Posts Tagged ‘NCDEX’

SUGAR……. “Ambas as extremidades de cana de açúcar não pode ser doce”

In Portuguese language “Ambas as extremidades de cana de açúcar não pode ser doce” means both ends of sugar cane cannot be sweet. Sugar travelling though its notorious cycle has always been continuously gathering news & issues all along these years. Starting with the sugar cycle, it follows a 3-4 years cycle with a bumper harvest resulting in higher inventory levels. Declining prices pressurizes the profits of sugar companies. Going around the downtrend in the sugar cycle starts with increased availability of sugars, decline in sugar prices. This prompts the farmers to switch over to other crops resulting in lower cane production. All these leads to higher sugar prices and the cycle turns around.

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FOREIGN NEWS

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•Mexico published a quota to import 100,000 tonnes of sugar to cover a shortfall in supply until the end of the year.

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•Tight supply supports raw sugar.

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•The US Department of Agriculture (USDA) has pegged India’s sugar production at 23.6 million tonnes, marking an increase of over 26 per cent from last year.

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•Brazil crops shrivel as Amazon dries up to lowest in 47 years.

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•Brazil will harvest 639 million tons in the year started May 1, 3.2 percent less than estimated in April.

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•Australia’s 2010/11 sugar output is being threatened by heavy rain in the northeastern cane growing state of Queensland, disrupting this year’s cane crush.

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•Liffe front-month, December white sugar ends $24.20 higher at $649.80 per tonne after earlier setting a 7-month high for the front month of $661.80 a tonne.

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•Market buoyed by a fresh wave of fund buying and crop concerns in South Africa, Argentina, Mexico and Australia.

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DOMESTIC NEWS

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•Sugar production in Uttar Pradesh, may rise to 6.2 million tonnes from 5.18 million tonnes in the review period.

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•Sugar output in Karnataka is likely to decline marginally to 2.3 million tonnes this year from 2.53 million tonnes last year.

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•Sugar output in Tamil Nadu may jump sharply to 2.1 million tonnes in the 2010-11 crop year from 1.25 million tonnes last year.

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•The output in Gujarat is pegged at 1.3 million tonnes against 1.19 million tonnes last year.

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•Cane growers seek higher prices of 200 rupees ($4.49) per 100 kilograms.

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•NCDEX seeks permission to do futures trading in sugar.

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•The Government has declared lower October sugar quota at 17.50 lakh tonnes (lt) against September’s 19 lt.

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•Sugar imported from India will be tested before its sale in Pakistan, said a minister who rejected the impression that Indian sugar was substandard.

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Seasonality – Indian Scenario

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Analyzing the seasonal index of Indian sugar prices, the prices remain under the pressure till the third quarter of the year. The fourth quarter is a seasonal buying period, as the market witness a recovery because of the festive season.As far as the medium to long-term outlook is considered, the price trends in international markets would be the key determinants of future profitability with the crude oil price trends, which determine the diversion of cane crop to ethanol.

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MUSTARD/RAPESEED SEED

Mustard/Rapeseed oil is the third largest edible oil produced in the world after soy oil and palm oil with accounts of about 12% of the total World’s edible oil production. By crushing rapeseed or mustard seed, oil and meal are obtained. The average oil recovery from the seed is about 33%. The remaining is obtained as cake, which is rich in proteins and is used as an animal feed ingredient. Being an important source of edible oil and feed meal to the country, mustard is undoubtedly the focus of Indian edible oil industry. In EU, rapeseed oil is mainly used for biofuel production.

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Global scenario

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The production and consumption of this oil has been growing at the rate of 4.65% and 5.03% respectively over the last decade. According to USDA, global rapeseed output for 2010/11 is forecast 400,000 tonnes higher this month to 57.1 million as a larger crop in Canada. While world production of mustard oil is estimated to 20-22 million tonnes. Canada is the major producer and exporter of seed and oil followed by Australia. China, European Union, Canada and India are leading producers of mustard seed and consumer as well as. The major seed importing countries are Japan and Mexico and US leads the list of mustard and rapeseed oil importing countries. Global rapeseed exports are estimated 410,000 tonnes higher this month due to lower exports from Ukraine and Russia as record heat wave in August causes crop damage.

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Indian scenario

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The Central Organisation for OilIndustry and Trade, the apex trade body, estimated the country’s mustard seed output at 64.2 lakh tonnes in 2009-10 (October-September) as against 63.5 lakh tonnes a year earlier,
while oil is around 21 lakh tonnes in 2009-10. The country also generates 24 lakh tonnes of oil cake.

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Rajasthan, Uttar Pradesh and Haryana produce the major share of rape /mustard contributing to over 70% of the total Indian produce. The crop accounts for nearly one-third of the oil produced in India, making it the country’s second most important edible oil after groundnut. Mustard oil is consumed wholly in the domestic market. The demand for the consumption of mustard/rape seed comes mainly from eastern and northern areas of the country.


