Market Strategy

Turmeric witnesses strong rally

Ravindra V. Rao | Updated on July 14, 2012 Published on July 14, 2012


Indian Commodities witnessed a very range-bound trade in the entire week but showed some strength on Friday with copper hitting a one-week high and crude oil up for a third straight day on investor relief that the Chinese economy didn’t slow more than expected.

The dollar's slide against the euro also supported the commodities.

Precious metals, although gained on Friday, ended the week on a lower note with MCX gold August contract down by 1.21 per cent.

Spot gold and silver prices in Mumbai closed higher on the last day of the week tracking the uptrend in COMEX futures, but the gains were capped due to a 1 per cent gain in rupee against the dollar.

The gain in COMEX futures came after expectation that China's central bank may undertake more stimulus measures as the country's April-June gross domestic product, although in line with market expectation, indicated a slowdown in the economy.

Non-agro sector

MCX crude oil was the best performer of the week in the non-agro sector (as of this writing) with a gain of 1.23 per cent.

The only factor supporting crude oil is the Iran geopolitical issue relating to its nuclear programme. The issue intensified after the US Treasury Department imposed additional sanctions against Iran's nuclear programme and identified a group of companies and banks to prevent evasion of sanctions.

But the concerns over energy demand as reported by OPEC and IEA is capping the upside.

Worries over Chinese oil demand have resurfaced after it reported a GDP growth of 7.6 per cent for April-June.

The best performing commodity in the base metals pack was the red metal, copper which gained by 0.21 per cent for the week. Copper is holding to its strength above Rs 416 on MCX despite global economic uncertainties in major consuming countries. According to preliminary customs data, China's copper arrivals fell 17.5 per cent in June from a month earlier.

Overall, the China's copper imports rose 47 per cent from a year earlier to 2.502 million tonnes (mt) in the first half. The views are mixed for copper as economic data’s from China and the US which are the major metal consumers are not showing strength. Additionally, due to slowing global economic scenario, the demand for the metal might keep the downside risk in prices intact.

Agro Commodities

On the agro commodities front, turmeric was the best performer with a weekly gain of more than 15 per cent due to concerns over monsoon which might delay the sowing in Andhra Pradesh and also due to expectations of a decline in area under cultivation. A slow start to the June-September monsoon rains means farmers with irrigation facilities have started sowing in some pockets but cultivators dependent on the monsoon are waiting for one or two spells of rains to commence sowing.

According to sources, turmeric acreage in India, the world's biggest producer and exporter of the yellow spice, is likely to fall 30 per cent this season, reducing exports in 2013-14, even though total overseas sales are still expected to be above average. Exports also might fall as higher prices due to fall in output could hurt overseas sales.



(The author is Associate Vice- President, Commodity Research, Motilal Oswal Commodities. The views are personal.)

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