The Chilli prices continued the bearish trend on extended selling pressure during last week. Futures started the week on lower note on continued selling.
Increased arrivals at spot market along with poor export demand pulled down the prices. However, reports of rains in Guntur regions created concern for crop which pushed the prices to recover.
However, later on prices resumed down trend on reports of increasing amount of fresh arrivals among the total arrivals. Therefore, on cues from futures traded down and closed on negative note.
Outlook
Chilli prices are expected continue the volatility on prevailing fundamentals. Though fresh crop of Teja arrivals at spot market of Guntur, however arrivals of exchange traded 334 variety is are expected to start February onwards.
Prevailing unfavourable weather condition in major growing regions might hamper harvesting activity. Therefore, threat of crop damage due to prevailing weather conditions might support prices to trade up in coming week.
Factors to watch out
Arrivals at Guntur chilli market remained in the range of 15,000-35,000 bags
Andhra Rabi chilli area is reported around 0.53 lakh ha as on 18th January against 0.48 lakh ha year ago
As per data released by Spices board, during Apr-Nov, 2011 chilli export from India were reported down by 24% to 1,32,500 tonnes against the same period last year
As per Spices Board data, international price of chilli in New York market remained stable to $3.53 per kg during the week ended January 13th 2011 against $3.20 per kg quoted in the same period last year
Derivative Analysis
The NCDEX chilli February contract prices, volumes and open interest have increased. It is a good indication that the price decline is being caused by disgruntled long position holders being forced to liquidate their positions.
Technicians view this scenario as a strong position technically because the downtrend will end as all the sellers have sold their positions, creating fresh buying opportunity at lower levels.
Courtesy: Karvy Commtrade Ltd.
