Festive demand, sub-par monsoon to support bullish trend in oil complex prices: Religare Broking

As per the government data, the retail prices of edible oils have risen over 62 percent in over a year.

Rising festive season demand, firmness in international markets, improved trading activities on the domestic and international front along with adverse reports on the monsoon may keep likely the uptrend in agri counters intact this week.

After giving positional buy targets for chana, guar and spices, we turn towards oil complex this week.

Refined Soybean Oil

The oilseed sector has revived in recent months as demand for food raw materials shot up during the lockdown situation. Government's various measures to boost agricultural economy have helped edible oils and edible oilseeds prices to jump significantly post March 2020. Import demand has increased in the last few months because of decreasing inventories and since the supplies are constantly getting absorbed, import deals are materialising regularly. Global business prospects are improving for Malaysian palm also, as nations are slowly removing lockdown restrictions. However, the latest USDA report has given an upward revision in global production as well as end stock of soybean for the current year versus 2019-2020.

For October contract in NCDEX, the positional target is Rs 950 per 10 kg for the next two weeks.

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Ajitesh Mullick

VP Retail Research|Religare Broking

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Soybean

Crop damage report is a huge factor that is likely to support prices in the long-term.  The rising festive season demand amid crop damage reports and the adverse monsoon could keep the trend bullish for this counter in the short, medium and long term. Moreover, as per SOPA, crop yields may fall by 10-12 percent roughly which may further support prices.

For October contract in NCDEX, the positional target is Rs 4,500 per quintal for the next one month.

Mustard seed

Declining inventory levels due to lower production last year and steady offtake from retail markets shall keep futures supported in the coming weeks. Strength in edible oils currently favours the upward trend and demand for RM oil remains healthy due to the increase in household consumption. Steady offtake is generally seen in mandis these days.

Estimates suggest rise in sowing area this season due to better price remuneration for the farmers in 2019-2020 but the old season crop estimate is seen lower year-on-year because of heavy rainfall across Haryana and Rajasthan during March and April months.

The impact is often seen in the futures market these days and this also explains September RM seed crossing Rs 5,400 mark last week. Traders and farmers have estimated the possible damage to be around 20-25 percent roughly. Selling among farmers and NAFED is slowing as expected as prices are going lower. This keeps recovery chances of prices quite higher.

For October contract in NCDEX, the positional target is Rs 5,800 per quintal in next 1 month.

Entire agri market remains bullish for now. Festive season demand and export demand is going to remain strong till December. Any negative reports on the Kharif production front will also keep prices strong.

(The author is VP - Retail Research at Religare Broking Ltd.)

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