Speaking to ETMarkets, commodity expert Yash Jain who is also a member of the Product Advisory Committee of the MCX said that the remarkable surge in prices can be attributed to the prevailing market sentiment.
“Mentha oil has recently experienced an astonishing upswing of 25% within a single month, propelling it to its highest point in 14 months. Historically, there has been a growing reliance on synthetic menthol sourced from international players. Notably, Zhejiang NHU offers a quoted rate of $12 per kilogram, subject to an 8.25% import duty (applied to imports from China), while BASF provides the same product at $13.5 per kilogram,” Jain said.
He sees opportunities for short positions which could be explored at the level around Rs 1,070. The commodity is presently hovering around its well-established resistance range, he said while advising traders to place a stop loss order at Rs 1,085 on a closing price basis with targets at Rs 1,008 and Rs 970.
He said that there is a firm conviction that the current price trajectory could undergo correction, while attributing introduction of synthetic menthol into the market, a development that has garnered approval for application across the FMCG and pharma sectors.
“Interestingly, stockists operating within the Gwalior region have displayed proactive enthusiasm in procuring menthol and its derivative products. Notably, this purchasing activity is steered solely by market sentiment and lacks any direct correlation with consumption patterns. It is worth noting that these developments coincide with the imminent unveiling of new pricing structures by prominent global manufacturers of synthetic menthol. This forthcoming data point assumes a pivotal role in shaping the market’s course,” he added.
Commodity and currency expert Neha Qureshi, Senior Technical & Derivative Analyst at Anand Rathi said that mentha oil prices have seen a dramatic rise in the last couple of weeks as supply-side fundamentals are seen tightening amid an expected drop in output during the 2023-24 season. “Output of this oil is seen declining for a second straight year and thus carryover stocks will shrink further by the end of the season,” Qureshi said.On the weekly chart, mentha oil futures have broken a previous pattern of lower highs and lower lows, indicating a shift to a bullish trend, the Anand Rathi analyst said.
The prices dipped to Rs 966 after reaching a high of Rs 1,070, which aligns with the 200 Exponential Moving Average (EMA), Qureshi said adding that this level acted as strong support, and the price rebounded, showing the dominance of bulls.
She echoed a similar sentiment as put out by Jain expecting a likely correction in the near term. “While the momentum indicator MACD confirmed an upward momentum with a positive crossover, the Relative Strength Index (RSI) is in the overbought zone, suggesting caution as a price correction might be on the horizon,” she added.
She sees resistance around Rs 1,100 and Rs 1,150 while support levels at Rs 966 – Rs 945.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)