RESEARCH, ROOTED IN YOUR GROWTH

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1 6th Annual Commodities Research Magazine (For private circulation only) C MMODITY O U T L O O K WHEAT CHANA NATURAL GAS CRUDE OIL SUGAR CASTOR IRON ORE COTTON CORIANDER REF. SOYAOIL SILVER MUSTARD GOLD CHILLI CARDAMOM TURMERIC JEERA ALUMINIUM NICKEL LEAD ZINC STEEL SOYABEAN PALM OIL RESEARCH, ROOTED IN YOUR GROWTH

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3 Content Jagannadham Thunuguntla Head-Research Commodity Fundamental Team Vandana Bharti AVP Commodity Research Sandeep Joon Sr. Research Analyst Subhranil Dey Sr. Research Analyst Shivanand Upadhyay Content Editor (Hindi) Support Team Kamla Devi Pramod Chhimwal Sonia Bamba Content Editor Graphic Designer Research Executive Corporate Office 11 / 6B, Shanti Chamber, Pusa Road, New Delhi Tel: , Extn. 625, 642, 674 Fax: Printed and Published on behalf of SMC Comtrade Ltd. 11/6B, Shanti Chamber, Pusa Road, New Delhi Website: Investor Grievance : smc@smcindiaonline.com Printed at: S & S MARKETING 102, Mahavirji Complex, LSC-3, Rishabh Vihar, Delhi (India) Ph.: , sachdeva_shiv@hotmail.com Page No. 1. Performance of 2013 & Events 4 2. Commodity performance Asset class comparison Span of price movement 7 5. Fundamental calls performance in Economic indicators Flashback 2013 & Outlook 2014 i. Bullions ii. Energy iii. Base metals iv. Spices v. Oilseeds & edible oil vi. Other commodities ime flies too fast. In 2009, it all started when this magazine Commodity Annual Outlook was launched by the finest minds in research. This year in 2014, we are Tcelebrating the sixth anniversary of this magazine and it's your interest which once again made the preparation of Commodity Annual Outlook successful in a continuous row, year after year. This time we have done several additions and made efforts to share with you the best possible information and research work. It is well said, Money always goes where it's well treated. We witnessed capital outflow from commodities and safe haven buying, while the inflow was more into riskier assets which gave a lucrative return. Furthermore, returns from commodity markets have disappointed over the past few years. The Thomson Reuters/Core Commodity CRB index consisting of 19 commodities was down by more than 10% last year, the third year of losses. The impact of weaker growth in the emerging market is being felt on the commodity prices, particularly in the industrial metals. Sustainable growth in U.S economy amid some recovery in major economies encouraged investors to rebalance their portfolio and put more money into the riskier assets. Back at home, some of the commodities decoupled with international trend on wild swings in rupee, especially gold. The year gone by was action packed, when it comes to commodities. Many government decisions had crucial impact on this market. Imposition of commodity transaction tax on non-agro commodities and processed foods since July 1 took a toll over the futures trading volumes on most commodity bourses. The turnover of the commodity exchanges fell by 36% of their accumulative turnover in the first nine months of this current financial year. Series of actions to curb gold import had shrunk the physical trade in Indian market. Going forward, tapering has begun, that means easy money that has flown to the rest of the world will, in some form, go back to the U.S. The Chinese economic growth is slowing down, but they will definitely stay on a growth path. The other emerging nations may maintain their current pace of growth whereas euro zone will still be a concern. Chinese government's policies to rebalance the economy may act as a brake. Taken as a whole, we can't say that commodities super cycle has broken but yet it faced strong downside and a consolidation in commodities is here to stay for 1-2 years. Extra supply in commodities, especially industrial metals may keep commodities on the back foot. Supply surplus is an evidence of investment projects that started 2-3 years ago when prices were higher. To conclude, commodities prices are going nowhere in short run as market is missing fresh and strong triggers. U.S bond-buying tapering has been almost discounted in the commodities space. Demand from emerging nations is once again crucial and can impact commodities in a big way. Don't close the eyes by not watching the currency movements; sometimes it works like the game changer. Rupee may trade in the range of per dollar whereas some appreciation is expected in Dollar Index. Few years back, commodities were motivated by the emerging market growth story, which included huge investments in infrastructure. Commodities on the whole are expected to stay weak in 2014 with gold to remain bearish and weakness to continue in base metals. Energy counter may trade flat whereas there should be a marginal gain in agro commodities. Weather related news will be the main driver for agriculture supply. Momentum and carry will be the winning strategy for various asset classes. Wild swings in some commodities can not be denied; hence frequent churning of portfolio is advisable. Happy Investing in Commodities (Vandana Bharti) Disclaimer: SMC Global Securities Limited is proposing, subject to receipt of requisite approvals, market conditions and other considerations, a further public issue of its equity shares and has filed a Draft Red Herring Prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The DRHP is available on the website of the SEBI at and the website of the Book Running Lead Managers i.e. Tata Securities Limited at and IL&FS Capital Advisors Limited at Investors should note that investment in equity shares involves a high degree of risk. For details please refer to the DRHP and particularly the section titled Risk Factors in the Draft Red Herring Prospectus. This report is for the personal information of the authorized recipient and doesn't construe to be any investment, legal or taxation advice to you. It is only for private circulation and use.the report is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such. No action is solicited on the basis of the contents of the report. The report should not be reproduced or redistributed to any other person(s)in any form without prior written permission of the SMC. The contents of this material are general and are neither comprehensive nor inclusive. Neither SMC nor any of its affiliates, associates, representatives, directors or employees shall be responsible for any loss or damage that may arise to any person due to any action taken on the basis of this report. It does not constitute personal recommendations or take into account the particular investment objectives, financial situations or needs of an individual client or a corporate/s or any entity/s. All investments involve risk and past performance doesn't guarantee future results. The value of, and income from investments may vary because of the changes in the macro and micro factors given at a certain period of time. The person should use his/her own judgment while taking investment decisions. Please note that we and our affiliates, officers, directors, and employees, including persons involved in the preparation or issuance if this material;(a) from time to time, may have long or short positions in, and buy or sell the commodities thereof, mentioned here in or (b) be engaged in any other transaction involving such commodities and earn brokerage or other compensation or act as a market maker in the commodities discussed herein (c) may have any other potential conflict of interest with respect to any recommendation and related information and opinions. All disputes shall be subject to the exclusive jurisdiction of Delhi High court.

4 Performance & Events Performance of Calls Given In Our Annual Magazine Commodity Outlook 2013 Range (Annual Magz. '13) Low* High* Gold (COMEX) Gold (MCX) Silver(COMEX) Silver(MCX) Crude Oil (NYMEX) Crude Oil (MCX) Natural gas(nymex) Natural gas (MCX) Copper Zinc Lead Nickel Aluminium Turmeric Cummin Chilli Cardamom Chana Kapas Wheat Sugar Soybean (NCDEX) Soybean (CBOT) RM Seed Ref. Soy oil CPO (MCX) CPO (BMD) * Up to 13 December 2013 FOMC & ECB Meeting Schedule For 2014 Months 2014 FOMC Meeting ECB Meeting January 28th and 29th 9th and 22nd February - 6th and 19th March 18th and 19th 6th and 19th April 29th and 30th 3rd and 16th May - 8th and 21st June 17th and 18th 5th and 17th July 29th and 30th 3rd and 17th August - 7th September 16th and 17th 4th and 18th October 28th and 29th 2nd and 15th November - 6th and 19th December 16th and 17th 4th and 17th WGC Gold holdings(top 10 Countries) Sr. No. Country Tonnes % of Reserves 1 United States 8, % 2 Germany 3, % 3 Italy 2, % 4 France 2, % 5 China 1, % 6 Switzerland 1, % 7 Russia 1, % 8 Japan % 9 Netherlands % 10 India % World Interest Rates Of Key Central Banks At Present Central Banks Country/Region Current Interest Rates Previous Rate Date of Change Federal Reserve (FED) U.S 0.25% 1.00% 16-Dec-08 European Central Bank (ECB) Euro 0.25% 0.50% 7-Nov-13 Bank of England (BOE) England 0.50% 1.00% 5-Mar-09 Bank of Japan (BOJ) Japan 0.10% 0.10% 5-Oct-10 Reserve Bank of India (RBI) India 7.75% 7.50% 29-Oct-13 People Bank of China (PBOC) China 6.00% 6.31% 5-Jul-12 Reserve Bank of Australia (RBA) Australia 2.50% 2.75% 6-Aug-13 Brazil Central Bank (BACEN) Brazil 9.50% 9.00% 9-Oct-12 4

5 Commodity Performance Return of Agri Commodities From 1st Jan '13 Till 13th Dec '13 % Change Corainder (NCDEX) Castor seed (NCDEX) Crude palm oil (MCX) Soyameal (NCDEX) Soybean (NCDEX) Chilli (NCDEX) Crude palm oil (BMD) Wheat (NCDEX) 4.90 Cotton oil seed cake (NCDEX) 3.17 Refined soy oil (NCDEX) Kapas (NCDEX) Soybean (CBOT) Gur (NCDEX) Maize (NCDEX) Jeera (NCDEX) Mustard seed (NCDEX) Sugar M 200 (NCDEX) Chana (NCDEX) Turmeric (NCDEX) Cardamom (MCX) Mentha oil (MCX) Return of Bullions, Metals And Energy From 2nd Jan '13 till 13th Dec'13 Gold Silver Crude Oil Natural Gas Copper Aluminium Zinc Lead Nickel MCX LME MCX LME MCX LME MCX LME MCX LME MCX NYMEX MCX NYMEX MCX LME Spot COMEX MCX LME Spot % Change COMEX

