Sugar futures on Indian exchanges traded on a positive note in early trade of Wednesday on extended buying interest. Earlier market participants bought futures anticipating emergence of retail demand for the produce.
Spot markets also witnessed steady demand, which resulted into rise in price by `5-10 a quintal. But, in later part of the day, prices shed earlier gains on profit booking. Gains in international market failed to have impact on Indian market.
Broad fundamentals: For February month, central government has fixed 16.23 lakh tons of sugar as Free Sale Quota. This includes 13 lakh tons as normal, 0.23 lakh tons of imported sugar and 3 lakh tons of carryforward from January.
Sugar production in the current year is likely to 24.5 million tons against 18.5 million tons. Looking into current higher food inflation, the central government has extended stock limit for traders till March 2011. Centre is also delaying taking decision on export of sugar under OGL
Outlook
The sugar futures are expected to trade on a weaker note on Thursday on subdued demand for the produce. Spot markets are witnessing limited trade activity with moderate demand from wholesalers. Spot prices improved by `5-10 a quintal.
Central government has give extension for sale of unsold free sale quota of January. This may lead to release of stocks by the mills in the near term. For January total quota fixed was 19.18 lakh tons.
Derivative analysis (decline in price, volume and open interest) is suggesting weak trend for the day. ICE sugar futures rose to 30-year high of 36.08 cents/lb on tight global supply situation and delay in export decision by Indian government.
Technical analysis
Sugar February futures on NCDEX traded marginally lower on yesterday’s trading sessions by reversing the previous trend. It made a high of 2784 then low of 2760 before settling lower at 2762 levels.
Closing of the daily candle renders downside movements for the day. In daily chart, Hammer candle stick is spotted suggesting bearish mode for the coming day. However, on the lower side crucial support is seen at 2731 levels.
On breach and sustained trade below would lead the prices to further lows. The momentum indicator RSI (14) is treading at 0.329 indicating indecisiveness in the trend. We expect prices to trade lower and recommend selling at resistance levels for the day.
