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Agridex's rally likely to continue on bullish demand for food items
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SME Times News Bureau | 29 Oct, 2020
Agridex, Indias first agricultural index comprising 10 liquid
commodities traded on NCDEX, the countrys largest commodity
future-trading platform, has gained nearly 20 per cent since its launch
on May 25, 2020 amid changing fundamentals for the agriculture
commodities during the Covid-19 pandemic.
With ease in
transportation, economic activities have improved in the country since
June 1 during the first phase of Unlock. This boosted the demand for
agricultural commodities for industrial purposes and direct consumption
as well, and the prices of the different commodities gradually improved.
The NCDEX's Agridex on Wednesday crossed the 1,200-level mark
registering a 20 per cent gain since its inception as the fundamentals
changed dramatically since May and unfavourable weather conditions also
supported rallies in agri-commodities, besides a bullish demand for
essential commodities.
The Agridex Index, which tracks the spot
and future of soybean, chana, coriander, cottonseed oilcake, guar gum,
guar seed, mustard seed, refined soy oil, castor seed and jeera, gained
nearly 5.49 per cent in October with positive returns on its
constituents. Soybean and Guar gum prices rose sharply by 11.90 per cent
and 10.76 per cent, respectively. Cottonseed oilcake gained 3.16 per
cent during October as demand is expected to increase on account of the
upcoming festive season.
Late monsoon rains in the southern
part of India caused damage to the cotton crop. Apart from the weather's
fury, the threat of pest attacks is one of the reasons which supported
rallies of some agriculture commodities grown mostly in the western part
of the country where locusts are the major threat to kharif crops.
The
threat of locust attack in Rajasthan and adjoining areas has supported
the prices of the agri-commodities. However, excess supply concerns
could prevail in the market as prices of some other commodities in the
edible oil complex continue to increase, shifting the demand to cotton
oil which increases the production of cake.
Chana on the other
hand witnessed consolidation of 3.16 per cent after a steep rally before
the festive season. Castor prices gained 4.45 per cent mainly due to a
fall in acreage compared to 2019. Gujarat, one of the major producers of
castor, saw the castor sowing area drop to 6.07 hectares compared to
7.18 hectares during 2019.
After a lagging start, Guar seed
and Guar gum gained nearly 10.76 per cent and 9.07 per cent,
respectively during October. This major spike was due to the opening up
of economies thus increasing industrialisation. Increasing crude supply
also supported the price rise as guar gum is used as a stabilising agent
on oil rigs.
Among spices, Jeera prices rose 3.17 per cent in
October ahead of strong festive demand. Export demand for cumin seed
also witnessed an increase as rival suppliers of India, at present are
facing geopolitical tension in the Middle East. As economies continue to
unlock, industrial demand is expected to increase.
Mustard
prices gained nearly 8.76 per cent in October rising from 5,468 to 5,947
levels on October 27. Mustard prices rose sharply due to good local
festive demand and exports as well for mustard oil.
Rising
coronavirus cases in Europe and North America has forced many countries
to increase restrictions hampering supply of commodities from those
countries. Soybean and refined soy oil gained 11.9 per cent and 7.96 per
cent, respectively due to festive demand for oil.
Agridex has a
low correlation with other asset classes and indices, and ensuring
diversification, no group of related commodities may comprise more than
40 per cent of the weightage in the index, said Ajay Kedia, Director,
Kedia Advisory.
"Agridex seeks to provide a holistic view on
sundry commodities traded on the exchange. It has a low correlation with
other asset classes and indices making this index more alluring for
investment. Since Agridex future contracts provide a diversified
cash-settled instrument, it will avail of widening participation on the
exchange from both institutional and retail investors," he added.
A
bullish trend will likely perpetuate in Agridex amid festive demand for
several of these commodities, ergo, buying in Agridex in case of any
drop would be propitious, as per the commodity analysts.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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