6 Asset Classes Comparison Asset Classes Performance from 2nd Jan'13 to 13th Dec'13 % Change Baltic Dry Index Nikkei Natural Gas (NYMEX) S&P 500 Japanese Yen/USD Dow Jones DAX INR/USD* CAC DJ EuroStox FTSE Euro/USD Crude Oil (NYMEX) Nifty* Dollar Index Hang Sang Shanghai Composite** GSCI commodity index US Treasury LMEX Copper (LME) Bovespa Gold (COMEX) Silver (COMEX) * Closing as on 1st Jan 2013 ** Closing as on 4th Jan 2013 It was an action packed year which started with some vital upturn in U.S and sluggish economic activities in most of the emerging nations accompanied by the flat performance of European countries with little upside. Government shutdown in U.S gave some restless time to financial market, which ended after couple of weeks. This was the 17th shutdown in the past 40 years, with the last one being in Apart from shutdown, tapering was a big concern for the entire world, which gave strong triggers to the market. It was expected in the mid 2013 but happened in December. In 2013, inflow of smart money was more in equities because many economic indicators signaled some recovery in major economies. While fixed income markets gave flat or even negative total returns as rising interest rates reduced the bond prices. Prices of equities and property in some markets have rebounded strongly. It was majorly due to lower interest rates and continued global stimulus measures. And thus, capital inflow was more in riskier assets like equities. U.S and other major equity exchanges of European Union outperformed Asian markets. Sluggish economic activities had a toll on most of the Asian markets, except, Japan which gave return of more than 40% as economy came into inflation after many years. Dow Jones gave more than 15% return whereas dollar index also closed in the positive territory. S&P 500 Index had its biggest yearly gain in a decade. Treasury and gold, which are friends of bad time, landed in the negative territory as safe haven buying faded on some economic recovery. In the times of crisis, treasury bonds and gold typically rise in value as a flight-to-quality instruments while risky assets like stocks sell off and vice a versa. Yellow metal gold plummeted more than 26% in 2013, had its first annual loss since 2000; as the Federal Reserve has started curbing its $85 billion in monthly bond buying. But silver was weaker than gold and saw a sharp decline of 36%. Commodities indices have underperformed other financial markets on moderate decline in purchases of raw materials such as oil, metals and agricultural products. Nevertheless commodities saw V-shape recovery after recession but if we consider broader picture, however it is still far below from their all time high. The Dow Jones-UBS Commodity Index is down by more than 10% in 2013 falling for the third straight year since its launch in Below average economic performance in the midst of smooth supply made base metals counter unappealing and in consequence we saw selling in the counters. Most of the base metals were stuck in structural surplus to a greater or lesser degree since 2007/08. It was one of the strongestever periods of supply growth amid average physical demand. LMEX was down by more than 10%. Even China was not in exception when it comes to slowdown in emerging nations. Back at home, NIFTY was slightly positive. But dismal performance of Indian currency decoupled commodities many times in 2014 with international market. Overall, financial markets gave opportunities to both bulls and bears in the year gone by. 6

7 Span Of Price Movement Span of Price Movement (Agro Commodities) COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW* SPICES Turmeric NCDEX Jeera NCDEX Chilli NCDEX Cardamom MCX OTHER COMMODITIES Chana NCDEX Wheat NCDEX Mentha Oil MCX Gur NCDEX Sugar NCDEX Kapas NCDEX OILSEEDS Crude Palm Oil MCX Crude Palm Oil BMD Soybean NCDEX Soybean CBOT RM Seed NCDEX Ref. Soy Oil NCDEX * Closing till 13 December 2013 Span of Price Movement (Bullions, Metals & Energy) COMMODITY EXCHANGE LIFE TIME HIGH LIFE TIME LOW 2013 HIGH* 2013 LOW* Gold COMEX MCX Silver COMEX MCX Crude Oil NYMEX MCX Natural Gas NYMEX MCX Copper MCX Aluminium MCX Zinc MCX Lead MCX Nickel MCX * Closing till 13 December

8 Performance of Fundamental Positional calls Performance of Metals And Energy Fundamental Positional Calls (January - December) 2013 Metal & Energy Analyst: Sandeep Joon Sl. Date Commodity Contract Trend Call Initiated Targets Stop Loss Remarks Price movement since No. Given Price call Is initiated (%) 1 7-Jan-13 Lead Feb Sell and Booked profit at Jan-13 Zinc Feb Sell and Booked profit at Feb-13 Natural gas March Buy and Stop loss hit Feb-13 Crude oil March Sell and Booked profit at Mar-13 Silver May Buy and Stop loss hit Mar-13 Lead April Buy Exit at Mar-13 Zinc April Buy Exit at Apr-13 Natural gas May Sell and Stop loss hit Apr-13 Gold June Sell and Both target met Apr-13 Silver July Sell and Booked profit at May-13 Crude oil June Sell and Booked profit at May-13 Lead June Buy and Both target met May-13 Zinc June Buy and Both target met Jun-13 Nickel July Buy and Stop loss hit Jul-13 Gold Oct Buy and Booked profit at Jul-13 Silver Sep Buy Booked profit at Jul-13 Silver Sep Buy and Stop loss hit Jul-13 Crude oil Sep Sell Stop loss hit Aug-13 Lead Sep Sell and First target met Aug-13 Zinc Sep Sell and Booked profit at Sep-13 Natural gas Oct Sell and First target met Oct-13 Lead Nov Buy and Booked profit at Oct-13 Zinc Nov Buy and Booked profit at Oct-13 Nickel Nov Buy Exit at Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls. 8

9 Performance of Fundamental Positional calls Performance of Agri Commodities Fundamental Positional Calls (January - December) 2013 Agro Analyst: Subhranil Dey S. N. Date Commodity Contract Trend Call Initiated Targets Stop Loss closing Remarks Price movement since Given Price below/above call is initiated (%) 1 29-Jan-13 Coriander April Sell 7, ,25 7, Booked profit at Jan-13 CPO Mar Buy Booked profit at Feb-13 Chilli April Sell 7,15 6,47 7,47 Booked profit at Feb-13 Pepper April Sell 35,10 32, , Booked profit at Apr-13 Mustard June Buy 3, , ,38 Booked profit at Apr-13 Cocud June Sell 1,56 1,46 1,61 Target Met at Apr-13 Maize June Buy 1, , ,15 Exit at May-13 Jeera July Buy 13,45 14, , Booked profit at Jun-13 Kapas Apr'14 Sell 1,06 1,01 1,09 Exit at Aug-13 Kapas Apr'14 Buy ,05 96 Target met at Aug-13 Chana Sept Buy 2,90 3, ,77 Booked profit at Aug-13 Cocud Dec Buy 1, , ,46 Stop loss hit Aug-13 Maize Oct Buy 1, ,34 1, Booked profit at Aug-13 Guar Seed Oct Buy 5,18 5,61 4,98 Target met at Oct-13 CPO Nov Buy Target met at Oct-13 Soybean Dec Sell 3, ,38 3,71 Booked profit at Oct-13 Mustard Dec Buy 3, ,02 3, Booked profit at Note: a) These fundamental calls are for duration of one to four weeks time frame and do not confuse with these with intraday calls. 9

10 Economic Indicators India Inflation % change Existing Home Sales -U.S in absolute numbers Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 India Inflation Existing Home Sales - U.S Industrial Production YoY -U.S Non Farm Payroll -U.S % change in numbers Jan-08 1-May-08 1-Sep-08 1-Jan-09 1-May-09 1-Sep-09 1-Jan-10 1-May-10 1-Sep-10 1-Jan-11 1-May-11 1-Sep-11 1-Jan-12 1-May-12 1-Sep-12 1-Jan-13 1-May-13 1-Sep Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13-2 Industrial Production YoY -U.S U.S Non Farm Payroll Data U.S Unemployment Rate Consumer Confidence Index -U.S % change in absolute values 1-Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 U.S Unemployment Rate Consumer Confidence Index - U.S 10

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12 Economic Indicators 6.00 Consumer Price Index PI Median -U.S in absolute values Baltic Dry Index in absolute values Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 1-Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 1-Jun-11 1-Sep-11 1-Dec-11 1-Mar-12 1-Jun-12 1-Sep-12 1-Dec-12 1-Mar-13 1-Jun-13 1-Sep US CPI Baltic Dry Index GDP - India & China (YoY) % change GDP - Euro Zone & US (YoY) % change Mar-08 1-Jul-08 1-Nov-08 1-Mar-09 1-Jul-09 1-Nov-09 1-Mar-10 1-Jul-10 1-Nov-10 India GDP (YoY)% Change 1-Mar-11 1-Jul-11 1-Nov-11 1-Mar-12 1-Jul-12 1-Nov-12 1-Mar-13 1-Jul-13 China GDP (YoY)% Change Mar-08 1-Jun-08 1-Sep-08 1-Dec-08 1-Mar-09 1-Jun-09 1-Sep-09 1-Dec-09 US GDP (YoY)% Change 1-Mar-10 1-Jun-10 1-Sep-10 1-Dec-10 1-Mar-11 1-Jun-11 1-Sep-11 1-Dec-11 1-Mar-12 1-Jun-12 1-Sep-12 1-Dec-12 1-Mar-13 1-Jun-13 1-Sep-13 Euro zone GDP (YoY) % Change 65.0 Comparison of Purchase Manager Index - U.S, China & Euro Zone in absolute values Jan-08 1-Mar-08 1-May-08 1-Jul-08 1-Sep-08 1-Nov-08 1-Jan-09 1-Mar-09 1-May-09 1-Jul-09 1-Sep-09 1-Nov-09 1-Jan-10 1-Mar-10 1-May-10 1-Jul-10 1-Sep-10 1-Nov-10 1-Jan-11 1-Mar-11 1-May-11 1-Jul-11 1-Sep-11 1-Nov-11 1-Jan-12 1-Mar-12 1-May-12 1-Jul-12 1-Sep-12 1-Nov-12 1-Jan-13 1-Mar-13 1-May-13 1-Jul-13 Purchase Manager Index-US Purchase Manager Index -China Purchase Manager Index -Euro zone 1-Sep-13 1-Nov-13 12

