Commodity Snapshot. Eased a bit. Bullion. Base Metals

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1 Commodity Snapshot February 28, 2014 February 28, FOR PRIVATE CIRCULATION ONLY Bullion Eased a bit Gold- MCX Gold may note some gains tracking cues from international exchange. COMEX gold trades near $1330/oz holding on to recent gains. Supporting gold price is mixed US economic data which has pressurized US dollar while fuelling expectations that Fed may not taper asset purchases soon enough. Fed Chairman Yellen has reiterated that asset purchases are not on preset course and key criterion is economic outlook. Tensions in Ukraine have also increased demand for safe haven assets like gold. Gold ETF investors have however moved to sidelines after recent inflows. Focus today will be on German retail sales, Euro-zone unemployment and CPI estimate, US GDP estimate, Chicago PMI, consumer sentiment, pending home sales and comments from Fed officials. US economic data will determine trend in US dollar and help form expectations about Fed's asset purchase program. Support for MCX Gold April contract is seen at Rs while Resistance is seen at Rs Silver- MCX Silver may note some gains tracking cues from international exchange however upside is limited. COMEX Silver trades mixed after recent correction. Mixed trade in gold and industrial metals and position squaring near expiration of March contract has resulted in some correction in silver price. ETF investors have also moved to sidelines after recent inflow. Trend in gold will continue to be key price determining factor for silver and focus will be on US economy. Support for MCX Silver March contract is seen at Rs while Resistance is seen at Rs Base Metals Copper- MCX Copper may note some decline amid rangebound movement in international market however downside is limited. LME Copper is trading in a narrow range near $7000/ton amid mixed cues. Supporting price is tightness in physical market, dwindling stocks at LME warehouses and weakness in US dollar. Stocks at LME warehouses fell by 2050 tonnes yesterday and stand near the lowest level since Dec However weighing on copper price is concerns about US and Chinese economy amid recent spate of mixed economic data. Focus today will be on German retail sales, Eurozone unemployment, US GDP estimate, Chicago PMI, consumer sentiment, pending home sales and comments from Fed officials. US economic data will help form demand outlook. Support for MCX Copper April contract is seen at Rs.438 while Resistance is seen at Rs.448. Aluminum- MCX Aluminum may note some decline amid marginal losses in international market. LME Aluminum trades marginally lower today weighed down by demand concerns amid uncertainty about US and Chinese economy. Also weighing on price is recent correction in energy prices and supply overhang. However supporting price is falling stocks at exchange warehouses and reports of production cuts by Alcoa and Rusal in face of lower price. Stocks at LME warehouses fell by 6950 tonnes yesterday. Aluminum may continue to move in sync with copper and other industrial metals however rangebound movement is likely. Support for Aluminum March contract is seen at Rs while resistance of Rs Zinc- MCX Zinc may trade in a narrow range in line with international market however bias may be on downside. LME Zinc trades in a narrow range amid mixed cues. Supporting price are falling stocks at LME warehouses and supply deficit in physical market. Stocks at LME warehouses fell by 3450 tonnes yesterday. However, concerns about Chinese economy have fuelled demand concerns and is weighing on industrial metals at large. Zinc may track movement in copper and other industrial metals and focus will be on US economic data and LME stock flow. Support for MCX Zinc March contract is seen at Rs.127 while Resistance is seen at Rs.130. Nickel- MCX Nickel may note some decline amid mixed trade in international market however downside is limited. LME Nickel trades mixed as support from supply concerns relating to Indonesia is countered by near record high stocks at Commodity Snapshot Please See Disclaimer on the Last Page 1

2 exchange warehouses and concerns about major economies like China and US. Nickel stocks at LME warehouses fell by 186 tonnes yesterday but stand near the record high levels. Nickel may move in line with other industrial metals however supply issues in Indonesia will keep a floor to price. Support for MCX Nickel March contract is seen at Rs.885 while Resistance is seen at Rs.910. Lead- MCX Lead may note some decline tracking range bound movement in international exchange. LME Lead trades steady in early trades today after a flat close yesterday which indicates lack of direction in the market. Weighing on prices is lower cancel warrants ratio at LME coupled with worries over fragile economic growth in China and US. However falling stocks at LME warehouses and supply deficit in physical market has lent support to price. Stocks at LME warehouses fell by 150 tonnes yesterday. Support for MCX Lead March contract is seen at Rs.130 while Resistance is seen at Rs.134. Energy Crude Oil- MCX Crude may note some decline tracking cues from international exchange. NYMEX crude trades near $102/bbl holding on to recent losses. Weighing on crude price is