last week on industrial metals were fulfiled as all counters witnessed a sizable surge in trader interest in tandem with the price appreciation. This week may see an extension of the trader interest, subject to routine corrections. Energy is likely to remain at the centerstage. Decline in US non-strategic reserves will keep the downsides cushioned.

Agri-commodities
Chana has shown signs of a mild strength as the bulls have lent some support at lower levels. Should its stay above the Rs 2,180 levels on higher volumes, expect the counter to remain bullish. Await a confirmed breakout before initiating longs on the counter. Market internals indicate a 3% decline in open interest. Mentha oil rallied from the Rs 500 mark, which has been established and activated as a short-term support. Till this support holds, avoid the temptation to go short. Fresh buys are recommended above the Rs 560 levels only. Market internals indicate a 30% rise in turnover and a 15% increase in open interest.
Potato has seen a breakout past the previous highs as the Rs 960 hurdle has been overcome convincingly on a closing basis. The Rs 910 level will be a short-term support for momentum players. Existing longs may be held with a stop loss at the Rs 910 level on a closing basis. Market internals indicate a 209% rise in turnover and a 3% decline in open interest.
Refined soya oil has seen a drop in prices as the Rs 475 short-term support has been respected for now. A forceful decline below this threshold will see fresh decline as bears come with daggers drawn on this counter. Watch this level keenly in the coming week/s. Market internals indicate a 20% increase in turnover and a 9% increase in open interest as fresh shorts were initiated.

Metals
Aluminium has witnessed resurgence in trader interest as the China factor coupled with hopes of an economic recovery boosted sentiments. The spike in traded turnover is confidence inspiring, and should the metal stay above the Rs 79 levels on a continuous basis, expect the outlook to be favourable to the bulls in the coming days. Market internals indicate a 33% increase in turnover and an 11% decline in open interest as higher levels attracted profit-taking.
Copper has rewarded patient bulls who initiated longs after the confirmation of the cup and saucer formation. The surge in prices backed by a short squeeze provided ample trading opportunities to the long traders. Should the uptrend continue, expect the red metal to test the Rs 270-275 band in the coming weeks. Market internals indicate a 3% decline in turnover and a 10% fall in open interest as the June series draws closer to expiry.
Gold has reacted lower on the double whammy of a rising US dollar and the hopes of an economic recovery. That has resulted in an expansion in the risk appetite of global investors who bought high risk assets like equities, at the expense of bullion. The Rs 14,900 double top is a serious resistance that needs to be overcome forcefully if any fresh upsides are to be seen in the near term. Declines are likely to see support emerging at the Rs 14,200 levels. Watch the rupee/dollar peg carefully for signs of trend determination. Market internals indicate a 17% fall in turnover and a 12% rise in open interest.
Nickel has rallied yet again as the supply side worries remained to haunt the markets. The 665 level is now the sizable floor support below which the short-term trend maybe under threat. Till this support holds, expect the outlook to be optimistic. Market internals indicate a 2 % increase in turnover and a 22 % decline in open interest as short term bulls preferred to lock in gains.
Silver has witnessed profit-taking on longs in tandem with gold as the focus has shifted to base metals. The Rs 22,800 level will be a short-term floor to watch below which the bears may grab the initiative. Fresh buying maybe contemplated only after the Rs 24,400 level is overcome. Market internals indicate a 19% decline in turnover and a 7% rise in open interest.
Zinc has rallied in tandem with its peers in the base metals segment. A consistent trade above the Rs 80 threshold will be a forceful buy trigger above which fresh buying cum short covering will be seen. The bias is towards longs and existing longs maybe held for now. Market internals indicate a 16% increase in turnover and a 16% fall in open interest.

Energy
Crude oil has managed another positive close on the weekly charts as the decline in US non-strategic reserves by 4.4 million barrels to 361.6 million barrels has resulted in short-covering. The downsides are likely to be cushioned by this factor and any decline in the US dollar versus the euro may add to the upward momentum. Monitor the currency peg carefully in the near term. Market internals indicate a 5% increase in turnover and a 29% increase in open interest.

Natural gas has seen a trickle-down effect of crude oil as the strong gains in crude have been replicated on this counter, albeit with slight effect. The impeding hurricane season on the west coast of the US is likely to witness an upthrust in prices. A confirmed breakout trigger will be a rally past the Rs 200 mark on higher volumes and open interest expansion. Buy only after this hurdle is overcome. Market internals indicate a 2% decline in turnover and an 8% risein open interest as fresh long positions were initiated.

The author is a Mumbai-based investment consultant.
Mandatory disclosure - the analyst has no exposure to any commodities recommended above.