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Commodities

Macro Economic Factors • It has been a tough time for commodities traders in our country as the volatile rupee has spoiled the mood of commodities market participants. • Importers and exporters of commodities are going through a very difficult time because of volatility and continuous weakness in the rupee. • Indian rupee is weak due to several reasons but one of the prime reasons is the strengthening of the US dollar on the back of expectations of strong economic growth in US, supported by rising yields and strong economic reports leading to outflows from all the emerging markets. • Current account deficit, high inflation and slowing growth, caused Indian currency to depreciate and made it the worst performer in Asia. • It’s not just the weakness but also very high volatility which is creating problems for commodities. • Repercussions have been terrifying because India imports 80% of its total demand of crude oil and with the weakening of rupee by 12%, the country’s oil imports are expensive by 12%. Commodity Crude Oil WTI Crude Oil Brent Gold Corn CMP 105.95 108.81 1277.60 702.25 % Change

0.99 1 -0.18 -2.13

Commodity Natural Gas26 July Alluminium31 July Copper-30 Aug Nickel-31 July Lead-31 July Menthaoil

Price 218.6 108.6 419.6 822.5 123.7 943.5

Change 0.7 0.05 0.1 0.8 0.05 0.8

% change 0.32 0.05 0.02 0.10 0.04 0.08

• Agricultural commodities are a concern, India is an importer of pulses, edible oils and a number of soft commodities which have become more expensive with the weakening of the Indian rupee.

Gold • Gold imports into India fell about 81 percent on month to 31.5 tonnes in June. This is after the government raised import duty & stopped consignment imports, but demand could rise in coming months, creating problems for a government battling a record high trade deficit. • Gold fell as a stronger dollar curbed demand for an alternative investment, narrowing the biggest weekly gain since October 2011 after Federal Reserve Chairman Ben S. Bernanke called for maintaining stimulus. Oil • Jobless claims in the U.S. hit a two-month high last week, rising by 16,000 to 360,000, according to the Labor Department this sent oil sinking on concerns that the U.S. recovery still faces headwinds and may demand less fuel and energy going forward than once thought, especially a day after Federal Reserve Chairman Ben Bernanke said that stimulus tools will remain in place for now. Copper • Copper futures fell for the first time in three days on signs that that the economy may expand less than the government forecast in China, the world’s biggest consumer of industrial metals. • Economic growth as low as 6.5 percent may be tolerable in the future, Chinese Finance Minister Lou Jiwei said yesterday. He expressed confidence that expansion will be 7 percent this year after the government set a goal of 7.5 percent in March. Figures on the gross domestic product are due on July 15, and GDP will weaken for the ninth time in 10 quarters. according to analysts surveyed by Bloomberg Rubber • Spot rubber prices for RSS 4 grade have risen from Rs 18100 per 100 kg to Rs 19500 so far this month after witnessing bearish trend for a prolonged period of time. Rubber Board data shows monthly production has declined 12.9% to 54000 tons in June amidst heavy rains which has disrupted tapping work in major growing areas.

Notifying the CTT today. this would prompt increased price volatility as markets cope with the drop in output likely to follow Important Events • Commodity Transaction Tax (CTT) at 0. cotton and potato. which for Arabica beans are down 60% from a 2011 high. Including wheat.01 per cent will be levied on various non-agricultural commodities. • As long as Fed doesn’t signal for withdrawal of QE3. would be exempted from the levy. including gold. barley. • QE3 will not be unwound as far as Bernake had indicated before.Coffee • Coffee futures. chana. it will keep prices elevated for the time being. The tax would be levied on futures trading and not on spot trading in the commodities. with effect from July 1. sugar and edible oils. the Finance Ministry said 23 agricultural commodities. .