Agri-Tech: Weekly Picks – September 17, 2012

Market Recap
Indian spices complex were on a recovery mode last week (barring pepper) as prices found support near the recent lows. ON-dip buying enabled the prices to post smart gains ranging from 2-4.5% on wow basis. Pepper turned out to be a laggard on the back of constrained demand and stray reports of poor quality of stocks that made the prices sway within a narrow range. Turmeric moved higher led by technical support and the underlying reduced acreage concerns that helped shore up the sentiment. Jeera attempted a cautious upside potential as better crop continued to put brakes on the bounce back, while short covering allowed nominal gains to percolate. Chilly witnessed a late week break out riding on the back of concerns that lower acreage and erratic weather developments ignited the market mood as prices retested 2 week highs. Chana prices continued to be weaker with improved final acreage prospects, but found support from the 2 month low of Rs4,320. Sugar prices posted a massive recovery gaining by over 1.2% led by buying support at lower levels and anticipated improved demand ahead of the religious festivities.
  
Recommended Strategy

	CMP	Trading range	Strategy	Levels	Target	Stop-loss
Rs/Qntl
NCDEX Chilly Oct’12	5,420	5,200 – 5,600	Buy	Above 5,460 (closing basis)	5,560	5,400
NCDEX Jeera Oct’12	14,260	13,900 – 14,750	--	--	--	--
NCDEX Pepper Oct’12	43,055	42,400 – 44,000	--	--	--	--
NCDEX Turmeric Oct’12	5,810	5,450 – 6,100	--	--	--	--
NCDEX Chana Oct’12	4,500	4,300 – 4,750	Buy	Above 4,550 (closing basis)	4,660	4,470
Rs/Kg
NCDEX Sugar Oct’12	3,615	3,550 – 3,700	Buy	Above 3,620 (closing basis)	3,685	3.575

Source: Bloomberg, India Infoline Research, rounded off to the nearest decimal
 

• As stated in our earlier update, spices complex paused at their medium term support levels and attempted a modest recovery last week. However, barring Jeera and Chilly which still hold the hope of extended gains, pepper and turmeric look vulnerable on any minor dose of selling pressure.  
• In case of chilly, the ability to hold above Rs5,350-5,150 range keeps the hopes of short term gains alive.
• Jeera prices could attempt to test the resistance of Rs14,600-14,700 initially, while Rs15,100 acts as a medium term barrier for sustained upward momentum.
• Pepper prices have been showing better resilience during the past 2-3 weeks around Rs42,000 indicating that possibility of a gradual uptrend.
• Sustenance above Rs5,950 is a necessary condition for the recovery in turmeric prices to be validated. A break below Rs5,730, would derail the positive tone and invite weakness.
• The ability of Chana prices to recover from multi month could invite short term gains, while medium term looks weak as long as prices are contained under Rs4,650.
• Smart recovery from the intermediate trendline (and moving average) support of Rs3,550 hints at the likelihood of positive undercurrents to support sugar prices for short run.

Chilly Oct’12
Chilly prices remained range bound until it staged a breakout during the weekend session. It has also led to a break above the 21DMA (adjusted) that raises hopes for short term gains, but restricted under Rs5,580. Immediate support rests at Rs5,350, while major support exists at Rs5,150. As long as prices are sustaining within / above this range, prospects for extended gains remain open.        

Pepper Oct’12
Pepper prices continued to find Rs43,500 as an important barrier, recovering from the week’s low of Rs42,370. Prices have been showing better resilience during the past 2-3 week around Rs42,000 indicating range bound trade, with a immediate support at Rs42,400. For the gains to sustain, prices have to close above Rs43,300.

Jeera Oct’12
The movement in jeera prices resembled that of Chilly as prices recovered from the support zone of Rs13,900-14,000 last week. Prices could attempt to test the resistance of Rs14,600-14,700 initially, while Rs15,100 acts as a medium term barrier for sustained upward momentum. Closing below Rs14,100 could signal onset of early weakness.    

Turmeric Oct’12
Turmeric prices managed to bounce back from the key support level of Rs5,450 and breached the 15DMA (adjusted) indicating short term strength. However, sustenance above Rs5,950 is a necessary condition for the recovery to be validated. As long as prices are able to hold above Rs5,730, positive tone stays alive.

Chana Oct’12
Chana prices nose dived retesting the past 2 month low of Rs4,330 last week. However, as prices have recovered from multi month low, short term trend could be construed as mixed tone with positive bias. As long as, prices do no break Rs4,580-4,675 range, mixed tone with chances for a lower low cannot be ruled out.   

Sugar Oct’12
Sugar prices consolidate above the support level of Rs3,550 (intermediate support) and evinced a smart recovery during the weekend. As Rs3,550 also coincides with the intermediate trendline level, last week’s price action has opened doors for the prices to test the prior high of Rs3,660 and also attempt to make a new high.      

Bhav Box

Markets	Sep-15	Sep-08	Chg (%)	High	Low	30D- High	30D- Low
Rs/Qntl
NCDEX Chilly Oct’12	5,420	5,312	2.0	5,460	5,212	6,280	5,154
NCDEX Jeera Oct’12	14,295	13,860	3.1	14,365	13,680	16,700	13,680
NCDEX Pepper Oct’12	43,000	43,140	(0.3)	43,560	42,370	43,825	41,585
NCDEX Turmeric Oct’12	5,912	5,662	4.4	5,930	5,458	6,522	5,458
NCDEX Chana Oct’12	4,499	4,844	(7.1)	4,875	4,326	5,055	4,399
Rs/Kg
NCDEX Sugar Oct’12	3,598	3,555	1.2	3,625	3,524	3,660	3,420

Source: Bloomberg, India Infoline Research, Prices rounded off to the nearest decimal