demand concerns amid mixed US economic data and uncertainty about health of Chinese economy. EIA weekly report was also mixed as it noted a smaller than expected build in US crude stocks but also an unexpected increase in distillate stocks despite persistent cold weather. However supporting price is weakness in US dollar and supply outages in oil producing states like Libya and South Sudan. Focus today will be on German retail sales, Euro-zone unemployment, US GDP estimate, Chicago PMI, consumer sentiment, pending home sales and comments from Fed officials. US economic data will help determine trend in US dollar and demand outlook. Support for MCX Crude March contract is seen at Rs.6300 while Resistance is seen at Rs Natural Gas- MCX Natural gas may note some decline tracking cues from international exchange. NYMEX gas trades weaker extending the losses seen in last few sessions. Profit taking near expiration of March contract resulted in sharp correction in price. EIA weekly report also noted a smaller than expected 95 Bcf decline in stocks adding to selling pressure. However forecasts continue to point to cold weather in US which will keep heating demand high. Focus will continue to be on US weather and economic outlook. Support for MCX Natural gas March contract is seen at Rs.274 while Resistance is seen at Rs.294. Edible Oil Complex Soybean- Domestic soy bean futures are expected witness correction after rising for 4 consecutive sessions. Internationally also prices eased on profit booking. Yesterday CBOT soy beans closed lower. The Rabi crop is expected to be good, but little late due to the disturbance in weather. Spot soybean prices were firm due to improved demand in the local market and lower arrivals. NCDEX and ACE March contract is getting support near Rs /qtl while resistance is seen near Rs Refined Soybean Oil- NCDEX soybean oil futures are expected to trade with downward bias during the session. CBOT soy oil futures were down on Thursday, with losses in outside vegetable oil markets and spreading against soymeal weighing on prices. Further CPO in Malaysia is also trading weak. Price in the spot market was stable on moderate buying at various key cash centers. In early trades CBOT soy oil and BMD futures are trading weak. INR is depreciating slightly and could support the prices. NCDEX and ACE March contract is getting support near Rs and resistance is seen near Rs Crude Palm Oil- Malaysian palm oil is expected to trade with downward bias during the session tracking cues from international market on profit booking. The undertone is expected to remain firm on lingering concerns of tighter global edible oil supplies. MCX March contract is getting support near Rs while resistance is seen near Rs Commodity Snapshot Please See Disclaimer on the Last Page 2

3 Rapeseed- Mustard seed futures may trade with downward bias during the session tracking cues from soy complex amid profit booking after recent gain. Spot price was up on weather concerns. Delay in arrivals in many states and stable arrival in Rajasthan capped the downside in the domestic price. NCDEX and ACE April contract is getting support near Rs while resistance is seen near Rs Pulses Chana - NCDEX chana futures are expected to trade firm during the session on reports of rains in key producing region of Madhya Pradesh and Maharashtra. Reports of crop damage are coming in from sources; however the intensity is yet to be known. For short term weather premium could keep the prices supported. Buying on dips could be ideal strategy for the pulse for short term. We see support for the April contract near Rs while resistance is seen near Rs Spices Jeera - Jeera futures may trade with downward bias during the session. Forecast of rain in Gujarat may firm up sentiments however any gain should be treated as an opportunity to sell. New crop arrivals are seen increasing at the spot markets. Today arrivals at the benchmark Unjha market are reported to be bags. Yesterday prices at the futures closed higher by Rs.90/qtl at /qtl as compared to previous session. Domestic demand lacks luster while export buying is active at steady pace. NCDEX new crop March delivery may seek support near Rs while resistance is seen near Rs Turmeric - NCDEX turmeric futures are expected to trade with positive bias during the session. Forecast of rain over Karnataka and Andhra Pradesh could support the prices. Rain during this period could slow the post-harvest drying process. Benchmark Nizamabad markets will remain re-open from Monday. Meanwhile the new crop arrival quality is not good and may keep the check on sharp decline in prices. The undertone is expected to remain firm on buying interest for good quality crop. Domestic demand is steady mainly from hedgers and stockiest. Low availability of good quality spice in the market could keep also support the firm trend. Yesterday the benchmark April contract closed down by Rs.20/qtl at 6980/qtl. NCDEX April contract may trade volatile and support is seen near Rs while resistance is seen near Rs Dhaniya - NCDEX dhaniya futures may witness volatile trade during the session. We could see a range bound movement during the session. On Wednesday prices rose on unfavorable weather at the major producing region on Rajasthan and Madhya Pradesh. Currently the