13 Annual Commentary & Outlook : Gold Annual Commentary - Gold The secular bull run which the yellow metal-gold witnessed in the last 12 years came to halt in the year 2013 and the prices fell like nine pins in COMEX. After registering life time high of above $1915 in 2011, prices failed to cross that magical figure and again made the high of nearly $1800 in But bears made merry in 2013 as after testing high of nearly $1700 during the first quarter of 2013 prices continued its downside journey with the second quarter registering the greatest fall of nearly 26%. The fear of end of quantitative easing, lack of safe haven buying, better return in riskier assets, ease in geopolitical tensions, accord between Iran and western countries, fall in crude oil prices and news of sell off by Cyprus added to the liquidation pressure. Massive decline in SPDR gold trust holding also prompted selling pressure in the bullion counter. Yellow metal is generally hedge against policies of massive quantitative easing, slower economic growth, against declining paper assets, global uncertainty and political and military stress. A short-term resolution to U.S. budget deficit troubles and yet another gold import tax hike in India were the negative factors for the precious metals. In the domestic market, weak local currency came to the rescue of the yellow metal and it managed to bounce back after plunging below in middle of the year. In July and August 2013, domestic gold prices rocketed higher and appreciated from low of nearly to above 35000, that is staggering jump of 37% in just two months. In the same period the local currency rupee depreciated nearly 17% amid the concerns of growing fiscal deficit in India. Moreover, the escalation of import duty of gold in India kept the prices elevated. But massive selling pressure was witnessed in the two months of September and October 2013, when price of gold dropped by 17% in MCX as rupee strengthened by 11%. India's gold shipments came to a virtual halt after the Reserve Bank of India (RBI) told importers on July 22 that a fifth of their purchases would have to be turned around for export and that 80% would be available for the domestic use. Some countries like Turkey etc raised their gold reserves by the most in five months in August and topped the list of countries that bought more bullion. U.S economy has seen some recovery as it expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate. In the September Fed meeting, FOMC expressed concerns that a sharp rise in borrowing costs could weigh on the economy. Federal Reserve Chairman Bernanke on Dec 18, 2013 meeting took measured approach and reduced monthly bond purchases to $75 billion from $85 billion. The Federal Reserve has reiterated that it will not start to raise rates until unemployment falls to at least 6.5%, so long as inflation does not threaten to go above 2.5%. India increased the import duty on gold jewellery to 15% from 10% in September in a move aimed to protect the domestic jewellery industry rather than stemming overseas purchases to narrow its current account deficit (CAD). The world's top gold consumer left the import duty on bullion unchanged at 10%. In the futures market in India, gold traded in backwardation, which is the rare of rarest case for this metal due to strict import in the middle of the steady demand owing to wedding and festive demand. Gold prices stabilized and moved in range during the last two months of the year as fear of tapering capped the upside while China gold demand supported the prices. Annual Outlook Gold Range: MCX: Rs COMEX: $ Bearish sentiment as seen in 2013 in the yellow metal in the international markets can reduce as lower level buying can be seen after second quarter of Lack of safe haven buying and outperformance of global equities markets prompted selling pressure in 2013 but macro-economic weakness of the world is likely to re-emerge in 2014, causing gold to recover lost ground. It seems that gold has already factored in the tapering effect of quantitative easing, which was started by Fed in its Dec meeting as it cut its monthly bond purchases from $85 billion to $75 billion. Meanwhile, the rupee dollar movement will also be keenly watched as its deprecation has largely supported the domestic prices in MCX in Going forward in 2014, rupee dollar can move in the range of India shipped $3.34 billion worth of gold jewellery in the (April September), down 58.34% from the same period the year earlier. Total gems and jewellery exports fell by 15.91% to $16.54 billion during the same period. To reign in the current deficit and to curb gold demand, the Indian government raised import duty on the metal to 10% and RBI imposed several conditions on imports by banks. Inward shipments of gold were linked to exports, making it necessary for importing agencies to fulfill export orders before sending any bullion for the local consumption. But with the gold imports taken a dip in second half of 2013 and the government is expected to relax its strategy of making gold imports costlier in India's gold imports are likely to fall by 40% to 500 tonnes in the providing relief to the government, which is trying to narrow the Current Account Deficit (CAD) and stabilise the rupee. Both the government and the Reserve Bank have taken a slew of measures to curb gold demand and the results are visible as imports till October have totalled about 400 tonnes. India imported an estimated 835 tonnes of gold in , a key reason for the record Current Account Deficit (CAD) of $88.2 billion, or 4.8% of GDP. In the domestic market, supply of gold was impacted as the premium of gold varied from $80-$120 an ounce because of a 13

14 Annual Outlook : Gold supply crunch caused by government restrictions on imports. Thus the premium will also cap the downside of gold in the domestic market going forward in the year The growing demand for yellow metal from China may support the prices in this year as China surpassed India as major gold consumer in But on long term perspective, Chinese demand for gold may not continue to grow at the speed at which it has expanded since the onset of the financial crisis as Chinese gold customers are not culturally attached to the yellow metal as Indian customers do. Moreover the demand for gold in 2013 may recover this year. The central banks buying of yellow metal will also give further direction in The most recent data by the IMF shows that in the first eight months of the 2013 central banks added gold at the slowest pace since the start of the financial crisis. According to the World Gold Council Central bank gold purchases may total 350 tonnes in 2013 after they added tonnes in 2012, the most since The ETP (Exchange Traded Product) holding is another factor which will influence the prices of gold in medium term as gold held in physically backed ETPs fundamentally altered the dynamics of supply and demand in Gold ETPs in 2013 turned into a source of supply, releasing 650 tonnes till November 2013 which is the equivalent of adding 17% to 2012's global gold supply. Geopolitical tensions in Middle East and in any other part of the globe will have impact on the yellow metal as it is considered safe haven in times of geopolitical uncertainty. Recently, Iran deal which reached in November eased tensions to some extent. The agreement limits Iran's atomic activities in exchange for as much as $7 billion in relief over six months. It allows Iran to export oil at current levels, rather than forcing additional reductions by the buyers, as would have been required under current law. Movement of dollar index will also influence the yellow metal in 2014 as it can hover in the range of Another factor which can affect the yellow metal is the U.S fiscal crises which have been extended till February Last year U.S government faced nearly month long shutdown due to lack of quick resolution of debt crisis. Last year, U.S Congress reached an 11th hour agreement to lift the debt ceiling, thereby avoiding a potential default, while simultaneously re-opening the federal government. Under the deal, the U.S borrowing authority has extended through February 7, while the government will be funded through to January 15, Stronger fabrication and ETF demand along with cost pressures on mines can give underlying support to the gold prices in Jewellery demand will continue to assist the gold prices in 2014.In the third quarter 2013, jewellery volume rose to its highest level for five years as the sharp drop in prices met with a very positive reception across the globe. Due to the lower prices, demand in value terms was the fourth highest on record. India and China generated the largest volume increase almost 120 tonnes of the 155 tonnes increase in demand in third quarter of Investment demand can prop up in 2014 as it plummeted to two year low in The investment in gold ETF like SPDR can show some bounce back after second quarter of 2014 amid safe haven buying. The movement of gold in India will very much depend upon the movement of local currency rupee and the domestic supply of gold which has been crippled amid import duty hike by government thereby rise in premium. Gold prices in COMEX can take key support of $1100 in 2014 while $1500 will be key resistance. On the domestic bourses if rupee manages to get strength in 2014 then it will pressurize Gold prices in MCX will be key support for Gold and will be key resistance in 2014 in the domestic market. Rs/10 gms Yearly price movement of Gold futures (MCX) India Gold Imports (% change YoY) Open High Low Close * Jan-08 1-Apr-08 1-Jul-08 1-Oct-08 1-Jan-09 1-Apr-09 1-Jul-09 1-Oct-09 1-Jan-10 1-Apr-10 1-Jul-10 1-Oct-10 1-Jan-11 1-Apr-11 1-Jul-11 1-Oct-11 1-Jan-12 1-Apr-12 1-Jul-12 1-Oct-12 1-Jan-13 1-Apr-13 1-Jul-13 1-Oct-13 * Close as on 13th December

15 Annual Commentary & Outlook : Silver Dow & Gold Ratio Gold & Crude Ratio (COMEX) Jan-11 3-Mar-11 3-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-12 3-May-12 3-Jul-12 3-Sep-12 3-Nov-12 3-Jan-13 3-Mar-13 3-May-13 3-Jul-13 3-Sep-13 3-Nov-13 3-Jan-11 3-Mar-11 3-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-12 3-May-12 3-Jul-12 3-Sep-12 3-Nov-12 3-Jan-13 3-Mar-13 3-May-13 3-Jul-13 3-Sep-13 3-Nov-13 Annual Commentary - Silver White metal Silver also showed extreme volatility in 2013 similar to gold on the domestic bourses. In COMEX, it fell more than 36% since the beginning of 2013 while in MCX it fell nearly by 24%. Apart from fall in gold prices, weakness in the base metals pack also pressurized the silver prices as it has dual properties of precious as well base metals. First half of 2013 was dominated by bears and prices fell from nearly to below in June But in the month of August alone prices made up the last six months losses and rocketed higher to again test nearly as weaker local currency supported the prices. Global economic events mainly the fear of tapering of quantitative easing kept the upside capped in When compared to gold this white metal plunged at faster pace especially in the domestic bourses as gold fell nearly 5 % while silver fell by 24% in the The ongoing concerns that the Federal Reserve could begin to slow its bond-purchasing program weighted on the sentiments in silver. Bearish sentiment in the silver in last quarter of 2013 remained intact after minutes of the Federal Reserve's October meeting revealed that the central bank could start scaling back its USD85 billion-a-month asset purchase program in the coming months if the economy continues to improve as expected. Cooling down of Middle East tensions after resolution of Syria crises and nuclear deal in Iran gave upper hand to the bears in third and last quarter of Talks in Geneva in November 2013 among the U.S. and five other global powers and Iran ended in agreement on a "first step deal that is meant to limit advancements in Iran's nuclear program in exchange for easing economic sanctions against Tehran. Falling silver prices continued to put pressure on silver miners in This is particularly true for those miners who were already unable to operate profitably at higher prices, such as Coeur d'alene Mines. Lower prices of silver prompted silver coins sales in US as U.S. Mint surpassed the 2011's all time high record sales of 39,868,000 ounces in American Eagle Silver Bullion Coins in Demand for the one ounce silver bullion coins has been intense throughout the entire year of When sales for the 2013-dated coins began on January 7, 2013, opening day orders totaled 3,937,000 coins, which seemed to represent the highest ever oneday sales for American Silver Eagles. Annual Outlook Silver Range : MCX: Rs COMEX: $17-28 White metal Silver, which is also known as poor man's Gold, was under heavy selling pressure both in the domestic market and COMEX last year. Silver prices often follow the movement of gold and base metals as it has dual properties which is the key reason that movement of base metals will have impact on silver. In India, gold prices fell only by nearly 5% in 2013 while silver tumbled by more than 24% thus indicating that silver became cheaper alternative to yellow metal. And more middle class investors in India will buy silver in 2014 thereby increasing its physical demand. 15

