`Rate cut by ECB can be positive for base metals & crude'

Kishore Narne, Senior Vice President of Anand Rathi Securities believes that interest rate cut by ECB could be positive for crude as well as for base metals.

In an interview with CNBC-TV's Udayan Mukherjee, Narne said, "We are looking forward to the ECB meeting. If there is any interest rate cut in the evening, there could be some positive reaction for base metals as well as the crude markets."

Below is the edited transcript of the interview, also watch accompanying videos...

Q: Crude has been holding internationally at USD 105-106 kind of a range. What would be a prudent trading strategy?

A: Crude at this point of time is stuck in a broad range. For the day it remains weaker. I would suggest selling it at current levels with targets close to Rs 4,850 per barrel for short term.

We are looking forward to the ECB meeting. If there is any interest rate cut in the evening, there could be some positive reaction for base metals as well as for crude markets.

Otherwise, fundamentally it still looks very weak on the demand front. Again, the Iran sanctions as well as the Syrian situation will continue to support on the lower side.

Q: You are not very bullish on gold for the moment, are you?

A: We are not bullish either on short term nor on medium term. We are looking for a pretty much lower USD 1,500 per 10 grams kind of levels by the end of this year on the gold market.

But for the day, maybe a slight pull back could be seen in anticipation of ECB easing further during the day. Towards the evening, we don’t expect any major change in the policy stance except any interest rate cut in ECB.

We would be selling on rallies towards around Rs 30,100 per 10 grams - that is the October contract and look for targets close to Rs 29,800-29,850 per 10 grams kind of levels.

Q: Are you constructive on base metals like copper?

A: In the entire base metal complex, the only metal which is a bit tight on the demand-supply fundamentals is copper. The PMI numbers were discouraging. So, more or all the markets - whenever these kind of negative sentiments come in - they anticipate that some kind of easing will come from either the Bank of China or ECB or Fed. That expectation can normally push it up.

I am not extraordinarily bullish. It’s stuck in a range of Rs 417-417 per kilogram on the lower side and Rs 423-424 per kilogram on the higher side. So, we are suggesting to buy at Rs 417 per kilogram - that’s the current level with a stop loss of Rs 415 per kilogram and look for targets of Rs 423 per kilogram. But on a medium term basis I think we would be crossing Rs 400 per kilogram levels maybe in the next couple of months.

Q: Do you have any strategy on the currency futures for today?

A: On the short term we expect rupee to get weaker towards around Rs 56-56.10 levels on the spot front which would be 56.20-56.25 on the futures - August month.

We are suggesting to buy at current levels on spot at 55.60 with a stop loss of 55.40 for targets close to 55.80 or 56 for the spot.