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Hence, India does not export mustard seed but imports some amount of oil. However India exports around 400,000 tonnes of oil cake. Recently due to the dominance of comparatively other cheaper oils like palm and soya, the import share has come down.

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Climatic conditions, especially progress of South-West monsoon is a major factor shaping the fortunes of  mustard seed. Price of other domestic and global oil seeds would also have significant bearing on mustard seed prices. Major trading centres  in mustard seed in the country are Jaipur, Sriganganagar and Alwar in Rajasthan, Hapur in UP, Delhi, Mumbai and Kolkatta.

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Outlook

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The mustard seed futures are likely to trade under selling pressure. Higher warehouse stock, poor buying interest, weakness in soy market, projection of record Kharif oilseeds production due to higher acreage and favorable weather condition is likely keep prices down. As on 13th September, NCDEX warehouses are
having a stock of 123,236 tonnes. Rise in volume, fall in open interest and price is indicating further weakness in the prices.

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Commodity Weekly Commentary 20th – 24th September 2010

Its seems that sky is the limit for bullion counter now a days, as prices surged high to their life time highs on domestic bourses. However, strong Indian rupee limit the upside movement in prices in both gold and silver. In international markets gold hit a record high above $1,280 per ounce last week, as currency market jitters and broader economic uncertainty enticed more investors towards the metal’s safe-haven credentials. The metal’s rise this year has been fueled largely by investor nervousness that stemmed from the fallout from the euro zone debt crisis and from economic data that has suggested global economic growth may be losing momentum.

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Base metals also surged high last week on weakness in dollar index and after reassuring comments from China’s central bank about its plans to keep monetary policy loose. In energy counter crude oil lost its esteem and traded down. Crude traded around $76 per barrel amid low U.S inventories, while Chicago pipeline leak continues weighing on prices as new Tropical Storm Karl threatens the Gulf of Mexican. The EIA report showed a drop in fuel demand by 1% to 19.5 MB. Gasoline also shed 694 thousand barrels to 224.5 MB. This comes at a time where imports have reached their lowest level in five months.

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Unlike metals, agro commodities fell like nine pin, even fall in dollar index could not supported them very much. It was not a good week for spices as sellers were more active than buyers in spot market. Future market reacted in the same fashion. Panic selling was continued in turmeric, jeera and chilli as well. Cardamom was also the victim of arrival pressure and closed down. Stockiest liquidation at higher levels dragged down chana futures on NCDEX as well. With declining prices of churi and korma, guarseed and guargum continuously traded southward.

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Wheat closed down on negative cues. Furthermore, traders preferred profit booking at higher levels in menthe futures. Strong crop projection of soya bean along with rise in crop projection of mustard seed crop in rabi season compelled oilseeds and edible oil futures to trade in negative zone. Higher domestic stocks, imports in the middle of arrivals in the domestic mandies further pressurized the oil seeds prices. As per expectation, the total crop size of soyabean in the current season is likely to be around 95 lakh tonnes, up 2% from last year.

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However there was a commodity which surprised the market with its nonstop three week upside on higher offtake amid tight supply and it was maize.

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COMMODITY WEEKLY COMMENTARY 13th – 17th September 2010

Silver along with gold once again shoot up last week as international prices tested $20 and $1255 respectively on COMEX division. Each time a rise in gold hits the headlines, it steals the limelight from silver. But this time silver has not only followed rallies in gold, but usually out performed, as can be seen in a fall in the gold/silver ratio. Prices went towards north last week as global stocks tumbled and the euro slipped on renewed fears about the health of the global economy.

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Base metals witnessed see saw movements as highly volatile currency market is rolling the prices in both direction. However, bias remained down side as fresh concerns about the health of the European banking sector fed a wave of risk reduction in the broader market and helped drag red metal (copper) prices away from four-month highs. Energy counter also remained under pressure as investor’s eye U.S economic strength and demand on fuel, while the dollar gains against a basket of foreign currencies amid the jittery sentiment. In other related news the dull hurricane season also limiting the upside in prices. The U.S. National Hurricane Center was monitoring three tropical systems in the Atlantic basin, one approaching the Caribbean Sea and two near Africa’s west coast. The NHC said cloudiness and showers over the Leeward Islands and northeastern Caribbean Sea were associated with Gaston’s remnants, but the system had just a 20 percent chance to become a tropical cyclone.

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Despite holiday’s shortened week, agro commodities witnessed active trading. After a noteworthy decline, oil seeds and edible oil counter was somehow able to cap the downside on the news of better soyameal export amid short covering in overseas market. Crude palm oil was also trading up. On the other hand upside was limited on the absence of fresh demand.