16 Annual Outlook : Silver ETF demand of silver continues to remain elevated in 2014 as seen last year. Silver prices also hinges on the global economic outlook where U.S employment data and housing data to affect the prices. Silver prices may gain upside momentum after the second quarter of Meanwhile, the growing usage of silver in the various applications may give some support to its physical demand. Recent advances in biotechnology have brought a renewed focus on silver's centuries old history as an important medical weapon. According to the silver Institute the medical use of silver has helped reduce the growing threat of antibiotic resistant germs. Nowadays the need to combat antibiotic resistant superbugs and to suppress hospital acquired infections has increased the importance and number of uses of silver infused products. Motorola uses silver embedded in plastic housings for many of its mobile phones. Other usage of silver is in the cases of calculators. Paints too have been made more effective against molds, yeasts and various bacteria with the addition of silver. Silver is a critical element in the production of Ethylene Oxide (EO), a basic chemical vital in the production of polyester textiles, Polyethylene Terephthalate (PET) bottles, and thousands of other products commonly used in everyday life. The popularity of silver coins globally will give support its prices of white metal. While the price of gold continues to trade at levels that puts gold bullion coins out of the reach of many investors, silver remains relatively affordable. Add to this the American Eagle Silver Bullion Coin's unique backing by the U.S. Government and its beautiful and uniquely American design increased its demand recently. Silver's underlying demand/supply fundamentals remain weak and inventory is abundant. Above ground inventory in China (the growing source of demand for the metal since 2009) remains as high as 18 months of fabrication demand, up from 16 months at the start of 2012 and only 4 months in Silver's industrial refuse (silver scrap) is not usually recycled because costs are high as compared to the price of the silver recovered. This makes silver more scarce than gold, and that scarcity is increasing. So, given the supply crunch of silver and growing usage prices will get support going forward in According to silver institute stronger silver industrial demand in the U.S. and Asia will be a key factor for driving growth through 2015, with healthy developing-country demand especially in markets such as China and India Gold Silver ratio is expected to move in the range of in Silver prices can take key support of $17 in COMEX and in MCX in Silver will face resistance at $28 in COMEX and in MCX. Rs/kg Yearly price movement of Silver futures (MCX) 7 Gold & Silver Ratio (COMEX) Open High Low Close * Jan-11 3-Mar-11 3-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-12 3-May-12 3-Jul-12 3-Sep-12 3-Nov-12 3-Jan-13 3-Mar-13 3-May-13 3-Jul-13 3-Sep-13 3-Nov-13 * Close as on 13th December

17 Annual Commentary & Outlook : Crude Oil Annual Commentary - Crude Oil Crude oil, which is also known as life blood of every economy, showed strong upside momentum as it traded in the range of nearly $ in NYMEX and in MCX in Crude oil rose the most from June to August 2013 in NYMEX while it rose by nearly 63% in MCX in four months from May to August amid depreciating local currency and Middle East tensions. In the month of August, crude oil tested the high of $112 in NYMEX and 7700 in MCX. Geopolitical tensions added premium in crude prices. Military takeover of power and the installation of a new government in Egypt and tensions in Libya supported the prices. Labor demonstrations in eastern Libya have forced the closure of a key port in August Pressure on oil markets continued as post- Arab Spring governments found hard to deliver on their promises. Syria was in focus for in most part of 2013 with the U.S. stated that it would increase aid to Syrian rebels who have been fighting against the regime of President Bashar al Assad in a bloody civil war. There were concerns that violence in Syria will extend to other parts of the oil rich Middle East. Prices dropped sharply from September 2013 to November in MCX and NYMEX. In these three months international prices dropped nearly 22 % in NYMEX while 16% in MCX. U.S. crude production surged as the combination of horizontal drilling and hydraulic fracturing, or fracking, has unlocked supplies trapped in shale formations in the central part of the country. Disappointing quarterly U.S corporate earnings offseted potential gains from the positive global economic data. Fear of tapering of monetary stimulus capped the upside in crude oil prices. Fed Chairman Ben S. Bernanke stated that the central bank may trim the $85 billion-a-month bond purchases and would end them in the middle of 2014 if the economy continues to improve. Prices stabilized to some extent in the month of December 2013 as winter demand and falling inventories supported the prices higher. Crude oil prices gained on ideas that January 2014 start up of a pipeline from Cushing, Oklahoma, to the Gulf Coast would drain crude stocks at the giant storage hub. Annual Outlook Crude Oil Range: MCX: Rs NYMEX $ Crude oil, often known as black gold, can trade on volatile path in 2014 as the key factors impacting the investor's sentiment in Crude oil will be the geopolitical tensions, macroeconomic events and U.S tapering of stimulus measures along with movement of Greenback. On the domestic bourses movement of local currency will be deciding factor in 2014 as its weakness has helped crude to test life time high in The key factor for crude oil prices will be issue of Fed tapering in In the last month of 2013 upward revision in U.S. thirdquarter Gross Domestic Product growth prompted Fed to reduce its monthly bond-buying programme from $85 billion to $75 billion. The oil market is on the cusp of a new cycle, with demand in the United States growing at a faster pace than in emerging economies such as China and India for the first time in a decade. Last year in November, Iran deal was reached and the global economic implications of Iran deal are immense since a deal on Tehran and its nuclear weapons programmes rules out the prospect of an Israeli or U.S air strike that escalates into a wider Middle East war. Washington's nuclear deal with Iran could also mean the prospect of a negotiated settlement in Syria and political stability in Lebanon. Production increases in Libya and Iraq could lead to lower output by Saudi Arabia in 2014, which will bring the reserve capacity to more comfortable levels. Moderate increase in oil demand is expected to be balanced by the rise in global supply, especially if U.S shale production continues to expand in the coming years. China demand is also key factor to give direction to crude oil prices as China's crude oil imports reached million tonnes in November U.S. EIA (Energy Information Administration) projects global consumption, which averaged 89.2 million barrels per day in 2012, will grow annually by 1.1 million barrels per day (bbl/d) in both 2013 and China, the Middle East, Central & South America, and other countries outside of the Organization for Economic 17

18 Annual Outlook : Crude Oil Cooperation and Development (OECD) account for nearly all consumption growth. Projected OECD liquid fuels consumption declined by 0.1 million bbl/d in 2013 and 0.2 million bbl/d in In 2014, growth in the total consumption of liquid fuels could slow to 30,000 bbl/d. EIA expects gasoline consumption to fall by 0.4% this year as continued improvements in new-vehicle fuel economy boost overall fuel efficiency growth. Japanese oil demand is likely to decline by 0.13 mb/d in 2014, as the country continues to replace oil as a source of power in its energy mix. EIA projects total OPEC liquid fuels production to decline by 0.8 million bbl/d to 35.9 million bbl/d in 2013 and to stay near that level in EIA expects Saudi Arabia to begin reducing its production in early 2014 as some of the disrupted production comes back on line and non-opec supply continues to grow. Forecast of non-opec liquid fuels production, which averaged 52.7 million bbl/d in 2012, increases by 1.6 million bbl/d in 2013 and by 1.5 million bbl/d in EIA expects U.S. crude oil production to rise from an average of 6.5 million bbl/d in 2012 to 7.5 million bbl/d in 2013 and 8.5 million bbl/d in It is expected that increase in global real GDP growth from 2.4% in 2013 to about 3.1% in 2014 is the best since 2010, with growth in advanced economies up from 1.1% in 2013 to about 2.0% in Growth is likely to be around 3% in the US and UK in Japan's growth is likely to show significantly during 2014 due to the consumption tax hikes. Global GDP factor could prove to be positive for crude oil. Moreover, oil is not just an energy form; it's an alternative investment, particularly for institutional investors (hedge funds, investment funds, and other high-net-worth investors) as the mode of portfolio allocation of these entities in Crude oil will also impact its prices in Furthermore any hurricane disrupting the supplies in 2014 can give support to the prices. Crude oil prices in NYMEX has key a support at $75 and 4500 in MCX while it has key resistance near $115 in NYMEX and 7000 in MCX. Rs./Barrel 8500 Yearly price movement of Crude Oil futures (MCX) 3 Brent & Light Sweet Crude Oil Spread($) Open High Low Close * Jan-11 3-Mar-11 3-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-12 3-May-12 3-Jul-12 3-Sep-12 3-Nov-12 3-Jan-13 3-Mar-13 3-May-13 3-Jul-13 3-Sep-13 3-Nov-13 * Close as on 13th December

