Corn Prices at 5-year low; Sukhjit Starch to benefit

Riken Mehta


Follow me on Twitter @mehtariken

Corn prices have witnessed a roller-coaster ride in last 2 years. After hitting a record high of USD 842.38 per bushel in August 2012, US corn future prices have plunged more than 60 percent to hit a fresh five year low this month. Record prices in 2012 lured farmers to harvest more corn in the following years thereby resulting in record output this year. As supply outpaced demand, prices fell forcing farmers to sell crops at lower rates. Eventually farmers will start looking for other crops to harvest where yields are better than corn. This is a typical commodity cycle which happens in several agri crops.

Sukhjit Starch, a Punjab based company is likely to benefit from lower corn prices. The company is one of the largest producers of maize starch, corn-based biochemical products and corn-syrups. As seen from the chart, maize prices shot up in second half of 2012 and company’s margins came under pressure for the next four quarters (Dec-12 to Sep-13). The correction in corn prices led to rebound in margins as raw material cost of percentage to total sales began to moderate.

Rising dollex spells bad news for Nifty

 

Riken Mehta


Follow me on Twitter @mehtariken

The US dollar index is trading at four-year high surpassing 85 levels on the upside on Thursday. The dollar index tracks greenback movement against six other major currencies. The current rally in dollar index is sparked by faster US economic growth pushing the US Federal Reserve closer to raise interest rates while the slowdown in Europe and Japan has forced central bankers to increase stimulus and boost liquidity.

As seen from the chart, the Nifty has negative correlation with the dollar index. Indian equity market banks heavily on foreign fund inflows and strength in US dollar index would accentuate selling in equities by FIIs.

The Indian rupee closed at 7-week low in trade on Thursday. FIIs have sold shares worth close to Rs 3000 crore in last three days. It would be premature to say that a deeper correction is underway but one should keep a close look at dollar index before starting bottom-fishing in the market.

Chart of the day: Brent crude Vs Nifty in past 3 years

Riken Mehta
Moneycontrol.com

Follow me on Twitter @mehtariken

The price of Brent crude fell below the USD 100 a barrel mark for the first time since June 2013 on Monday as data from China and the US pointed to slower economic growth in the world’s largest oil consumers.

Investors have driven global prices down 15 percent from mid-June highs as fears about a supply disruption in Iraq or elsewhere faded and concerns about weak global demand grew. This has given more legs to the extended bull run in Indian equities.

While crude prices came off, foreign institutional investors pumped in a net of Rs 1,162 crore into Indian equities, which is expected to help the Central government and the Reserve Bank of India to rein in fiscal deficit and inflation.