Mentha oil outlook positive; buy on dips

By Vedika Sharad Narvekar

MCX mentha oil prices settled 1.2 per cent lower last week, as seasonal demand has been restricting any sharp fall in the commodity. Otherwise, there are no fundamental triggers for prices to continue above the Rs 1,250 level on MCX. Higher output in the 2019-20 season ensured smooth supplies of mentha during the current season.

Meanwhile, the market is optimistic about the new sowing season, which will commence next month. This is because farmers are getting good returns of almost double the cost of production. Also, we are seeing a shift in their preference from traditional crops to mentha due to attractive returns. Madhya Pradesh is one such state where farmers have started growing mentha. At present, new crop arrivals are coming from the state. However, the crop being smaller than the traditional mentha-growing states — Uttar Pradesh — the impact on prices is negligible.

We may see some upside in the short term, considering seasonal demand amid extreme winters this year. However, as cold weather recedes, prices may once again come under pressure.

Stocks of mentha oil at MCX-accredited warehouse, at 1,62,106.6 kg, were unchanged from the previous week.

Technically, MCX mentha oil February may continue in a tight range of Rs 1,250-1,320. But as the bias is positive due to seasonal demand, buying near the support level is recommended.

(Vedika Sharad Narvekar is Research Analyst Agro Commodities at Anand Rathi. Investors are advised to consult financial advisers before taking an investment calls based on these observations)