Chana prices warm up

Chana prices, which tumbled 49 per cent between October 2012 and July 2013 and were trading in the range of ₹2,500 and ₹3,200 a quintal until recently, have made a bullish breakout. Heavy rains and hailstorm in central parts of the country have damaged the chickpea crop, setting the stage for a rally. On the NCDEX, chana contracts are up 4.5 per cent in the last one month at ₹3,300.

However, the demand-supply dynamics in the crop are not favourable to prices.

In 2012-13, chana production in the country was 8.8 million tonnes, a 15 per cent jump from the previous year. In the current fiscal again, the Ministry of Agriculture has projected production of this rabi crop to increase 11 per cent to 9.8 million tonnes. This record production is likely to keep a check on prices, given the fact that the market estimates consumption not to increase significantly. In 2012-13, chana consumption was around 9.5 million tonnes. In 2013-14, again, demand is expected to be only 9-10 million tonnes, leaving some surplus. But note that demand depends on a number of factors, including price of the substitute — yellow peas — which is imported.

Long-term view : Chana futures on the NCDEX have dropped some 49 per cent, from ₹4,999 a quintal in October 2012 to a low of ₹2,528 in July 2013. However, the price action since then suggests a base formation.

Also, the breakout above ₹3,000 this February signals a trend reversal. Even if the commodity loses strength and goes down from here, there is a long-term trendline support at ₹2,500, which can limit the fall. So, the long-term outlook for the contract is bullish. The contract can rise to the target of ₹4,055, the 61.8 per cent Fibonacci retracement level over this period.

Medium-term view : The medium-term view for the contract is also bullish. The contract has consolidated sideways between ₹2,800 and ₹3,100 since September 2013. A breakout above ₹3,100 was witnessed in early March this year, accompanied by strong volumes.

The medium-term support is at ₹2,800 and above this the contract can rise to ₹3,763, the 50 per cent Fibonacci retracement level, and ₹3,840.

The 100-week moving average, which is currently at ₹3,626, will be the intermediate resistance for the contract. On the other hand, if the contract declines below ₹2,800, then it can target ₹2,500 thereafter. But the probability looks less for a break of the support at ₹2,800.

Short-term view: The short-term trend is up. Within this uptrend the contract is now witnessing a corrective fall after recording a high of ₹3,416 on March 11. Short-term supports for the contract are available at ₹3,176, which is the 23.6 per cent Fibonacci retracement level also the 21-day moving average is at ₹3,180. Then ₹3,102 which is the 50 per cent Fibonacci retracement level is the next significant short-term support. This support can halt the corrective fall and keep the short-term uptrend intact.

A reversal from this support can target ₹3,470 in the short term. Only a decisive break below ₹3,100 will turn the outlook negative.

Such a break can take the contract towards the subsequent targets of ₹2,970 and then ₹2,900 levels.

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