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Kunal Shah
Head of Commodity
Research at Nirmal Bang
Kunal Shah serves as the Head of Commodity
Research at Nirmal Bang. He closely tracks
precious metals, base metals, energy and
agricultural commodities. He addresses
seminars on the outlook of commodities across
the country. He appears regularly on business
channels. He is also sought by the print media
and wire services too, on a regular basis. Prior
to Nirmal Bang, he was associated with
Motilal Oswal Commodities Pvt Ltd, where he
managed the research desk.
Beyond Market 04th Feb ’11
The next speaker in line was Kunal Shah, who chose to delve on commodities as an asset
class, its value, the opportunities and outlook in the coming times as well as the potential
risks involved in commodity trading.
Where opportunities are concerned, Shah said that the volumes have grown by leaps and
bounds even though most have not got the permission to enter the commodity markets.
He moved on to the do’s and don’ts to be followed by market participants while trading
in the commodity markets. According to him, all those entering the commodity markets
should have adequate knowledge and must only trade as per individual capacity and keep
a futuristic view while trading in commodities.
He attributed the rise in commodity prices to a number of reasons, including liquidity. He
told the audience that where fundamentals are strong, there will be liquidity. Shah also
mentioned that commodities have outperformed other asset classes globally because
currently commodity fundamentals are quite strong.
Shah said that in the coming times, the population is bound to rise and the demand will
maintain an upward pressure on commodity prices. He spoke about commodity index
funds and said that he sees a liquidity-driven run up in the markets since the value of
commodities is rising.
Talking about the outlook of the commodities market, Shah said that inflation is on a rise
due to a gap in the demand and supply of agro commodities. He is bullish on agro
commodities till no substantial rise is visible in their supply. He also listed out various
reasons supporting his bullish outlook on agricultural commodities.
Shah said that there has been no major correction in commodities but inflation is rising
due to global uncertainties like the European sovereign debt crisis and excess liquidity.
Rising commodity prices will affect the profitability of companies.
The slackening growth in China, weak housing market data in the US and high frequency
trading that has been adopted globally are all posing a problem presently and could do so
in the future too. Shah feels that rising rates could affect growth prospects of economies
and, in turn, affect commodity prices.
In agro commodities, Shah feels guar seed could test `2,900 level and guar gum could
touch the `7,200 level in a month’s time. Shah expects soya bean prices to drop and
advised investors to accumulate it on declines as he sees soya bean giving good returns in
the coming year. He is bullish on coriander seeds and thinks the price will touch
`6,000/quintal – `7,000/quintal in the next four months or so. Long positions in cumin
seeds are to be avoided in the near future.
As far as base metals are concerned, Shah feels that only nickel is strong and one could
enter around the level of `1,130/kg – `1,135/kg and see the level of `1,200/kg –
`1,230/kg. Copper can be shorted around the level of `450/tonne – `455/tonne with a
stop loss of `460/tonne - `465/tonne. He feels that zinc, as a base metal, is fundamentally
weak. Shah warns investors of the ongoing rally in other base metals and thinks that the
short-term outlook is not very positive but he is bullish on base metals with a long-term
investment perspective.
Shah does not see much of an upside fundamentally in crude oil and believes it will go up
to a maximum price of $95/barrel - $96/barrel. In the near term, a correction in precious
metals is likely but the long-term outlook is bullish.
It’s simplified...
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