Mentha oil may regain flavour



The MCX mentha oil futures contract has tumbled 67.5 per cent from its 2012 high of Rs 2,564.8/kg to Rs 832, After the Forward Markets Commission (FMC) levied an additional 10 per cent special cash margin.

The commodity is yet to recover from the fall.

India is the world’s largest producer and exporter of mentha oil. The commodity and its derivatives such as mint oil, pepper mint oil are widely used in industries such as food, pharmaceuticals and perfumes. Data from the Ministry of Commerce show that the export of mentha oil and its derivative products are on the rise since financial year 2011-12. Exports increased 21.5 per cent and 26.5 per cent in 2011-12 and 2012-13, respectively.

The volume of exports in 2012-13 was 15,891 tonnes. And exports in the first half of the current fiscal were 9,963 tonnes.

Being an export-oriented commodity, a pick up in global demand and weak rupee can limit the downside pressure on mentha oil and chances are good for prices to rebound.

TECHNICAL OUTLOOK

Long-term view The MCX menthe oil futures contract has been declining since 2012.

The trend is likely to continue in the coming months. However, the contract has a strong long-term support at Rs 600, which can halt the current downtrend. A reversal from this support will have the potential to take the contract higher to Rs 1,300 in the long-term.

Medium-term view: The medium-term trend is down. Key resistance is at Rs 1,100 and the trend will remain bearish as long as the contract trades below this resistance level.

Immediate support is at Rs 800. A break below this support can take the contract lower to Rs 600 in the medium-term. However, if the contract fails to break below Rs 800, an intermediate rally to Rs 1,100 is possible before a fall.

Short-term view: The downtrend since March 2013 is getting support near Rs 800 over the past few months. The contract can trade sideways between Rs 800 and Rs 900 for a while. A break above Rs 900 can take the contract higher to Rs 1,050 in the short term.

On the other hand, a fall to Rs 700 is possible in the short term if the contract declines below Rs 800.

> gurumurthy.k@thehindu.co.in

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