19 Annual Commentary & Outlook : Natural Gas Annual Commentary - Natural gas Natural gas prices have shown recovery in the third consecutive year in 2013 as prices steadily appreciated from low of 176 in January 2013 to above 245 in April Its prices appreciated nearly 40% both in NYMEX and MCX in first four months of the year. Decline in inventories and weather concerns supported its prices. Fall in rig count also supported the prices higher. The US rig count declined to 1758 in April Prices dipped lower in middle of the year on feeble demand but prices recovered and continued upside journey from August Natural gas prices hit yearly high of above 270 in August 2013 in MCX and above $4.41 in NYMEX. On the domestic bourses weak local currency kept the price elevated in the month of August as rupee dollar tested above 68 levels. Colder winter temperatures as compared with the record warm temperatures in 2012 increased the amount of natural gas used for residential and commercial space heating. Natural gas prices have shown steep rise in last two years after testing 10 year low of below $2 in NYMEX due to production cuts by some producers and decline in rig count. From 5 April to 13 September, US natural gas inventory has increased by 94% to 3.3 trillion cubic feet, just above the six-year ( ) historical average. US natural gas inventories usually rise in this period as US gas production outweighs demand. Some factors kept pressurizing the market in 2013 as natural-gas production, which remained at record highs, fueled by hydraulic fracturing and horizontal-drilling techniques that have enabled energy producers to tap supplies in shale-gas fields. Natural gas demand has lifted since the US Environmental Protection Agency (EPA) drafted laws to restrict emissions on new coal power plants. It is estimated that CO2 emission standard for new coal plants will be eased, but it is still unlikely to change the preference for gas power over coal power in the US utility landscape. There is a structural shift toward natural gas power generation in the medium to longer term, but higher natural gas prices slow this transition in the immediate term. Natural gas prices got support in November and December 2013 due to built up of winter demand and on worries that storms could threaten output from the Gulf of Mexico. Also seasonal demand for natural gas generally increases during the fourth quarter which gave support to the prices. During the last quarter of 2013, inventory building was below average, as demand was strong during the relatively hot summer period. Therefore, the level of inventories was at the lowest level in five years. Annual Outlook Natural gas Range : MCX: Rs NYMEX $ Upside momentum of the last two years may prevail in 2014 due to decline in rig count and inventories along with increasing usage as clean fuel considering stringent environmental norms across the globe. Natural gas is considered clean fuel as compared to other energy resources such as coal and nuclear energy. So both industrial and household usage of natural gas will keep the prices well supported. Weather related news can have a big impact on natural gas prices, both from a supply and a demand side going forward in According to Energy Information Administration Roughly half of all U.S. households rely on natural gas as their primary heating source But if natural gas prices would rally much further, electricity producers would switch back from gas to coal, as carbon prices are still very low which can reduce its demand and thereby pressurize prices. Finally, if prices rally, it will become more profitable to produce more natural gas, which ultimately will lead to higher stocks, and therefore put a cap on natural gas prices in From the demand side, US economic growth and the closure of older coal plants should lead to a rise in gas consumption. From a supply side, there will be a cap on natural gas prices, as higher prices will lead to increased production. This is especially true given that there is significant production capacity that is ready to be 'switched on', but which is currently offline due to low revenues. However, this will not prevent US production from expanding, as it will be a part of the US' carbon reduction plan, helpful in becoming energy independent and be subservient in meeting the rising demand for natural gas for LNG export. U.S. Energy Information Administration raised its estimate for the domestic natural gas production in 2014, expecting output this year to be up more than 1 percent from 2013's estimated record high levels. It is expected that marketed natural gas production in 2014 to rise by 0.74 billion cubic feet per day from 2013 to bcf per day. Growth has mostly been driven by rising production from the Marcellus shale play in Appalachia, which has more than outpaced declines in offshore Gulf of Mexico and Haynesville shale output. Pipeline imports from Canada are expected to continue to decline in 19

20 Annual Outlook : Natural Gas 2014, falling to 7.4 bcf (billion cubic feet) daily from the 7.53 bcf estimated in EIA slightly raised its estimate for gas consumption in 2014, but still expects usage to slip 0.8 percent from 2013 levels to 69.6 bcf per day. According to EIA coal used for power generation will rise from 37.4 percent in 2012 to 39.4 percent in 2013 and 40.2 percent in Natural gas which is used for power generation is expected to decline from 30.4 percent in 2012 to 27.4 percent in 2013 and 26.9 percent in Natural gas is also making in-roads in transportation, in the fleet vehicle market or where vehicles return to the same site to re-fuel. Furthermore, natural gas will continue to displace oil in factories, home heating, and displace coal (and other fuels) in electric power generation. Comparatively cheap, abundant Natural gas is displacing oil in the United States for several energy uses, decreasing oil demand. Weather conditions also dictate the trend of Natural gas in 2014 and the temperatures present in winter and summer induce heating demand in winter and cooling demand in summers. Natural gas prices will face resistance near $5.5 in NYMEX and 350 in MCX. While key support is near 190 in MCX and $3.2 in NYMEX. Yearly price movement of Natural Gas futures (MCX) Rs./mmbtu Open High Low Close * * Close as on 13th December 2013 Crude Oil & Natural Gas Ratio (NYMEX) U.S Natural Gas (Weekly) Rig Count Jan-11 3-Mar-11 3-May-11 3-Jul-11 3-Sep-11 3-Nov-11 3-Jan-12 3-Mar-12 3-May-12 3-Jul-12 3-Sep-12 3-Nov-12 3-Jan-13 3-Mar-13 3-May-13 3-Jul-13 3-Sep-13 3-Nov Feb-11 4-Apr-11 4-Jun-11 4-Aug-11 4-Oct-11 4-Dec-11 4-Feb-12 4-Apr-12 4-Jun-12 4-Aug-12 4-Oct-12 4-Dec-12 4-Feb-13 4-Apr-13 4-Jun-13 4-Aug-13 4-Oct-13 4-Dec-13 Source: Baker Hughes 20

21 Annual Commentary : Base Metals Annual Commentary - Base Metals Base metals prices remained in a volatile range in the year 2013 amid mixed fundamentals. U.S shutdown, debt concerns and fear of tapering of monetary stimulus kept the prices under pressure while physical supply tightness in some of the base metals such as Lead capped the downside. Macroeconomic uncertainties affected the base metals prices to larger extent in the year Global PMI (Purchasing Managers Index) indicators along with ISM (Institute for Supply Management) survey affected the sentiments. In the year 2013, slow Chinese demand concerns kept the investors on cautious note while the stimulus measures from the various banks lend underlying support. However, the overall weakness in the local currency rupee also aided to the bullish sentiments as it depreciated more than 17% in In the year 2013, lot of events took place like U.S shutdown; tensions in Syria, North Korea and Egypt took centre stage which affected the risk sentiment. Copper, the leader of base metals pack, tested the low of 366 in the first quarter of 2013 in MCX as stronger greenback kept the prices downbeat. Copper also diminished lower on growing skepticism about QE3 after fed minutes. But after the first quarter of 2013 prices appreciated gradually and tested yearly high of above 510 in the month of August 2013 amid sharp depreciation of local currency rupee. Thereafter, prices dipped gradually and tested low below 430 in MCX in the month of November China copper imports slowed down in April 2013 as it fell 7.4% from a month ago to hit a 22 month low, hit by port strikes in Chile and delays to shipments after the closure of India's top smelter. In the year 2013 mining shutdown has also lead to shortage of metal in physical market. Jinchuan Group Ltd, China's third largest copper producer, has shut a 200,000 tonne a year facility due to raw scrap shortage, which reduced its refined copper output by more than 16 percent in Consumer morale in the euro zone improved to a two year high in September 2013, with confidence in the wider European Union surpassing its long term average for the first time since the summer of U.S economic situation improved as consumer spending rose in July 2013 at its fastest pace in seven months, a sign of quicker economic growth that could strengthen the case for the Federal Reserve winding down a major economic stimulus program. Aluminum dropped at steady pace in the first four months of 2014 as it tested low of nearly 100 while it witnessed robust growth after April and tested 133 in August 2013 amid weak local currency. But after that prices witnessed sharp profit booking and tested low of nearly 110 in November Growth concerns in China and ample stock positions amid decline in crude prices kept the prices on backfoot. The aluminium industry is struggling with excess capacity, rising costs and weak prices. United Company RUSAL, estimated that a fifth of global production outside China is loss making, even with demand expected to grow 6 to 7 percent in Inventory financing and cancelled warrants have lifted aluminium premiums higher by lengthening the queue to withdraw aluminium from LME warehouses in Battery metal lead also weakened in the first quarter of 2013 till April amid rising greenback and declining cancelled warrants. But prices gradually appreciated from low of nearly 106 tested in May to above 155 in August 2013 amid steep depreciation in local currency rupee and rise in battery demand coupled with rise in cancelled warrants. After August 2013, prices dipped lower and traded in the range of for rest of the year. Higher premium of lead continued to support prices of lead. Lead premium stood around $260 per tonne in the beginning of September Total global refined lead production increased 4.4% to 5.27 million tonnes in January-June 2013 compared with 5.05 million tonnes in the cumulative period January-June The increase in metal output was on account of heavy increase of 12.4% in production in China. Meanwhile the global refined lead usage rose by 6.8% to 5.31 million tonnes in January-June This was higher compared with 4.97 million tonnes in January -June Zinc more or less tailed the movement of lead as it remained downbeat in the first four months of 2013 but appreciated more than 40% in subsequent four months testing yearly high of 140 in the month of August Strong global equity markets along with weaker rupee were the key factors behind the escalation in the prices. But in September 2013 price drifted lower and tested 121 and remained in range till the end of the year. Fear of tapering by Fed capped the upside in zinc prices while galvanizing demand supported the prices. According to the ILZSG (International Lead and Zinc Study Group) data global supply of refined Zinc metal has exceeded demand by tonne during Jan-June Total reported inventory levels over this period decreased by tonne. Like other base metals pack Nickel also nose dived in the first four months as it fell nearly 16%. Record stockpiles and feeble demand pushed the prices lower. But prices gradually headed higher and tested the four digit market of above 1000 in the month August But due to sudden appreciation in local currency rupee and fear of tapering Nickel prices dropped lower in the month of September and gyrated lower for rest of Lower prices of Nickel have amounted to shutdown of some small mines in Australia and Belvedere Resources's Hitura mine in Finland. 21

