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com March 17, 2008

Base metals lower on Bear Stearns

Base metals: Settle mostly lower on Bear Stearns stockpiles at LME warehouses are finding their way to China's
troubles; weak Dollar supportive today warehouse, thus falling stock picture is surely deceptive.
Base metals settled mostly lower on Friday as the US equities Cancelled ratio rose to 20.06% from 18.68%. Cancelled
tumbled on the news that Bear Stearns has received tonnage stands at just above 25,000 tonne, which is likely
emergency funding from JP Morgan and the US Fed. to support strong outflows in the coming days. LME cash-
to-3 month spread has tightened by $20 to $124(b) which
BS shares fell 47% and the Dow JIA Index lost 195 points, as indicates that shorting would be a difficult option. Although
the investors fear that financial crises would worsen. fundamentals are not really so compelling, it is advisable to
stay long on the complex for the next two-three days.
Base metals surrendered their intra-day gains as the traders
decided to square off some of their longs on the last trading Support for the red metal lies at Rs342.30/Rs338. Resistance
day of the week. Bullion complex emerged as the direct and would come at Rs346.10/Rs347.90/Rs350.20.
obvious beneficiary of the BS fiasco, and further gains are
expected. Nothing much is happening on the front of the fundamentals
of rest of the base metals. However, the weak Dollar story
On one hand base metals are finding it difficult to remain at is likely to keep them supported. So, buy on dips is the
present elevated levels, as the fundamentals don't warrant strategy.
such high levels, however on the other hand lack of any other
opportunities to park the funds is pushing them higher. Support for lead is seen at Rs126.30/Rs123.70. Resistance
Needless to say the US Dollar, which is falling like a rock is would come at Rs128.45/Rs130.
adding to the upward pressure on the base metals.
Support for zinc is seen at Rs105.10/Rs103.05. Resistance
Today the US Fed has reduced the discount rate by 25 bps to would come at Rs107.20/Rs108.20.
3.25%. BS troubles are likely to force the US Fed to ease the
rates by at least 75 bps, which could see the US Dollar losing Support for nickel is seen at Rs1,325/Rs1,309. Resistance
further, thus exerting further upward pressure on the prices. lies at Rs1,342/Rs1,360.

We recommend buying the dips for the next two-three days Support for aluminium would come at Rs124.70/Rs122.55.
unless some key change occurs in the financial markets. At Resistance lies at Rs126.15/Rs127.50.
the same time, we would like to highlight the point that rally
Chana: To see sideways movement
without fundamentals could be short-lived and reverse sharply
Chana futures saw deep intra day fall on Friday on heavy
on even the slightest change in the driving factors as the
selling, as stocks in exchange warehouses had witnessed a
meltdown in the global equities spell nothing but a
rise from 1,000 tonne to around 6,000 tonne in the last one
pronounced weakness for the base metals in the coming
month. However, some short covering at very low levels led
months, esp. When the peak demand season of Q2 ends.
to some recovery by the end of the session. Chana stocks in
However, till the US Dollar is unable to find some support,
National Commodity and Derivatives Exchange (NCDEX) -
we suggest going long.
accredited warehouses, as on Thursday, were over 6,000
Copper closed with a loss of $13 at $8,360.SHFE stock report tonne, unchanged from the previous day, the NCDEX data
showed that the stockpiles rose by whooping $8,483 tonne. showed. Processors stayed away as they expect prices to
The week marked the fifth consecutive week of buildups, fall further and will enter the market then. Arrivals on Friday
thus giving basis to the talks that the China's demand is not rose to 30 trucks (of 18-20 tonne each) from 20 trucks on
so strong presently. LME stockpiles fell by 2725 tonne, which Thursday.
took the headline figure to just above 125,000. Falling LME