weather is clear in these regions and hence we could see some selling pressure on profit booking. Overall prices have become range bound at the futures counter. Delay in new crop arrivals are keeping the prices supported. New crop arrivals at the benchmark Kota market is 50% lower as compared to last year same time. Domestic demand is reported to be good from the hedgers and consuming centers. We could see buying emerging at lower levels due to low ending stocks at the spot markets. On Wednesday the April contract closed up by Rs.151/qtl at Rs.9304/qtl. The NCDEX April contract is getting support near Rs and resistance is seen near Rs Cardamom - MCX cardamom futures are expected to trade with positive bias on good export demand for the spice. There is shortage of exportable quality of the spice which could support further upside in price. On Tuesday the March contract closed up by Rs.20.1 at Rs.802/kg. We expect the support for the March contract near Rs while resistance is seen near Rs /kg. Softs Commodity Snapshot Please See Disclaimer on the Last Page 3

4 Cotton / Kapas- Natural Fiber could see profit booking emerge at lower levels on firm global cues and weather adversities in India. NCDEX Kapas April 2014 contract closed at 915, down by Rs per maund or -2.0%. Cotton February contract on MCX closed at down by -230 Rs on a bale or -1.1% and March contract on ACE closed at Rs down by Rs per candy or -1.1%. Cotton arrivals sustained at around 1.95 lakh bls despite adverse weather. In Gujarat S-6 cotton (A Grade) were slightly weak at Rs 42,500-42,800 for ready delivery. Heavy rains and frost in western part of India could have ended up damaging the open bolls of cotton. New York-traded cotton for March delivery settled up by 1.54 cents, or 1.8%, at 86.9 cents per lb on ICE Futures. Now active May 2014 futures closed at 87.8 up by 1.7%. Cotton futures rebounded from two days of declines to rise nearly 2 percent on Thursday, their most in a month, as speculators returned to support the market despite sharply lower export numbers for the fiber. In Indian market the Kapas Apr 2014 could trade in the range of February contracts on MCX could trade in the range of per bale and March contract on ACE could trade in the range of Sugar Domestic sugar futures may trade sideways in a choppy range during the session. Despite announcement of subsidy the notification of the same is not yet released and is weighing down market sentiments. On Wednesday domestic futures prices traded weak and the most active March contract closed down Rs.5/qtl at Rs.2769/qtl. Internationally sugar futures once gain traded higher supported with improved buying. ICE Raw sugar futures on ICE were firm, with March ended up 0.15 cent, or 0.9 %, at cents a lb. May white sugar futures on Liffe settled up $7.50, or 1.6 %, at $ per ton. On Indian exchange expect now active March contract to find support at around while resistance is likely to emerge at Grains Maize- NCDEX Maize could see buying emerge on weather risk but the upside would be limited due to weak global cues and strength in Indian currency. Benchmark March contract of Maize Kharif closed at 1218 marginally up by 1.0 or 0.1%. Rabi Maize April contract closed flat at 1161 up by 0.1%. Total volumes traded were lower and the OI remained flat. NCDEX polled prices for Wednesday, were mostly steady to weak in all centers, except Karimnagar, where the prices gained over previous day. Spot markets were closed on Thursday due to Mahashivratri festival. In Ahmadabad, Poultry feed makers and starch makers demand quoted firm in the range of Rs to Rs per quintal on Wednesday. Heavy rains and frost have been reported many parts of India. Over last couple of days, rains were witnessed from eastern Rajasthan, Madhya Pradesh and Maharashtra to portions of Uttar Pradesh, Jharkhand and West Bengal. Amounts ranged 0.05 to 0.50 inch with one location in north-central Madhya Pradesh reporting 2.76 inches. Meanwhile, some showers also developed in northern Karnataka and southern Maharashtra where amounts varied from 0.24 to 1.18 inches. The most significant rain showers will shift into eastern Madhya Pradesh and Chhattisgarh into Uttar Pradesh, Bihar and Jharkhand today into Saturday. Rain showers will also continue in western Madhya Pradesh into far eastern Rajasthan and western Uttar Pradesh today into Friday. Shower activity will be greatest today into early portions of Friday before shower activity begins to die down through Saturday. Precipitation amounts will be heaviest from eastern Madhya Pradesh and Uttar Pradesh through Chhattisgarh into Bihar and Jharkhand and possibly portions of Orissa where total amounts will range from 0.50 to 1.50 inches and a few local amounts may exceed 2.50 inches through Saturday. The impact of rains could be beneficial in some regions, but the frost in certain regions could end up hurting the crop. The assessment will be done in next few days. Meanwhile CBOT March Corn gained by -7.5, or -1.6% to close at 448. Corn futures fell more than 1 percent for their biggest losses in 1-1/2 months on Thursday, pressured by plunging wheat futures and plentiful corn supplies following last year's record harvest. The U.S. Agriculture Department reported corn exports of 842,300 tonnes for last week, above the high end of analysts' expectations ranging from 475,000 to 775,000 tonnes. Japan and Colombia were the top buyers. For the day expect March contract on NCDEX to face resistance at , while support in the immediate context could emerge at Wheat- Nearby wheat futures on the Chicago Board of Trade continued its slide on Thursday. Wheat futures at the three main U.S. exchanges fell on Thursday on slowing export demand for U.S. supplies, with chart-based selling adding to the Commodity Snapshot Please See Disclaimer on the Last Page 4

