Fundamental Analysis Sugar futures surged by almost 7% in the last 2 weeks on reports of lower output in India coupled with better demand in the physical markets. Also, restricted supplies in the last 3-4 days due to ongoing nation wide trucker’s strike supported the prices.
As per the initial estimates regarding availability of sugarcane, 2008-09 seemed to be a reasonably comfortable season. However, recent reports from some of the States indicate that the sugarcane availability would be substantially less than what was estimated earlier.
Thus, from the medium term (February) prospective, fundamentals for Sugar remain strong due to lower production estimates in the India.
If we consider the supply side in the global markets, lower production in India may be offset by the excess production of Sugar in Brazil, world’s largest producer. Thus, there would not be supply tightness in the international markets till the first quarter of 2009.
Technical Analysis Sugar prices (NCDEX Feb 09 Contract) close at Rs. 2001 per quintal against the previous close of Rs. 1986 per qtl.
Prices closed above its 5 days, 20 days SMA and 65 days SMA indicating an uptrend. RSI at 65.87 is currently moving towards overbought region.
Candlestick chart has shown reversal pattern on daily charts. Thus some correction is expected in the intraday session. However, buying on dips is suggested as trend remains bullish.
Outlook
Sugar futures are likely to remain firm in the intraday due to improved demand and lower output forecast in the domestic markets. Indian production is expected to fall below the previous estimations of 22 million tonnes due to lower production in Maharashtra and UP. This might further support the prices in the medium term.
Courtesy: Angel Commodities