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Favourable weather and better outlook of crop shed the gain of wheat futures. Northward journey of maize futures supported by multi month’s higher prices in CBOT surprised the market players. Spices counter traded with downside bias moreover. Chilli, jeera, turmeric and cardamom were down on lower offtake in physical market. Turmeric futures were in complete grip of bears on lower demand in spot market. It touched multi week lows on NCDEX as well. It was only pepper in spices counter which propped up on fresh buying. Mixed sentiment in guar compelled guarseed to trade in slim spread whereas guargum was rangebound with upside bias.

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Chana continued to witness downtrend following lower demand in the domestic market.

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Soybean oil….. “Prices sail along with the winds over harbor”

Soya bean oil is the second leading vegetable oil traded in the international markets after palm. Palm and Soya bean oils together constitute around 68% global edible oil trade volume, & Soya bean oil alone constitutes of 22.85% of the whole.

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Soybean Oil World Scenario –A SNAP SHOT

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•World Production: U.S. (38%) is the biggest producer of soybeans followed by Brazil (13-18%) and Argentina (27-37%).

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•World Imports: China, Japan, Mexico, Taiwan and South East Asia are major importers of soybeans while India, China, Pakistan, Bangladesh, South & Central American countries (Peru, Venezuela, Bolivia, Dominican Republic) and Africa (Egypt, Morocco) are major buyers of soya oil in world market.

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•World Exports: U.S. is the largest exporter of soybeans while Argentina is the biggest exporter of soy oil followed by Brazil.

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Hot talks………….. China, the world’s biggest user of cooking oils, and Argentina remain in talks about China’s embargo on imports of soybean oil from the South American nation.

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China imports all its soybean oil almost from Argentina and Brazil. India imports nearly 1 million tonnes of soya oil yearly from Argentina, Brazil and US. India imported 192649 tons of Crude Soya oil during June 2010. According to USDA, the country is estimated to import 1.19 million tonnes of soy oil for 2010-11, while China is estimated to import 2.15 million tonnes during the same period.

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China has frozen all Argentine soybean oil imports in retaliation for Buenos Aires decision to restrict imports of Chinese products. The Chinese blocking of Argentine soybean oil threatens a key hard currency earner for the South American nation, estimated at 2 billion US dollars for the current year.

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Domestic scenario: India is the sixth largest producer of soya oil with account of 4% of world production. In India, Madhya Pradesh produces estimated 53% of the country’s soybean followed by Maharashtra (34%) and Rajasthan (8%). It is sown during June-Jul period and harvested by October in India. The domestic production soyabeen is around 1.4 million ton in 2009-10. Almost 70 to 80% of total oilseed production is crushed for oil while the balance quantity goes for food, feed and seed use in the country.

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So total soya oil production is around 0.7-0-8 million ton in 2009-10, While annual consumption is around 2.0-2.2 million ton with a market value of `9000 crore.

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The above chart shows that during January-June 2010, imports of soya oil totalled almost 7.36 lt against 5.99 lt a year ago. According to the Solvent Extractors Association, the increased imports have resulted in inventories building up at the ports.

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Imports getting surge in December 2009 primarily in view of the kharif oilseeds crop hit by the erratic weather and the rupee’s rise against the dollar.

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Kharif production has been estimated at 161 lt against 178 lt last year. Rabi output, however, is seen marginally up at 101.31 lt against 99.11 lt a year ago.

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Spot markets of Indore and Mumbai serve as the ‘reference’ market for Soya oil prices.

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The prices in Indore reflects the domestically crushed soybean oil (refined and solvent extracted) while Mumbai price indicates the imported soy oil price.

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In exchanges….. Futures trading in soya oil essentially serve as the right tool for hedging against market-linked risk by all those in the value chain of the commodity- the soyabean producing farmers, processors, brokers, speculators, soyabean and meal traders, traders of other oilseeds and oils, etc.

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CBOT is the biggest exchange for soybean oil. In India, NCDEX and NBOT are the major exchanges for these commodities. Its contracts are traded with high liquidity. The domestic future prices of soya oil are largely influenced by the international edible price movements (especially Malaysian palm oil and soybean oil at CBOT), soybean availability in domestic markets, demand for meal and other associated supply-demand factors of soybean and its derivatives.

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Current scenario: Refined soyaoil futures is trading up with August and September contracts moving up by 0.45% and 0.54% respectively. August soyoil futures traded at `484.70 while September futures were at `487.50 per 10kg. Crude Soya oil import price is US$ 880 per ton at Mumbai port whereas Crude Palm oil import price is US$ 805 which indicates the difference of less than 10 percent between the two. There is zero import duty on crude soybean oil in India while it is 7.5% for refined oil.

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Weekly Update 26th – 30th July 2010

The markets witnessed good buying in the week gone by as the corporates from U.S. to Europe showed good performance raising the confidence in the strength of the global economic growth. Continuous buying by the foreign institutions and the strength in the developed markets helped stocks to scale 29 months high. U.S. Fed chief Ben S. Bernanke said that central bank would take additional action if the world’s largest economy does not continue to improve.

