An unexpected outcome of the general elections in the form of a stable government and the subsequent 17% rally in the domestic equity
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markets, drove the Indian rupee nearly 3 per cent higher on Monday. The appreciation of the local currency has caused the prices of commodities to decline in the domestic futures market even as the international prices traded on a flat-to-negative.
Currently the spot Dollar rupee exchange rate is quoting at 47.90, up more than 1.5 rupees from Friday’s close of 49.39 – translating into a rise of more than 4.25 per cent from its May 14 low of 50.02.
This appreciation has affected the MCX gold price to decline by more than Rs 350 per 10 gm or 2.5% even as international spot prices trade above $930 an ounce. Spot prices in the international market closed at about $932 on Friday.
Same is the case with crude oil, whose international benchmark June future on NYMEX (New York Mercantile Exchange) is currently trading 1% higher from its previous close.
For base metals, the decline has been even more intense as international benchmarks on LME are trading down by about 1-3% since Friday. Against this, MCX near month future for the industrial metals have, on an average, lost 4.5% for the day. The fall has been severe for metals like Nickel (down 6%) as its benchmark on LME is trading down 3% for the day.
Commenting on this decline, Harish Gallipeli, research head, Karvy Commtrade said that commodities like gold, crude oil and base metal are typically prone to movements in international markets. “However, today’s rally in domestic equity market has managed to affect them negatively through the rupee appreciation,” he added.
Commodity traders are expected to be impacted on their trading positions in the domestic market even if they stood on the right side of the trend. “The clarity over such an effect will come by Tuesday after the movements in US trading hours are factored in prices,” added Gallipeli.
