Turmeric futures traded on the National Commodity and Derivatives Exchange tumbled 7.3 per cent in the last two weeks to ₹6,490 a quintal.

Weak demand following the arrival of low- and medium-quality turmeric in the market is the major reason for this price fall.

Last year was a mixed one for turmeric. Excess supply had dragged its price from a high of ₹7,248 per quintal in April to a low of ₹4,426 in October.

However, a near-19 per cent decline in the area under cultivation, 22 per cent drop in production and a surge in export demand reversed the price trend towards the end of the year.

India is the largest producer, consumer and exporter of turmeric. According to data from the Spices Board, turmeric exports in 2012-13 increased 11.3 per cent to 88,513 tonnes over the previous year.

Export demand for the commodity in the current fiscal year has also been robust with data available until December 2013 showing a 17 per cent jump. In the near term, turmeric may see only limited price correction as export demand is rising and there is threat to supply from a below normal monsoon forecast for the current year. Also, if El Nino occurs as projected, then the spice could get a boost in the later part of the year.

Outlook

Long-term view : The NCDEX-Turmeric futures contract is in a long-term uptrend. The contract has been moving in a bull channel since mid-2012.

The channel support is currently placed near ₹4,900. The uptrend will remain intact as long as the contract trades above this support level.

Though an intermediate fall to test this level of ₹4,900 cannot be ruled out, the probability is high for the contract to reverse higher again from here.

Such a reversal will hold the potential to target ₹8,200 in the long term. On the other hand, if the contract falls below the long-term support at ₹4,900, which is less probable, it will fall further to ₹4,400 and ₹3,400.

Medium-term view : Though the contract has been in a strong uptrend since November 2013, the medium-term outlook could be turning bearish now. The contract has failed to breach ₹7,500 decisively and has come down in the last three months. The 200-week moving average resistance at ₹6,968 will be a key medium-term resistance for the contract, which has restricted the uptrend since November 2013 to extend further. While the contract remains below this resistance, the outlook will remain bearish.

A fall to test the support at ₹5,800 looks likely now. A reversal from here can take the contract higher again to test the 200-week moving average resistance. The outlook will turn bullish only if the contract records a decisive close above this level. The ensuing target on such a break will be ₹7,600. But if the contract declines below ₹5,800, then the downtrend can extend further to ₹5,300.

Short-term view : The short-term trend is up. But this uptrend could be in danger. Though the sharp 9 per cent fall from the high of ₹7,122 has found support at the 61.8 per cent Fibonacci retracement level of ₹6,471, the reversal from this low is not gaining momentum. Friday’s 2 per cent fall is keeping the contract under pressure.

The outlook would turn negative if the contract declines below ₹6,471. Such a break can take it lower to ₹6,400-6,350 initially and then to ₹6,200 and ₹6,100.On the other hand, if the contract manages to bounce back from ₹6,471, the uptrend will remain intact and a rise to ₹6,820, the 100-day moving average, is possible in the short term. A breach of this level can take it further higher to ₹7,050, which is a significant short-term resistance for the contract.

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