22 Annual Outlook : Copper Annual Outlook Copper Range: MCX: Rs LME: $ The copper market often has been said to own a PhD in economics, because its performance frequently forecasted the strength of the global economy. Global economy will face uncertain times in the year 2014, so will the copper. The Federal Reserve action will weigh in this year as it is approaching a phase out of its $85 billion-a-month bond buying program. In anticipation, long term interest rates have already risen in 2013 by about a percentage point, putting a dampener on mortgage applications. The economic situation in China and U.S housing and employment situation will hold centre stage going forward in In U.S government shutdown contributed to slower GDP growth about 1.7% in 2013, but the picture could brighten in It is expected that by mid-2014, quarterly growth should reach an annualized pace of 3%, making the economy more durable in the face of challenges that include policy uncertainty at home as well as soft growth among major trade partners. Then, the U.S economy should be able to generate 200,000 or more jobs a month. In China, economy is slowly limping back to normal as in the calendar quarter ended Sept China will continue to be the key price driver of copper prices as it is quite amazing fact that China, primed by government spending to boost growth, will need enough copper every month to circle the globe more than 100 times. Copper use in China jumped nearly 8 percent to a record million metric tonnes in As per customs data, shipments jumped 32 percent from August 2013 to 347,305 metric tonne in September 2013 the highest level since February Chinese monetary measure in 2014 will also affect the red metal prices as China tightened the money supply and its banks tripled the amount of bad loans of slowing metal consumption demand. It is expected that world copper supplies will exceed demand by about 340,000 tonnes through 2015 thereby pressurizing the prices. Supply can increase by 1 million tonne in 2014 and an additional of 800,000 tonnes in It is expected that increase in inventories can fuel concern that demand won't be strong enough to whittle away excess supplies amid the outlook for increased mine production. Meanwhile, stockpiles tracked by the London Metal Exchange rose by 49 percent in According to Glencore Xstrata Plc, the metals producer and commodity trader, quarterly copper output surged by 34 percent as African mines added to volumes. The metals group is saddled with significant surpluses going forward. Even if there is a stronger demand going forward in 2014 that will likely reduce some of this excess, it would not be strong enough to nudge the markets toward a balanced or a deficit type situation. If one goes only by the level of copper stocks held in the exchange warehouses, which it defines as those belonging to the LME (London Metal Exchange), SHFE (Shanghai Futures Exchange) and COMEX (Chicago Mercantile Exchange), then it does look like the market is in surplus, as these stocks have risen by about 110,000 tonnes in Stocks of copper held at bonded warehouses in China peaked at somewhere between 1 million and 1.1 million tonnes in January 2013, and have fallen to a low of little more than 300,000 tonnes till Nov And the netting off 110,000 tonnes of higher exchange stocks versus 800,000 tonnes of lower bonded stocks suggests a substantial deficit. China housing bubble has grown by wide margin as small two bedroom Beijing flat now costs the average of 32-years' salary, or $330,000 dollars. China's property tycoons are uneasy and in fear that the boom has become a bubble at risk of bursting. Furthermore, copper demand from copper ETF can support the prices in BlackRock Inc., performed very well, which was listed as copper backed exchange traded fund in Other copper backed funds are ipath Dow Jones UBS Copper Subindex which showed good investor participation. As in 2013, copper prices in this year also can trade on volatile path. Strike by the various mines can keep the prices well supported. It is expected that Copper prices will swing to the tunes of sentiments pertaining to the action taken by US Federal Reserve regarding QE3 in In Dec 18, 2013 meeting, Fed cut its monthly bond purchases from $85 billion to $75 billion. Copper prices may find support near 380 in MCX while 540 will act as a resistance on the domestic bourses. In LME, prices can get support near 6000 while 8300 can act as a resistance. Rs./Kg Yearly price movement of Copper futures (MCX) Open High Low Close * * Close as on 13th December

23 Annual Outlook : Nickel Annual Outlook Nickel Range: MCX: Rs LME: $ Nickel, which was the underperformer among other base metals pack in 2013, can witness some buying in 2014 as Indonesia's plan to ban the export of Nickel ore in About 30 percent of nickel mines in Indonesia are losing money at current prices. Indonesia accounted for 28 percent of global Nickel supply in Vale Indonesia produces nickel in matte at its smelter in Sulawesi, and ships ore overseas. Indonesia is seeking to boost the value of commodity sales, and while a blanket ban is mandated by the 2009 Mining Law, the government may exempt companies that are operating or planning to build processing plants in Nickel is expected to be in surplus to the tune of 70,000 tonnes in 2013 slightly narrower than the 75,000 tonnes surplus in 2012 offsetting what it sees as a demand increase of 7% in The wild card for Nickel in 2014 is an Indonesian law that is set to ban ore exports by producers starting this year. The law requires mineral ores to be processed domestically before being exported to encourage foreign investment and boost local miners' profits. According to BNP Paribas enforcement of the ban on ore exports could either boost prices in 2014 or have a negligible effect, depending on Chinese producers' response. Chinese processors of nickel pig iron, which is a cheaper version of nickel compared with primary nickel, cut back on production, would necessitate increased imports of primary nickel to the Middle Kingdom, which can boost Nickel prices. But if Chinese nickel pig iron production continues apace, with producers relying on stocks of ore they have been hoarding since the beginning of 2013, the impact of Indonesia's ban on global prices may be muted. As per Glencore Xstrata Plc Indonesia will export 60 million tonnes of nickel ore in 2013 from 45 million tonnes in 2012 due to record shipments to China China has built up nickel ore stocks as a buffer against a ban equivalent to around six-10 months of consumption, both at ports and at nickel pig iron production facilities. Customs data from China showed that nickel imports from Indonesia totaled 56.9 million tonnes in the January-October 2013 period, up 41% on as compared to same period in Mining closure across the globe amid reduced prices can give some support in Mining majors such as Glencore Xstrata have suspended mining operations at Folcando in the Dominican Republic in The capacity of that mine is around tonne per annum. Norilsk Nickel, the world's largest nickel producer has also made its intentions very clear in unveiling a new strategy on concentrating on nickel mines only in Russia and deciding to exit its nickel mines in other countries in Most of the nickel market surplus has been contributed by the Chinese nickel pig iron industry. China's nickel production also remained higher at 196,896 tonnes for the third quarter of 2013 amidst rising stock piles. After the ban is enforced in Indonesia about tonnes per annum of nickel in ore will be removed from the traded ore market. Chinese Nickel Pig Iron (NPI) smelters, which are heavily reliant on Indonesian saprolitic ore, will lose their primary source for feedstock. As a result many Chinese NPI smelters will be forced to shut, reducing finished nickel supply and boosting prices. Customs data from China show nickel imports from Indonesia totaled 56.9 million tonnes in the January-October period in 2013 up 41% on year. Meanwhile, nickel prices may tend to get some support from the robust demand from the stainless steel sector and potential supply shortage from the Indonesian export ban in Nickel prices have key resistance of 1150 in MCX and $18000 in LME while 750 are the key support in MCX and $12000 in LME. Yearly price movement of Nickel futures (MCX) Rs./Kg Open High Low Close * * Close as on 13th December

24 Annual Outlook : Zinc Annual Outlook Zinc Range: MCX: Rs LME: $ Zinc, the galvanizing metal, which was quite volatile in the year gone by can witness choppy movement with the positive momentum in the year Demand from the construction and auto sectors and the growth in steel sector will impact the prices in Tightening global zinc mine production is expected to create a bullish trend in zinc prices in Mining shutdown is also likely to affect the zinc prices going forward in Production in the Glencore's zinc mine declined by 12% (YoY) due to the closure of two big mines namely Perseverance and Brunswick last year. The two mines are expected to reduce a total of tonnes per year from the world zinc supply. Demand from construction, transport, consumer goods, electrical appliances and general engineering will give direction to Zinc prices in Meanwhile in 2014, the US debt problems along with pace of recovery in US and China are likely to affect the price movement of Zinc. Zinc inventory positions in LME and other warehouse like New Orleans used to affect prices in 2012 but as many inventories are locked in the financial deals as in 2013 so they do not have much impact on prices as earlier. Inventories of the metal continue to show downward trend in LME warehouses with zinc stocks down by 160,000 tonne in However, the interesting point is that industry players suggest that some 240,000 tonne of metal is probably laying in warehouses not controlled by LME. LME stocks are concentrated to a major extent at a single centre, New Orleans. The total inventory sitting at New Orleans is to the tune of 396,000 tonnes forming almost 80% of the entire non cancelled inventories in LME warehouses. In mid October 2013 stocks at New Orleans registered a sharp rise of 75,000 tonne in a single day. Usually such a move would have had profound impact on prices but nothing much happened to the prices, suggesting that the role of inventory movement to gauge the demand and supply for the metal is diminishing as many times the flow of the metal is simply to lock in the material for financing deals. According to the International lead and zinc study group Chinese zinc demand would rise by 7.7% in 2013 and that net imports of refined zinc metal into China would remain at just over half a million tonnes. In 2014, it is predicted that Chinese zinc usage would increase by a further 7%. European demand is forecasted to fall for the second successive year in 2013 although, at 0.8%, the extent of the reduction would be small. In 2014, an expected 3.8% rise would be primarily due to anticipated growth in Belgium, Italy and Poland. In the United States, it is expected that demand would increase by 7.1% in 2013 and by 1.2% in Elsewhere, demand is forecasted to rise in Brazil, India and Turkey and to remain stable in Japan and the Republic of Korea. According to International Lead Zinc Study Group growth in the global demand for refined zinc metal is expected to increase in 2013 and continue in 2014 with a rise of 4.8% to million tonnes and 5% to million tonnes respectively. In 2014, global zinc consumption is expected to rise as a result of urbanization plans, infrastructure projects and strong production of cars. Silver-Zinc vehicle SLI batteries, which have 45 percent more power and a 30-percent longer life, are also commercially available and competitively priced. So demand for SLI batteries can give support to Zinc demand in On the supply side Xtsrata's Brunswick and Perseverance mines have been closed in 2013 with Vedanta expected to close Lisheen mine in Other smaller mines are expected to follow suit putting pressure on supply side in 2014 thereby supporting the prices. Zinc will face key support of 100 in MCX and $1750 at LME while key resistance will be 150 in MCX and $2400 in LME. Rs./Kg Yearly price movement of Zinc futures (MCX) MCX Lead Zinc Spread Open High Low Close * Jan-11 1-Mar-11 1-May-11 1-Jul-11 1-Sep-11 1-Nov-11 1-Jan-12 1-Mar-12 1-May-12 1-Jul-12 1-Sep-12 1-Nov-12 1-Jan-13 1-Mar-13 1-May-13 1-Jul-13 1-Sep-13 1-Nov-13 * Close as on 13th December