5 declines. Most-active CBOT May wheat WK4 fell through support at its 50-day moving average at $5.93-3/4 a bushel and settled at $5.89-1/4. Front-month contracts lost ground to back months on spreads ahead of first notice day for March deliveries. Egypt's GASC bought 295,000 tonnes of wheat, including four cargoes from Russian and one from Romania and nothing from the United States - reflecting how U.S. wheat has become less competitive on the world market. Nonetheless, USDA reported export sales of U.S. wheat in the latest week at 365,100 tonnes for 2013/14 and 199,800 tonnes for 2014/15, topping trade estimates for combined-year sales of 300,000 to 500,000 tonnes. In Indian market, weather has turned hostile in certain areas. Most wheat growing regions have seen heavy rains and at some places frost. While rains could end up helping the crop in some areas, the damage if any will be known in only in few days time. Till then the weather premium will end up supporting the prices. On NCDEX, We see support for March contract at Rs with resistance of Rs Commodity Snapshot Please See Disclaimer on the Last Page 5

6 Prerana Desai Vice President- Research Dharmesh Bhatia DVP Research- Technical Analyst Faiyaz Hudani AVP Research - Oilseeds, Grains faiyaz.hudani@kotakcommodities.com Tapan Patel Sr. Research Analyst- Technical Analyst tapan.patel@kotakcommodities.com Sudha Acharya Sr. Research analyst- Spices, Pulses sudha.acharya@kotakcommodities.com Ankit Narshana Associate Research- Technical Analyst ankit.narshana@kotakcommodities.com Madhavi Mehta Sr. Research analyst- Energy, Bullion madhavi.mehta@kotakcommodities.com Priyanka Jhaveri Sr. Research analyst- Base Metals priyanka.jhaveri@kotakcommodities.com Disclaimer This document is not for public distribution and has been furnished to you solely for your information and must not be reproduced or redistributed to any other person. Persons into whose possession this document may come are required to observe these restrictions. This material is for the personal information of the authorized recipient and we are not soliciting any action based upon it. This report is not to be construed as an offer to seller or solicitation of an offer to buy any commodity or commodity derivative to any person in any jurisdiction where such an offer or solicitation would be illegal. It is for the general information of clients of Kotak Commodity Services Limited. It doesn t constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. We have reviewed the report, and in so far as it includes current or historical information, it is believed to be reliable though its accuracy or completeness cannot be guaranteed. Neither Kotak Commodity Services Limited, nor any person connected with it, accepts any liability arising from the use of this document. The recipients of this material should rely on their own investigations and take their own professional advice. Price and value of the commodity referred to in this material may go up or down. Past performance is not a guide for future performance. Certain transactions including those involving commodity derivatives involve substantial risk and are not suitable for all investors. Reports based on technical analysis centers on studying charts of a commodity s price movement and trading volume as opposed to focusing on a commodity s fundamentals and as such may not match with a report on a commodity's fundamentals. We do not have any information other than information available to general public. The report is based on information from sources like respective industry associations, FICCI,CII, companies, media and other public sources. Opinions expressed are our current opinions as of the date appearing on this material only. While we endeavor to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice. Our proprietary trading may make trading decisions that are inconsistent with the recommendations expressed herein. We and our affiliates, officers, directors, and employees worldwide may: (a) from time to time, have long or short positions in, and buy or sell the commodities mentioned herein or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodity/(ies) discussed herein or have other potential conflict of interest with respect to any recommendation and related information and opinions. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject commodity and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. No part of this material may be duplicated in any form and/or redistributed without Kotak Commodity Services Limited s prior written consent. Registered Office: Kotak Commodity Services Ltd., Nirlon house, 1stFloor,Dr. Annie BesantRoad, Opp. Sasmira, Worli, Mumbai - 25 Commodity Snapshot Please See Disclaimer on the Last Page 6