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European Banks Stress test result showed that from a sample of 91 European banks, representing 65% of the European market in terms of total assets, 7 banks would see their Tier 1 capital ratios fall below 6%. The focus of the test was mainly to assess the ability of the banks to absorb possible shocks on credit and market risks, including sovereign risks over a 2 years horizon, until the end of 2011. The test revealed that the aggregate Tier 1 ratio, used as a common measure of banks’ resilience to shocks, under the adverse scenario would decrease from 10.3 percent in 2009 to 9.2 percent by the end of 2011 (compared to the regulatory minimum of 4 percent and to the threshold of 6 percent set up for this exercise). However investors are still ambiguous about the credibility of the test as it ignores the majority of banks’ holdings of sovereign debt assuming a case of no default by Greece or any other European country.

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India Inc. has so far shown good performance. The net profit of 339 companies that have declared results has grown by 25.5 percent and sales have shot up by 17.8 percent compared to corresponding quarter last year. The annual monsoon rains improved 24 percent from the deficit in the previous week, but were still 17 percent below normal in the week to 21July 2010, as per the data of the India Meteorological Department on Thursday, 22 July 2010. The seasonal monsoon rains during 1 June to 22 July 2010 were 12 percent below normal.

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The expectation of another 25bps hike in policy rates has already been built in the market. Market would take a cue from what RBI says in its monetary policy on 27th July about the health of domestic market and the steps in its act of balancing growth while anchoring inflationary expectations.

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Trend of Indian Stock Markets is up since a month and now the world markets are also participating in the rally. The rise in Base metal commodities is giving more steam to the rally as that is a reflection of increasing demand for metals in the industry. Nifty has support between 5315-5250 levels and Sensex between 17700- 17500 levels.

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Better than expected earnings amid optimistic equity market bestowed the much needed direction to the commodity market and thus it headed for biggest gain since March. In the meantime, dollar is going down and likely to trade in a negative territory as investors are moving back to the risky asset, which is appearing more promising in current context. Gold is narrating the same story and it is moving in a range with downside bias. Gold silver ratio has declined as silver outperformed gold, getting support from terrific rise in base metals prices. Energy complex has ignored the negative news and shore up on better results and strong technicals. But yes, it’s a time to book profit in spices as they are overbought now, especially pepper.

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Weekly Update 19th – 23rd July 2010

The concerns over recovery in global economy resurfaced in investors mind as China economy grew 10.3 percent in the second quarter showing moderation from 11.9 percent expansion in the first quarter. In U.S., consumer confidence dropped in July to the lowest level in the year to 66.5 from 76 in previous month and factory output too fell by 0.4 percent in June.

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The minutes released by the office of the Federal Reserve said that “The economic outlook had softened somewhat and a number of members saw the risks to the outlook as having shifted to the downside”. The statement and weak data only added to the worries and led to the decline in most of the global markets.

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India’s Industrial Production growth came surprisingly low to 11.5 percent in May from a year earlier and the April growth was revised downward to 16.5 percent from 17.6 percent. It is expected that the Industrial Production will remain close to double digits as some of the leading indicators like vehicle sales remained buoyant in June.

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Keeping a vigil on the liquidity and in order to ensure smooth credit lines for both government and corporate to sustain the growth momentum, RBI has further extended the second liquidity adjustment facility (SLAF) on a daily basis till July 30, 2010. Strong credit growth in Banking system and Industrial production together with high food inflation may influence RBI to raise policy rates by another 25 bps in its first quarter review on 27th July.

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The latest statement by the IMD that the monsoon up to 15 July has so far been 14 percent below the long period average is a cause of concern.July, especially being the most important month for sowing the Kharif crops has led to the alteration of earlier beliefs that going ahead food inflation will moderate.

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Mostly world markets are in downtrend though Indian stock market is still in uptrend. The base metal commodities are not able to rise which is showing the underlying uncertainty in the markets. One should be cautious in such markets.

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Nifty has support between 5280-5220 levels and Sensex between 17600-17400 levels.Indian markets have gone up substantially in last one and half month and dollar index has fallen sharply from higher levels but the Indian rupee has not moved much which is a sign of concern as rupee should have strengthened in such an environment.

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Lack of clarity with reference to the direction of world economy is painting a hazy picture for commodity market. Even uncertain outcome of economic releases and result of second quarter is giving little direction to the commodities. Investors are refraining to make large position in current situation. This week, we have important data form UK and Canada. Housing data can give further direction to base metals. Bullions can trade in a slim spread. Expiry of July contract in NCDEX may result in more volatility in all agro commodities. After witnessing a multi week high some spices may see a pause in rally.

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