Select commodities beat Sensex, Nifty in 2013

If you believe investing in metals such as gold and silver made you richer in 2013, think again.

Digging deeper into the commodity basket and the price performance data reveal an interesting picture.

In Indian context, among top gainers on the spot National Commodity and Derivatives Exchange, is coriander that saw its price moving up nearly 38 per cent (year-to-date, or YTD).

Pepper prices gained nearly 33 per cent on the back of short supply situation amid lower production estimates.

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Among other agri commodities, chilli (Guntur) prices have been volatile with a positive bias (up 34 per cent YTD), as most farmers and traders were expecting the output to be in line with last year.

However, the projection has been lowered, as only 70 per cent of the crop is now expected to hit the market due to crop damage.

However, Brent crude prices have slipped around two per cent YTD, while that of natural gas futures have gained 17 per YTD to $3.9/mmbtu as on November 29, data show.

Gain in these commodities is far higher than the rise in Nifty (up 5.3 per cent YTD) and Sensex (up 7.6 per cent YTD).

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Interestingly, gold and silver have lost nearly 26 per cent and 35 per cent at the international level, data show.

Base metals like copper, aluminium, lead and zinc have also not fared well on the London Metals Exchange thus far in 2013.

Analysts suggest the commodity prices have also been impacted due to the US Federal Reserve’s plans to wind down the bond buying programme, demand from China and the rupee-dollar equation.

Gaurav Dua, head of research at Sharekhan, says, “US bond-buying taper has already been impacting the commodities space markets for quite some time. The impact is seen on bullions and industrial commodities as well.”

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Shriram Pitre, senior vice-president and head of commodity and currency research, says, “Commodities already seem to be factoring the likelihood of the US Fed beginning to scale back the size of its asset-purchase programme. Markets now seem to be anticipating the tapering to start in Q12014.”

The key factor that would impact precious metals in India will be rupee’s movement against the US dollar.

At the same time, commodities that are not internationally traded, domestic production and consumption would be the price determining factor, analysts say.

Anand Rathi’s Pitre is bearish on international gold and silver for 2014. However, if the rupee continues to weaken, he expects the downside in these precious metals to be limited.

 “We would not recommend buying gold and silver at current levels. For investing, a level of Rs 25,000-24,000 for gold and Rs 35,000-32,000 for silver would be more attractive instead,” he says.

(With inputs from Ashok Jayavant Divase in Mumbai)