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Not just gold & silver! Top bets to consider in commodities for FY22

After starting Calendar 2021 with a bang, the commodity market appears to have taken a breather after an honest rally.

Gold and silver costs have eased 9-15 per cent from final 12 months’s peaks on indicators of financial restoration amid the Covid-19 vaccination drives, and moved in the ranges of $1,678-1,954 and $24-29 per ounce, respectively.

Crude oil has cooled off after surging to take a look at the $70 a barrel degree amid optimism for demand pickup and provide controls by prime producers.

Analysts say whereas the dear metals might proceed to transfer sideways in the close to time period, different pockets, resembling agri-commodities, industrial metals and power, appear to offer upside potentials.

Metals

“The outlook for industrial metals, crude oil and most agricultural commodities stays optimistic so long as the Chinese economic system continues to develop and world financial restoration continues to acquire momentum,” mentioned Ravindra Rao, VP-Head Commodity Research at Kotak Securities.

The world restoration might discover ft this 12 months with progress on the vaccination entrance, and the Chinese economic system, which is main the best way, might underpin growth-linked commodities resembling industrial metals and crude oil.

“Commodities like gold and silver may remain choppy, as market players try to ascertain when the stimulus measures may be withdrawn,” he mentioned.

Analysts say expectations of upper infrastructure spending in the US on the again of the file $1.9 trillion stimulus are probably to help demand outlook for industrial metals.

Kishore Narne, Head of Currency and Commodities at Motilal Oswal Financial Services, sees extra upside in choose base metals following the outstanding rally to the tune of 35-60 per cent from March 2020 lows.

His prime bets are copper and nickel based mostly on components resembling decrease inventories, enhanced electrical car utilization and better infrastructure spending.

Technical Forecast

  • Copper: The metallic might scale new life-time highs above $10,500/tonne (Rs 750-760 per kg); CMP round $8,800/tonne (Rs 650 per kg)
  • Nickel: It may very well be the following finest guess amongst metals; might cross $20,000 in the direction of $22,000 per tonne (Rs 1,550 per kg) over the following 12 months; CMP $16,220/tonne (Rs 1,200/kg)

Analysts say the yellow metallic has largely discounted a lot of the inflation, and it stays to be seen how briskly it flares up. This is what goes to decide worth motion in bullion.

Narne recommends accumulating treasured metals for a 20-25 per cent upside over the following 12-19 months.

“Gold may very well be concentrating on in the direction of $2,000 by the tip of 2021 and should finally head in the direction of a brand new lifetime excessive of $2,250, whereas on the home entrance, the potential upside may very well be up to the Rs 50,500 mark adopted by Rs 56,500,” mentioned Narne, who additionally expects industrial metals to lead the rally in 2021. He can be optimistic on power on the prospects of resumption of worldwide journey.

Agri-commodities

Expectations of a standard monsoon and its resultant influence on farm produce, which might maintain agricultural commodity costs in examine, might create a window of alternatives for buyers, say analysts.

“A traditional monsoon might outcome in increased manufacturing of agriculture commodities and assist cool off the costs, that are ruling at multi-year highs,” mentioned Rao of Kotak Securities. He is optimistic on agri-commodities, as demand from China stays agency, however mentioned climate might stay a key issue, each domestically and globally.

The nation will most likely see a close-to-normal monsoon in the absence of El Nino or La Nina climate patterns throughout the moist season, mentioned AccuWeather Inc.

The monsoon season, which generally runs from June to September, is taken into account regular when whole rainfall is 96-104 per cent of the long-term common, the climate forecaster mentioned.

Weather workplace India Meteorological Department is anticipated to launch its monsoon forecast later this month.

In case of a standard monsoon, buyers can have a look at oil seeds like soybean, rapeseed, mustard, peanut, sunflower, cottonseed and copra, as edible oil costs are anticipated to stay agency in FY22, mentioned Kshitij Purohit, Product Manager, Currency and Commodities, CapitalVia Global Research.

Here are his prime technical bets:

  • Castor seed futures: The worth is making a wedge bullish sample on the each day chart. A breakout above the resistance degree of Rs 4,848 will affirm a bullish momentum in the direction of Rs 5,935.
  • Chana gram futures: The worth has moved in a rising channel sample since 2018 with some corrections. The general development in the commodity tends to be bullish and a breakout above the resistance of Rs 5,850 will point out a rally in the direction of Rs 6,445.
  • NCDEX Agri index: Since its inception, in May 2020, the gauge has been in a robust uptrend. A minor correction in the direction of 1,230-1,210 ranges might function a shopping for alternative for buyers in the approaching months.

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