25 Annual Outlook : Lead Annual outlook Lead Range: MCX: Rs LME: $ Battery metal lead may remain on firm footing in 2014 amid increased demand and higher premium. In 2014, outlook for the lead market is expected to remain positive, with good demand growth from the industrial battery sector and for Sealed Lead Acid batteries (SLA), which are used to power e-bikes. Lead is majorly used in car batteries, mobiles and e bikes. Its corrosion resistant quality makes it suitable to store sulfuric acid. Due to its malleability and anti corrosion characteristics it is also used in building construction. The regime to follow carbon emission norms has also hit lead production thereby supporting prices. Replacement battery demand is growing in India along with that the power shortages has increased options for alternative energy. Steady growth in automobile battery demand in Asia Pacific, especially India and China are expected to keep the lead prices well supported in Winter demand often gives support to the Lead prices. Northern Hemisphere winter is expected to drive up demand for the industrial metal. Lead is largely used in the automobile batteries, which often require replacement in colder weather. At the same time, the world's major economies, such as the U.S. and Germany, are recovering, which could mean more rivalry for limited lead supplies. Dwindling supplies due to mining closure could give further support to the prices going forward in Key mines like Glencore Xstrata's Brunswick operation in Canada have been closed in 2013 and aren't being reopened. The last primary U.S. lead smelter, Doe Run's Herculaneum, Mo., site, will close in January 2014, after the miner decided that upgrades needed to meet environmental laws weren't financially viable. Lead is often mined as a byproduct of zinc, but as closed mines are replaced, there's much less of the metal on the radar for minerals producers. New facilities like Glencore's Perkoa project in Burkina Faso are heavily skewed toward zinc production. According to the International Lead and Zinc Study Group, a Lisbon based intergovernmental organization supplies fell short of demand by 46,000 metric tonnes in the first nine months of 2013 but ended 2013 with an estimated small surplus and in 2014, the group expects demand to exceed supply for the first time in five years About 80% of lead demand comes from battery manufacturers. In addition, Japanese and U.S. auto makers are selling more vehicles, which means greater demand for new batteries. But the real driver for lead is likely to be no surprise is China, as the country's rising number of cars and electric powered bicycles bolster demand for batteries. China's car sales hit their highest volume in nine months in October U.S demand for primary and secondary batteries is expected to increase by 4.2 percent per year to $17.1 billion in 2017, accelerating from the period. Gains will be driven by an upturn in motor vehicle and other durable goods output, and supported by stronger personal consumption expenditures growth. Motor vehicles in US will post the largest increases in dollar terms as motor vehicle production rises after more than a decade of decline. It will also be the fastest growing market in percentage terms, with overall battery demand bolstered by expanding production and sales of hybrid/electric vehicles (HEVs). Backup power supplies will register the next fastest demand gains, boosted by a pickup in nonresidential fixed investment, especially for wireless device transmission towers and related facilities, and by continuing concerns about the perceived vulnerability of the nation's power grid in US. With greater demand and restricted supplies the prices of battery metal Lead can show buoyancy in Lead Zinc spread may expand further and widen towards 18 in MCX as Lead prices can outperform Zinc amid strong fundamentals in Lead has a key support of 110 in MCX and $1750 in LME and key resistance of 160 in MCX and $2650 in LME. Rs./Kg Yearly price movement of Lead futures (MCX) Open High Low Close * * Close as on 13th December

26 Annual Outlook : Aluminium Annual outlook Aluminium Range: MCX: Rs LME: $ White metal Aluminum may remain range bound in Increase in demand from key consuming sectors can be offset by oversupply concerns in Also the movement of crude oil prices in 2014 will be watched as the energy constitutes per cent of aluminum costs. Positions of cancelled warrants and mining closures will influence its prices in The demand trend from the sectors like packaging, aerospace, automobiles, construction and power will influence its prices in Aluminium is also used from airliners to drinks cans and its demand pattern in 2014 will have big impact on the prices. The future of domestic demand in China owes much to infrastructure projects, particularly compared to consumption in Western economies. In North America consumption is driven by transport, such as automotive and aerospace, as seen in a mature consumer driven economy by packaging. But in China, demand is driven by construction, with transport playing a lesser role and packaging down in single figures. Chinese demand therefore has the potential to be more volatile. Meanwhile, while global aluminum demand is growing, production is growing at faster pace. Indonesia's plan to ban the export of mineral ores, including bauxite, is now slated to take effect from January 13, Meanwhile, China, the major importer of Indonesian bauxite, remained generally skeptical that a full ban would actually be imposed due to economic and social factors. Bauxite and other ore exports bring in a lot of money to Indonesia, and a full ban could hurt the economy significantly. Bauxite supply in 2014, however remains a major concern to Chinese importers, many of which have been actively seeking and stepping up their search for alternative supplies, as well as stockpiling, in recent months. The spot market premium in 2014 will affect its prices, which are determined by the higher freight cost, financial deals and supply demand dynamics. By volume, aluminium is by far the most stocked metal in LME warehouses. Total stocks currently represent weeks of consumption. However, stocks in terms of weeks of consumption have been slowly but steadily decreasing since the peak seen in 2009, indicating solid demand growth. According to the latest figures from the World Bureau of Metal Statistics The global aluminum market surplus totaled 1.2 million tonnes in the first nine months of the 2013 That is more than double the 539,000 tonnes surplus recorded over the whole of Aluminium smelters worldwide are battling high energy costs, especially the small producers. High energy costs, which are a large proportion of the total cost structure for aluminium smelters have already produced many victims worldwide. In particular, the smaller smelters have difficulty remaining profitable with relatively low aluminium prices and high energy costs. These smaller smelters produce relatively low tonnages in order to absorb the increasing costs. Moreover, small players have limited power to negotiate better power deals or to secure power supply at more economical rates. Leading indicators across regions are showing promising results, including the increase in the purchasing manufacturing indexes, increases in car sales & production and gains in industrial production in general which can give support to Aluminum prices. China has ambitious plans to restructure its aluminium sector by eliminating obsolete aluminium plants. China must lower its capacity in order to rebalance its oversupplied market and restore prices. The pace of restructuring is slow. However, at this stage, only plans for the sector have been announced. These plans include investments in energy-efficient facilities and improvements in technology for lower energy consumption. The closure of small facilities will be inevitable. The proposal for changes in warehousing policies (to force the reduction of queues) could become effective by April 2014, which could dampen the aluminium prices. Aluminum prices is expected to take key support near 90 in MCX and $1600 in LME and resistance will be 135 in MCX and $2200 in LME in Rs./Kg Yearly price movement of Aluminium futures (MCX) Open High Low Close * * Close as on 13th December

27 Annual Commentary & Outlook: Cardamom Cardamom Annual Commentary During the previous year, cardamom prices continuously slipped throughout the whole year, because of bearish fundamentals. In spices complex, cardamom futures fell the most by more than 48% on MCX, touching low at levels. Meanwhile, on the spot market at individual auctions, the counter tested 600 levels. Factors such as lack of aggressive buying by upcountry dealers, supplies outstripping demand, good rains giving positive impact on the crop and import of cheaper-grade cardamom from Guatemala aided to the steep fall in the counter. In addition, the arrivals quantity of cardamom to the market had almost doubled with the introduction of high-yielding 'Njallani' variety and new farming techniques. An upsurge in the arrivals was visible, as it was reported that the supplies by the end of November were viewed by the trade as the highest ever in the history of the crop. By the end of the year, the counter stabilized near 600 levels as the growers were not interested to sell their produce because it was much below the remunerative price levels. The current season has begun officially from August 1 and hence the total arrivals up to Dec. 29 stood at 11,169 tonnes against 6,115 tonnes in the last season. The sales were at 10,892 tonnes and 5,823 tonnes respectively. On the business front, the estimated exports of cardamom (small) from India during April - September 2013 witnessed a rise of 51% as compared to same period in 2012, meanwhile the exports of large variety dipped by 53%, in terms of quantity. Annual Outlook Range: Rs The fundamentals on the supply side show that the excess rainfall in major growing regions of cardamom has taken away the initial expectation of bumper production in the current crop year of Now, production is estimated to be around tonnes, which is about 6% less than the year production. In this year , the growers are expecting the output to be further down, around 30% lower. Factors affecting the decline in production are the heavy rains in the key growing areas of Kerala and Karnataka, climate change & labour requirements issues. Moreover, growers are opting for an intercrop after being hit by low prices during the previous seasons. According to them, anything below Rs 750 a kg is not remunerative. In the current scenario, the weighted average price as on December 1 stood at around Rs a kg as against Rs a kg as on the same date a year ago. On the international market, the harvesting of the new crop had just started in Guatemala & the crop size is similar to last year. Guatemala is the largest producer of cardamom in the world, with an average annual yield of between 25,000 to 29,000 metric tonnes. Currently, cardamom futures on MCX are reeling under supply pressure of above 100 tonnes at each auction from the current rounds of harvesting. The buyers are keeping away from fresh buying & not risking as they fear that with such pace of arrivals, the counter may fall further towards 650 levels. However, by the end of the year the inflow of 8mm bold capsules would witness a decline, giving support to the cardamom prices. Cardamom futures are expected to hold above 600 levels. In the first half of the year, the counter will possibly gain by 10-15% as the stockiest may hold back the capsules to meet the demand during Ramadan (July 28, 2014), keeping a view in mind that the supplies for the next season may remain tight as the output is declining on year-on-year basis. On the export front, the main export destination for India would be North Africa and West Asia region, with Saudi Arabia - the biggest importer. The United States and Europe are not looking at India for imports, as Indian parity is high. In EU and United States, demand is largely fueled by the large south Asian community residing locally. Cardamom wholesale distribution also takes place from Colombia as the cardamom grown in that region is fresh, aromatic and of superior quality. Going by the seasonality, in the latter half of the year i.e from July to October, cardamom prices are likely to plunge more than 20% on account of the fresh plucking that would start in the major growing areas such as Kerala & Karnataka. The whole harvest will be completed in 7 or 8 rounds, by maintaining a gap of days. The seasonal lows may be seen in the month of October as the bulk of the arrivals hit the spot markets. Moreover, the Guatemalan harvest begins in September and concludes in the February month. During the last three months of this calendar year, cardamom prices would possibly see a bounce back, pushed by the seasonal demand during marriages & winters. However, the upside may remain capped near 950 levels. Rs./Kg Yearly price movement of Cardamom futures Open High Low Close

