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ShareMumbai: The markets witnessed a lower turnover week as the high base effect and caution in the trader camp impacted sentiments. The market-wide turnover on the MCX was lower by 14% and the open interest was higher by 19%.
The action was seen shifting somewhat towards the agri-commodities as the onset of the monsoons saw traders build positions on soft assets. Industrials witnessed profit sales at higher levels as the US job data dampened sentiments. Energy too witnessed profit sales as the previous top proved to be a formidable hurdle to overcome.
Bullion remained quiet as the US dollar was steady vis-a-vis most currencies. The turnover gainers during the week were CER, mentha oil and platinum whereas open interest addition was seen on chana, crude oil, natural gas, platinum and refined soya oil. This week will see traders taking cues from the consumer sentiment report, crude inventories and the job data. Traders should scale down their exposure till a clear directional breakout / drawdown is witnessed.
Agri-commodities
Chana has made a higher closing for the second week in a row as the traders supported values at lower levels. The commodity must trade above the Rs 2,225 levels with higher volumes and open interest expansion if the uptrend is to persist this week. Market internals indicate a 17% increase in open interest as fresh longs were initiated.
Mentha oil continues to trade on a downward trajectory as the lower tops and bottoms formation continues unabated. Bulls need to watch the Rs 495 levels as a crucial support below which the outlook can favour the bears significantly. Fresh longs maybe initiated only if a consistent close over the Rs 520 mark is witnessed. Market internals indicate a 29% increase in turnover and a 3% decline in open interest.
Refined soya oil has slipped after a ray of optimism last week. The strength of the rupee and trader apathy has seen the lower tops and bottoms formation remain in force. Since the arrival of the produce is expected to hit the markets, the prices are in a downward spiral. Buying is recommended only above the Rs 490 levels. Market internals indicate a 43% decline in turnover and a 13% increase in open interest.
Metals
Aluminium has retraced some of its gains as the Rs 80 level advocated as a sizable resistance proved to be insurmountable. Unless that occurs, bulls are advised to lay off fresh longs. Market internals indicate a 39% decrease in turnover and a 11% decline in open interest as traders lowered exposure on this counter.
Copper has retraced from the Rs 250 levels for the third week in a row as this hurdle is likely to be a trigger that momentum players will await for a crossover before initiating fresh longs. It is crucial for the trend determination that this hurdle is crossed with big volumes and open interest addition for the upthrust to be sustainable. Declines may test the Rs 235 mark. Market internals indicate a 17% decline in turnover and a 25% decline in open interest as the June series expired and fresh positions were yet to be initiated in full swing.
Gold is precariously poised at the threshold of a short-term support at Rs 14,375 which is a recent bounce back point and also the 30-week SMA. A consistent trade below this threshold will imply a fresh pressure from short sellers and unwinding by bulls. The near-term outlook depends on the direction of the US dollar and crude oil. Unless the Rs 14,900 hurdle is overcome, avoid fresh buys. Market internals indicate a 22% decline in turnover and a 5% decline in open interest.
Nickel is probably the strongest metal in the industrial commodities segment as the rounding bottom formation continues. The volumes are marginally lower but higher tops and bottoms formation continues unabated. Bulls may hold on to their existing long positions and add on significant declines for profit. Market internals indicate a 3 % decline in turnover and a 22 % decline in open interest.
Silver has witnessed a higher decline in relative comparison to gold and is likely to seek support near the Rs 21,000 levels. The white metal remains under pressure and unless the Rs 22,250 hurdle remains intact, the overhead supply is likely to remain constant. Market internals indicate a 11% decline in turnover and a 4% decline in open interest.
Zinc has witnessed a retracement in tandem with the base metals segment as the Rs 80 level remains a hurdle that the bulls have not yet managed to overcome.
The chart pattern is likely to follow that of copper this week with minor variations. Market internals indicate a 26% decline in turnover and a 2% decline in open interest.
Energy
Crude oil has witnessed a bearish engulfing pattern on the weekly charts as the week's range has been beyond the previous weeks. The higher open interest suggests a bearish build-up and the outlook in the near term is that of weakness. Should the US dollar strengthen further, the outlook for crude can slip even further. Market internals indicate a 6% decline in turnover and a 48% increase in open interest.
Natural gas has declined as the Rs 200 / 205 band was not overcome as advocated last week in this column. The support at the Rs 168 mark needs to be watched as the commodity has historically bounced from this low.
With the impeding hurricane season in the US, the downsides should hypothetically be lower. Market internals indicate a 22% decline in turnover and a 121% increase in open interest.
The analyst is the author of India's only commodity training manual and invites feedback at vijay@BSPLindia.com
Mandatory disclosure: The analyst has exposure to gold mini futures
