Commodity Online
Will India’s food inflation ease from 18% after staying at that level for past six weeks? According to two key officials, food inflation is likely to ease. The high food inflation is likely to ease in the next few months on the back of a good rabi crop harvest, said Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission,

The Whole sale price index of lentils, rice, vegetables and other food articles compiled by the Commerce Ministry rose 17.81 percent in the week ended February 27 from a year earlier after a 17.87 percent gain the previous week.

Inflation was the result of drought conditions that prevailed in some parts of the country last year. It was also driven by some amount of speculation in the market. It is likely to ease as there are good reports on the rabi crop, Mr Ahluwalia said.
The Indian economy is on the upswing and the GDP growth for 2010-11 fiscal is expected to be 8.5 per cent and in the subsequent year it will be 9 per cent, he said.

The Government's Chief Economic Advisor, Kaushik Basu, said on Friday that following the release of food grains since January, there has been a downward pressure in food prices. “From January, we have been releasing on a regular basis a small quantum of grain in the open market, which has resulted in a downward pressure on prices,” said Basu at a FICCI seminar on commodity futures and options

Pointers
Oil Demand: The monthly report from OPEC said world demand will rise by 880,000 barrels per day (bpd) in 2010, up from its previous forecast of 810,000 bpd. Global oil demand will rise more quickly than expected in 2010, increasing the need for crude from the 12-member group.

FII’s upbeat on India: Foreign institutional investors have put in more than Rs 10,000 crore in the equity markets since the Budget was tabled in Parliament on February 26.March inflows formed the bulk of this year's FII investments of Rs 10,959 crore or $2.41 billion, the SEBI data showed. FIIs were net buyers of equities worth Rs 10,180 crore in the secondary and primary markets.Foreign investors have welcomed the road map announced in the Budget to bring down the fiscal deficit from above 6 per cent of the GDP to 4.8 per cent in FY12 and to 4.1 per cent by FY13.

India’s Copper consumption to rise: The energy efficiency initiatives of the Government coupled with a rebound in the construction sector are expected to boost copper consumption in India, according to the International Copper Association (ICA). Mr Richard Xu, ICA's Regional Director for Asia said India is one of the fastest growing markets for copper consumption in the region

US $149 bn package for jobless, tax breaks: The U.S. Senate on Wednesday passed a $149 billion package of jobless aid and tax breaks, as Democrats continued efforts to lower the 9.7 percent unemployment rate before congressional elections in November. The measure, approved by a vote of 62 to 36, now heads to the House of Representatives, where many Democrats have pushed for more aggressive job-creation measures in the face of the worst U.S. economic downturn since the 1930s

Global Stocks Climb: Major stock indicators climed last week with S&P’s 500 index closing at its highest level in 17 months. Major stock indicators climbed for the week after investors grew more upbeat about the health of banks. Shares of Citigroup Inc. rose 13.4 per cent for the week. For the week, the Dow rose 0.6 per cent, the S&P 500 index rose 1 per cent and the technology-dominated Nasdaq climbed 1.8 per cent.

Sugar industry for 60% import duty on white sugar: Barely weeks after Indian sugar prices hit a peak of Rs 50/kg, a panicky industry has now started lobbying hectically for clamping a 60% import duty on white sugar at the earliest . Apprehensions mounted in the sugar industry after international prices dipped sharply for white sugar, marking a 7-month low.Consumption is estimated to have risen 18.5% from 12.99 mt to 15.40 mt.

Falling Vegetable Oil production: India’s vegetable oil production declined over 10 per cent in the last three years due to a reduction in the overall oilseed cultivation area, as farmers moved to better remunerative crops, including wheat, sugarcane and pulses. Dorab Mistry, director of the London-based Godrej International and the world’s most vocal personality in vegetable oil industry, estimates India’s vegetable oil production at 6.4 million tonnes in 2009-10, a decline from 6.7 million tonnes and 7.1 million tonnes in 2008-09 and 2007-08 respectively.

India GDP will be 8.2% next fiscal: India's gross domestic product (GDP) would be around 8.2 percent next fiscal, Chairman of the Prime Minister's Economic Advisory Council C. Rangarajan said. "In the current fiscal (2009-10) we would clock 7.2 percent GDP and 8.2 percent in the next fiscal (2010-11)," he said, addressing a conference organised by the Calcutta Chamber of Commerce.

Gold rally in Euro terms: Gold's rally to record highs in euro and sterling terms and the resilience of spot prices in the face of a rising dollar is sign-posting the metal's broadening insurance appeal, as sovereign debt fears shift to the fore. Worries over Greece's fiscal outlook created a perfect storm for euro-priced gold this month, as some investors selling the single currency chose bullion as an alternative

Rollback of fuel prices ruled out:  Finance minister Pranab Mukherjee on Friday rejected opposition members demand to roll back the increase in duties on crude oil and automotive fuel and the attendant increase in price of petrol and diesel. He said financial position of the government does not permit him to take such a step.