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Gold: In uncharted territory However. during the current season is expected to decline around Speculators were expecting a possible duty cut as the 7. most of the Dollar is likely to further widen the scope of export.5 lakh tonne last has already achieved 98% of the target (30. finance minister P Chidambaram while speaking on inflation buying support by AP Markfed at Rs3. total export volume in entire February per quintal as against Rs3. However.00 an ounce. buyers in the spot markets are keeping themselves at sidelines on the speculation of a further decline in prices. the impact should be short term increasing arrival of fresh crop in the market yards against and temporary as the European Union (EU) constitutes the backdrop of higher production outlook. oils by 10% in the coming few days. also showed in the physical market at Nizamabad mandi is around 15. arrivals are expected to increase to 25.67 10% up in 2007-08 season. and it then went up slightly.9 lakh tonne last year.11 lakh tonne in 2008 against 1. However. Guar: Sideways to mildly weak Mandatory PCP testing by Indian exporters shipping guar Jeera: To trade rangebound with weak undertone gum to Europe has dented the market sentiments in the Jeera is likely to trade rangebound with weak undertone on last few days. there by affecting the supply.000 bags during the last week. With the export opportunity. farmers and The dip in the Indian parity has provided some further stockiest are offloading their existing stocks. During last two days spot market prices in Nizamabad Soy oil futures have been weak in the past week on the has fallen by Rs100 per quintal. In this scenario.02% a week ago. while the Asta grade pepper in Vietnam is 1. However. 2008 Home Next .000 a prices. and good acreage in Gujarat is likely to increase the The guar gum exports are already expected to be 8% to production to around 2. as the green chili crop in Pakistan was hit by the New York market opened.000 per quintal from in the parliament blamed high prices of primary food local market is likely to support the market.200 a tonne (fob). the prices export demand is expected to support the market at lower should recover. India's headline inflation rate for the lower this year amidst good global demand. A duty cut was expected prices are not expected to see major dips as the output is due to high inflation. in April-January period is lower by 6% as against that of the last year. in February as fuel costs dropped.900 per quintal.000 bags (1 bags=40-45kg) per day for last couple of reportedly quoted higher at above $4.200-3. Turmeric export articles including edible oils for the rising inflation. in Vietnam.4% gain in January. levels and would resist from major falls.000 tonne) set year. which exclude food and energy costs. the first time they didn't increase since bags (1 bags=70 kg) as against 7. Around 30-40% of the total crop is already harvested NCDEX quality chili is quoting lower at Rs3. good export opportunity may support the market Gold stayed in the $990-$1000 band throughout Friday till against dips. Carry over stock from the previous year is estimated in the year and the export data is expected to rise further. market green chili price has shot up to a record Rs180 [US Consumer prices in the US were unexpectedly unchanged $3] per kg. days as compared to the daily average arrival of 70.5 lakh tonne. However.500-3. Increasing Indian parity of pepper is currently competitive vis-à-vis arrival of the fresh crop in the market yards is weighing other parities. Stockists are keeping speculation that the government can reduce duty on edible themselves at sidelines at higher price levels. Chili production this year is expected to be corresponding period last year.800 per quintal during the reportedly declined by 39% to 2. Higher yield Europe constitutes just around 20% of our export market. the levels. So-called core to increasing arrivals of fresh crop. The November 2006. Turmeric output week ended March 1 rose to 5. Pepper export till January higher around 13 lakh tonne as against 11.000 bags in coming For Private Circulation only Commodities Buzz 2 March 17. Karachi wholesale The closing was far better at $1008.sharekhan commodities buzz Soy oil: Speculation of expected duty cut days. Turmeric prices are unlikely to sustain at higher levels due The figure followed a 0.000 bags last week.000.000 no change. good domestic as well as and stocks likely to wear out as days progress. Meanwhile weakening of Rupee against absence of firm fundamentals in short term. severe cold.560 tonne as against previous day. Increasing arrival of good quality crops combined with good Pepper: To recover on export opportunity carry over stock is underpinning the market tone. Further. Indian parity remained around $4. easing concern that Turmeric: Prices unlikely to sustain at higher side inflation would keep accelerating as the economy slows.00. With season coming to an end lakh tonne last year. Turmeric export in the period of April-January is still lower by 10% as against Chili: Tone still weak on increasing arrivals last year.11% from 5. export performance is still weak in Chili sanam spot prices also quoted lower at Rs3. Chili prices are moving down due to weak fundamentals. around 1.5 lakh tonne against 8. Brazil parity is also reportedly trading above the Indian 80. In Guntur market. Guntur spot market has seen arrival of around tonne (c&f). Daily inflow of turmeric prices.600 the country.

with the euro at 1. or a record 37% to $36 at The US currency also plunged to below parity with the Swiss 10:08 am in New York Stock Exchange composite trading. With the Japanese yen hitting a high of 95 and credit-market contraction. The measure is the markets at every available opportunity. Kindly note that this document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation Commodities Buzz 3 November 05. and buy and sell securities referred to herein.herein2008 do not necessarily reflect those of Sharekhan Commodities Pvt. BS plummeted $21. Michigan’s preliminary index of consumer sentiment The Federal Reserve may continue to throw surprises on decreased to 70. only or any other use is prohibited. But at the same time the risks are also very and Americans braced for higher inflation as the economy high. We do not represent that it is accurate or complete and it should not be relied upon as such. Record gasoline prices and the Home To know more about our products and services click here. So the best the lowest reading since February 1992 and compares with strategy is to wait and watch. or perform investment banking. sharekhan commodities buzz Bear Stearns Cos (BS) obtained emergency funding from JP loss of 85. He had since the European currency's debut in 1999. The information contained herein is from sources believed reliable. and is intended only for the person or entity to which it is addressed to and may contain confidential and/or privileged material and is not for any type For Private of circulation. We may from time to time have positions in. denied this week that BS faced a cash shortage. please contact the sender and delete the material immediately from your computer/mailbox. any company mentioned.000 jobs so far this year are undermining Morgan Chase & Co and the New York Federal Reserve as consumer sentiment.5 from 70. If you have received this in error.85 on Friday. Reuters/University of at $21. or other services for. or options on.6 in 2007. an average 85. "This document has been prepared by Sharekhan Commodities Pvt. Circulation Any review. pointing to weaker spending. Chief Executive Officer Alan keep a credit-market crisis from triggering a recession.20 an ounce can well be a dangerous thing to do.5904 the story is absolutely bullish for US consumer confidence sank to a 16-year low in March gold and silver. Ltd. saying the The things are dramatic since the beginning of trade this company's liquidity cushion was sufficient to weather the morning. The shares fell slash interest rates a full percentage point next week to to as low as $26. We may from time to time For Private Circulation only Commodities solicit from. 2007 Home Next of any transaction.8 in February. franc for the first time as traders speculated the Fed will the lowest level in more than eight years. Buying gold at unforeseen prices of $1026 and silver teeters on the brink of a recession. the weakest in response to market rumors of a liquidity crisis." . Schwartz said in a separate statement that the firm acted The US currency plunged to $1. AnyBuzz January comments3or statements made01. retransmission. Ltd.5688 per euro. the securities firm said its cash position has significantly deteriorated.