Mentha oil futures have jumped more than 18% in August and are currently trading at a 4-month high level, riding on sentiments around the fall in output and amid hopes prices could remain firm, said experts.
Anuj Gupta, Head Commodity & Currency, HDFC Securities recommended a buy on MCX Mentha Oil August futures at Rs 995 with a stop loss of Rs 970 and a price target of Rs 1,030.
Commenting on the current surge, Anuj Gupta, Head Commodity & Currency, HDFC Securities, said that the rally in mentha oil futures has been on the back of crop damage due to floods in many areas where the crop is sown, including Barabanki, Chandausi and Rampur, low arrivals and growing export demands.
The commodity has increased by 18% on a month-to-date basis, Gupta said. The low production, demand from domestic FMCG companies and exports are likely to keep prices on the up, Gupta said.
“The years 2022–23 witnessed a significant decline in the production of mentha oil, with only 41,937 MT produced compared to 48,389 MT in the previous year. This led to an increased reliance on synthetic menthol, which impacted the price of mentha oil. Looking ahead to the years 2023–24, the production of mentha oil is expected to drop even further, down to 32,259 MT,” Neha Qureshi, Senior Technical & Derivative Analyst, Anand Rathi Commodities & Currencies told ETMarkets said.
The demand for mentha oil is likely to increase in the winter, especially from companies that make things like toothpaste and mouthwash with more countries wanting to buy because the Indian rupee is getting weaker, making it cheaper for them, she said, adding that all these factors make mentha oil’s prospects quite promising.
On technical charts, Mentha Oil August futures recently broke out of a descending channel on the daily chart, signalling a shift towards a bullish trend. The price faces strong resistance between Rs 1,070-1,075.
With the Relative Strength Index (RSI) showing the commodity in an overbought zone, price correction to levels around Rs 975-Rs 950 cannot be ruled out in her opinion. Buyers may become active again in the range of Rs 1,075-Rs 1,100, she said pegging key resistance levels as Rs 1,075 and Rs 1,100, while support levels are at Rs 971 and Rs 942.
On the daily chart, MCX Mentha Oil August futures are trading above the falling trend line which indicates bullishness in the counter. The 21 & 50-day Simple Moving Average (SMA) have given positive crossovers on the daily timeframe, she said while recommending a buy-on-dip strategy.
Brokerage firm Geojit also has a positive view on mentha oil futures with support seen at Rs 971 and next support at Rs 952 while the resistance is at Rs 1,088 and the next support at Rs 1,069.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)