India to make rupee fully convertible: India will take gradual steps to full convertibility of the rupee but not in one go, Finance Minister Pranab Mukherjee told Parliament. "The full convertibility of rupee is our ultimate destination and we are taking gradual steps towards this. However, it is felt that it is not time to jump to that destination at one go now," Mukherjee said in a prepared answer to Parliament.

Buy Asian stocks outside Japan: Investors should buy Asian stocks outside Japan after valuations dropped and before sentiment strengthens further, Goldman Sachs Group said. "By the time all the lights turn green, the race will already be well under way," Goldman Sachs analysts led by Timothy Moe wrote on Thursday. "Sentiment and valuation will improve as the year progresses, and we would prefer to be early.

Commodity bourses trading rises 50%: The turnover of 23 commodity exchanges surged by over 50 per cent to Rs 69,72,216 crore till February of the current fiscal due to a sharp rise in participation of agricultural and other commodities, the Forward Markets Commission (FMC) reported.

The turnover of commodity bourses had stood at Rs 46,44,496 crore in the same period last year, it said. The maximum of business has come from the futures trade in farm items such as guarseed, soyabean, soy oil and mustard seed as well as commodities such as energy and crude oil, the the data released by commodity markets regulator FMC showed.

US Export Initiative: U.S. President Barack Obama will detail the national export initiative he announced in January at the Export-Import Bank's annual conference Thursday. During his State of the Union address, Obama set a goal of doubling U.S. exports in the next five years to keep the United States competitive internationally while supporting the creation of 2 million jobs at home, the White House said.

Bullion
Spot Gold prices gained back towards the end of the week wiping out earlier losses as the dollar index fell below the crucial 80-mark on Friday. The yellow metal prices were continuously facing pressure in the beginning of the week from the strong dollar. However, the greenback weakened towards the end of the week as risk appetite in the financial markets emerged and weakened the low-yielding dollar as investors flocked towards high yielding and riskier investments. In the last week, the US department released economic data on unemployment claims and trade balance.

Unemployment claims in the world’s largest economy decreased by 6,000 to 4,62,000 as against previous of 4,68,000. The unemployment claims decreased continuously for two weeks reflecting some signs of recovery in the labour market. But trade deficit in US declined in January as imports of crude oil declined. Reports also indicated that the exports declined 0.3%, the first decline since April. Moreover, Data from the US authorities indicated that the US government recorded a budget deficit of $220.9bn in February – the largest monthly deficit in its history. The total deficit since the beginning of the fiscal year in October now stands at $651bn.

Outlook: We expect the dollar to remain weakened on the back of risk appetite in the financial markets. This may help the gold prices to gain back. However, if Greece’s debt issues re-emerge back, this may act as a bearish sign for the markets and the dollar may gain back as a safe-haven investment. MCX Gold prices are likely to find support at Rs.16,390/Rs.16,170 levels and resistance is seen at Rs.16,855/Rs.17,110 levels.

Basemetals
Base metal prices continued to remain under pressure last week on the LME on concerns that China may increase interest rates on the back of rising inflation and to control real estate prices. However, declining inventories of metals on the LME underpinned the metal prices from tumbling down. China's rising industrial and inflation figures renewed concerns it would start raising rates sooner rather than later, causing growth in the world's third top economy to slow. This dampened sentiment in broader markets; lackluster US trade data and weekly US jobless figures provided little in the way of relief.



Copper prices continued to remain under pressure trading below the crucial $7500 mark as concerns of supply of the red metal increased after earthquakes continued to hit Chile, a top producer of copper faded away as Xstrata confirmed that its operations in Chile were not affected by aftershocks because they are far from the epicenter, as did Freeport-McMoRan Copper & Gold Inc.

Outlook : Prices of metals will take cues from the decisions in Chinese monetary policy. It is expected that the fastest growing economy may increase interest rates to curb inflation and real estate prices. This may weigh on the metal prices as the country is the largest consumer of metals in the world. China had increased its reserve requirements for banks on two occasions since the past two months. Prices can also come under pressure if Greece’s debt issues re-emerge and affect the investor sentiments. The country faces more than 20 billion euros in debt redemptions in April and May this year. MCX Copper has support at Rs.333/Rs.325 levels whereas resistance is seen at Rs.350/Rs.358 levels.

Crude Oil
Crude oil prices gained last week on the back of weaker dollar. Positive economic data from US is indicating that the economic recovery is on track and this factor can help in increasing demand for crude oil from the world’s largest consumer. Moreover, there is news that OPEC will increase shipments on strong demand in China during the four weeks ending March 27. OPEC is expected to meet on 17th March in Vienna to decide on whether to adjust production quotas. In order to prevent a decline in oil prices, markets expect production quotas to be reduced.

Outlook :We expect crude oil prices to trade with a positive bias. However, sharp gains in the commodity could be capped on account of concern over rising inventories and expectations of tightening of monetary policy in China. China is the fastest growing economy and second largest consumer of crude oil. MCX Crude prices are likely to find support at Rs.3650/Rs.3550 levels whereas resistance is seen at Rs.3820/Rs.3890 levels.

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