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India commodity market outlook 2012 clouded by uncertainty amidst positive trends
Commodity markets were volatile in 2011 but provided better returns than equities to investors but the outlook for 2012 remains clouded by the Eurozone debt crisis and the weakness in the Indian rupee rupee and gains in US dollar strength
Gold, silver and metals prices witnessed huge volatility throughout the year but investment demand continues to be robust for precious metals despite the sharp fall in gold imports in Q4, 2011, according to Mr Sreekumar Raghavan, Chief Commodity Strategist at Commodity Online. Investment demand constituted 35% of gold demand while jewellery demand slipped due to prevailing higher prices leading to fall in gold imports to 878 tonnes compared to 958 tonnes in 2010.
Several positive factors have emerged in the Indian economy that could provide firm support for commodities in 2012. The Reserve Bank of India has halted the policy of raising key bank rates and RBI Governor has hinted that monetary easing could begin sometime on easing of food inflation to 0.42% while headline inflation has fallen to 9.75%. The HSBC Purchasing Managers Index has risen to 54.2, the highest level in six months while China’s PMI fell from 50.3 to 49 in November.
Agri-commodities especially oilseeds, pulses and food grains are rebounding on adverse weather, acreage concerns and likely fall in production in the coming season. Overall mixed trends are expected with some commodities such as cotton and sugar weakening on rise in production.
Indian equity market has begun on a positive note in 2012, European stocks have shown buoyancy offlate and US unemployment data point to slow recovery taking place which augurs well for the commodity as well as equity markets, according to Sreekumar Raghavan. Strengthening of US dollar, Euro will reduce the appeal of precious metals and energy complex, he added.
India commodity futures market has already grown more than 65% at Rs 130.577 lakh crore till December 15 of 2011-12 and looks set to cross Rs 160 lakh crore by the end of the financial year compared to Rs 115 lakh crore recorded in 2010-11.
Highlights of Commodity Online Outlook January
Natural gas futures prices at India’s Multi Commodity Exchange is expected to trade weak on higher production and prevailing mild weather in consuming nations. MCX Natural gas has resistance at 184 and bearish trend is expected.
Crude oil prices is expected to show bullish trends despite the Eurozone concerns but stronger manufacturing growth in China and India, geo-political tensions in Iran together provide firm support to the energy complex. At MCX crude oil has support near Rs 4600 per bbl and it could rally to 5780 levels in the coming sessions. Among precious metals, both silver and gold was hit by higher price levels and liquidity conditions in the market and going ahead in 2012, MCX silver prices could trade in the range of 48000 to 55000 per kg while MCX gold prices could trade in Rs 26500 to 28300 per 10 gms in early 2012. Base metals has witnessed sustained losses in 2011 and copper is expected to gain on positive economic data from US, China and India while MCX Aluminium may rise to 115 to 120 levels in the long run.
Contact: Sreekumar Raghavan, Chief Commodity Strategist (firstname.lastname@example.org)
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Commodity Online, promoted by Commodity Online India Ltd is lndia's leading provider of news, market data, analysis and advisories on commodities traded across the globe. It has strong editorial and research team based in Ahmedabad and Kochi in India