Rubber approaches 52-week peak amid Kerala lockdown; analysts see 6% upside in a month

Rubber approaches 52-week peak amid Kerala lockdown; analysts see 6% upside in a month

Prices of rubber, an industrial commodity, jumped more than 1 per cent in thin trade on Monday, supported by its rise in the international markets and tight supplies back home.

MCX rubber futures due for delivery on May 31 traded Rs 194, or 1.13 per cent, higher at Rs 17,374 per tonne, having risen to as high as Rs 17,450 earlier on Monday. The price came within a Rs 100 distance of a 52-week high registered last week.

Positive economic data and strength in global prices helped sentiment. Rubber futures in Japan and China hit six-week peaks upon resuming trade after holidays and that continued to support local rubber prices, analysts said.

However, concerns on stricter restrictions back home to curb the spread of the Covid pandemic are denting the outlook, they add.

“Escalating Covid-19 infections in the country have raised worries over demand. Many states such as Kerala have imposed lockdowns to control the spread of infections,” said Anu V Pai, research analyst at Geojit Financial Services.

India is the world’s second biggest consumer of natural rubber, behind China, and the sixth largest producer. Kerala, which is the top rubber producer in the country, has imposed a complete lockdown from May 8 to 16.

Rubber prices have risen around 13 per cent so far this year. Tightening of supplies has boosted prices in the recent past.

Analysts remain upbeat on rubber from a short- to medium-term perspective thanks to positive price trends, but caution traders that some profit taking cannot be ruled out.

The broader rally in global commodities is supportive of rubber prices. However, lockdown restrictions could shake up demand from automobile industries,” said Manoj Kumar Jain, Director and Head of Commodity Research, Prithvi

.

Rubber is a widely used industrial material with heavy demand from sectors such as automobiles, aeronautics, electronics, healthcare and power transmission.

Technical view

Jain sees support for the near-month futures contract at Rs 17,040 and resistance at Rs 17,550. “If MCX rubber futures start to sustain above the Rs 17,550 level, further strength towards Rs 17,850-18,100 levels can be expected,” he said.

Rubber is expected to touch the Rs 17,900-18,100 levels in the short to medium term, said Kshitij Purohit, Product Manager, Currency & Commodities, CapitalVia Global Research.

“Technically, rubber is expected to trade with a bullish momentum as it has broken the Double Top formation made in early May,” he said.

Ajay Kedia, Founder and Director of Kedia Advisory, recommends taking long positions in near-month rubber futures at Rs 17,340 for a target of Rs 17,900-18,500 with a stop loss at Rs 16,900 from a one-month perspective.

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