28 Annual Commentary & Outlook: Turmeric Turmeric Annual Commentary Turmeric - the yellow spice, had a rough journey during the past year and it witnessed lows of 4426 levels on the national bourse, falling by more than 40%. During the period January-April, turmeric futures witnessed a consolidation in the range of levels, supported by demand from North India & increased buying by upcountry exporters. Heavy rains in Andhra Pradesh had damaged the crops and raised concerns over the availability of the quality produce. According to a press release issued by the Andhra Pradesh Government, around 9,240 tonnes of turmeric in Nizamabad yard were damaged due to heavy rain. By mid-april, prices of hybrid variety of turmeric at the spot market, touched Rs 10,000 per quintal. The farmers had begun to stock up turmeric expecting prices to go up further higher. However, the fundamentals reversed because the factors such as profit booking, dwindling upcountry orders & lesser buying interest from stockiest came into picture. Even, a day had come when 60% of the produce offered went unsold. The growers came with their medium and poor quality produce in Erode markets and holding back their quality produce, with an expectation of prices to improve. Turmeric prices failed to sustain at higher levels on the spot as well as on the national bourse due to higher carry forward stocks available in the domestic market. It was estimated that the spot market carried around lakh bags in the major mandies, which was easy to convene the demand till the year-end. Most importantly, the area under cultivation witnessed an increasing trend as farmers shifted from paddy to turmeric cultivation. On the export front, estimated export of turmeric from India during April - September 2013 witnessed a meager change of 2% in terms of quantity, while the increase in value was 37% more as compared to April - September 2012, as Indian Saffron has always been preferred in the foreign countries because of its bright yellow colour & high curcumin content. Annual Outlook Range: Rs The amount of stocks held, present crop scenario, export demand and domestic demand would be the major factors deciding the price of turmeric in India. In yellow spice, the carryover stocks from the previous year are estimated around lakh bags lakh bags. Coming to , the area under turmeric cultivation in Andhra Pradesh is around hectares, which is 21.38% lesser than in In Tamil Nadu, the area under turmeric cultivation in the current season ( ) is around hectares, which is 40% lesser than in Despite projections of a lower crop next season, there would be no shortage to meet the demand for the next 2-3 months i.e, around 8-10 lakh bags. The annual demand for turmeric is around lakh bags, which includes the domestic and export demand. In the current scenario, the harvesting has begun & may continue till end of the March. In the continuation, the fresh arrivals are likely to flow into the Erode market from Mysore region, during the period from January to April. On the demand side, the upcountry exporters are now lacking the orders from North India; hence the sales at the spot market are lower. Tracking the weak fundamentals of the spot markets, turmeric futures on the national bourse, is expected to face resistance near 7000 levels. The factors such as arrival pressure and high carry forward stocks are likely to keep a lid over the gains. Fresh turmeric arrival in Erode regulated market would start from mid January and get continued to June. Adding to it, the inflow of arrivals during January to April turmeric from Mysore region to Erode market, shall add to the selling pressure over the counter. The general trend in Erode market is the arrival of Mysore region crops during the month of January to April followed by Anthiyur, Bhavani, Gobi, Sathyamangalam, Thondamuthur, Kodumudi and Modakurichi regions. However, the downside may remain capped near 4500 levels, supported by the demand from the stockiest to store the commodity & make it available to the upcountry buyers throughout the year. As regards, the outlook on price movement, during the first half of the year, turmeric futures may witness a consolidation in the range of levels. The forward contracts of turmeric futures (July) is quoting near Rs.6244 per quintal. The seasonality pattern shows that the period of July-September, the counter may see a downfall as the demand for the yellow spice tapers off with the onset of monsoon, as the content of mositure increases. Moreover, the heavy rainfall occurs in the coastal regions & this hampers the shipments. In the last quarter of the year, turmeric prices may get pushed up towards 9000 levels by the factors such as lower level buying to meet the marriage season demand & export enquiries for high content of the Indian curcumin. Rs. /Quintal Yearly price movement of Turmeric futures Open High Low Close

29 Annual Commentary & Outlook: Jeera Jeera Annual Commentary Among spices complex, jeera futures fell the least by 19%, tested a low of levels. Factors such as low demand from stockists and favourable weather conditions in producing states kept a lid over the gains. Since the beginning of the year, the strong production estimates in Gujarat & carryover stock at around 8-9 lakh bags, softened the counter. However, the counter managed to take support above levels till mid-october, cushioned by exports orders getting diverted to India due to crisis situation in Syria. On the export front, the estimated export of jeera from India during April - September 2013 witnessed a whopping rise of 93% both in terms of value and quantity as compared to April - September For Singapore, Indian cumin seed with an allowance for 1% foreign matter was offered at $2,150-2,250/tonne free on board Mumbai. Cumin seed 1% for Europe was offered at $2,400-2,500/tonne on cost and freight basis. On the supply side, the global supplies were also less as other producing nations such as Turkey and Iran were facing a shortage of crop. India's jeera crop for the year was expected to be 400,000 tonnes, about 10-15% higher from the five year average but lower than the previous year's record production of 461,160 tonnes. In the last quarter of the year, jeera prices tumbled further on the back of increasing supply during harvesting season. Being a Rabi crop and getting good soil moisture after a good monsoon, the crop's acreage was higher due to the favourable weather conditions. Annual Outlook Range: Rs Jeera, being a tropical plant, is cultivated as a Rabi crop in India. Internationally, cumin is mainly grown in Egypt, Syria, Turkey and Iran. The estimated world production of cumin is around 300,000 tonnes. This season in India, a hope of higher production has emerged due to the favorable weather conditions prevailing over the major growing areas. On the contrary, some farmers on a minor scale have been seen to get diverted towards growing pulses. Jeera sowing has started in the key cultivating areas. Favourable weather conditions has helped crop in vigorous vegetative growth. Sowing operations are still on in some parts of Gujarat and Rajasthan. Weather remains favourable for the sowing, germination and vegetative growth of the crop. The initial estimates show that the seed area is likely to increase around 20-25% in Gujarat and in Rajasthan 25 30%. Jeera output is estimated at lakh bags (of 55 kgs each), higher than 40 lakh bags in The total carryover stocks of jeera are currently estimated at 8 lakh bags as against 10 bags during the same time a year ago. On the demand side, export enquiries are flowing into Indian pockets from the middle-east countries like Jordan and Iraq, which were usually the buyers from the main competitor - Syria and Turkey. The U.S, U.K, Japan, Brazil are the major cumin seeds importing countries. Both whole seeds and powdered seeds are internationally traded. Cumin essential oil is also becoming popular in the western hemisphere. Indian exports have witnessed a CAGR of 9% over the last 5 years. Jeera futures on NCDEX would consolidate in the range of levels till the month of May, as a selling pressure from the harvesting season would be there over the counter. Tracking the seasonality, jeera prices may rise by 10-15% in the month of June- July, taking the advantage of lean season in the global market. The new crop in Syria and Turkey is harvested in August September, so until then, Indian cumin seed finds good market in overseas countries. Currently, 1% Jeera of Indian origin is being offered for Singapore at $2,150-2,250/tonne (FOB Mumbai) while for Europe at $2,400-2,500/tonne (CNF). In long term, the upside momentum in jeera futures on the national bourse may remain capped near levels on account of higher output & carry forward stocks from the previous season. Yearly price movement of Jeera futures Rs. /Quintal Open High Low Close

30 Annual Commentary & Outlook: Chilli Chilli Annual Commentary In 2013, Chilli futures began the year with a bang, gained more than 14% in the month of January and made a high of 7130 levels. In the initial two months of the year, the factors such as shortfall in production and good export demand flared up the chilli prices on the national bourse as well as on the spot market. It was reported that around % decline in sowing was reflected in the output as well. However, with the beginning of the third quarter till the month of August, chilli futures plunged by 31% on account of profit booking from the higher levels along with a forecast of a good chilli crop in China and large carryover stocks of around 30 lakh bags in the cold storages in Andhra Pradesh. Moreover, India faced intense competition from China, as the later emerged as the largest paprika producer prompting oleoresin exporters to set up factories in the country. Statistics showed that India's Byadagi chilli production is around 1 to 1.2 lakh tonne, China's paprika production has crossed 1.5 lakh tonne. As cited by Spices Board of India, the estimated export of chilli from India during April - September 2013 dropped by 3% in terms of quantity as compared to April - September The fundamentals changed the price scenario from the month of September, as the monsoon failed to spread out evenly across the state of Andhra Pradesh & area under chilli dipped by 22%. Meanwhile, in Madhya Pradesh, much of the crop from the first picking was washed away by the excessive rains. In Karnataka, farmers were seen getting shifted to other lucrative crops like cotton. Taking advantage of lower level buying and reduced area under cultivation, chilli futures rebounded from its lows to make a yearly high at 7666 levels. The export demand from Sri Lanka and Bangladesh also added to the bullish sentiments. Annual Outlook Range: Rs The carry forward stocks of the current year in Andhra Pradesh is 40 lakh bags (1 bag= 35 kg) where as in Tamil Nadu, it is 2 lakh bags. As cited in the season and crop coverage report Rabi , by the Dept. of Agriculture, Andhra Pradesh, for the week ending with 4th December, 2013, the area sown under chilies is 27,301 hectares, is down by 4.91% as compared to the previous year. There are talks that if weather remain good till picking activity in January, Note: Currently no future contracts are available in Chilli production will improve. In Andhra Pradesh, new crop arrival is likely to hit the spot market after the month of January. Thereafter, Tamil Nadu chilli arrivals will start from March and extend till May, which were sown during October- November and raised in nursery or from directly sown. In the current scenario, new crop arrivals are coming from Madhya Pradesh region in the domestic market. In Madhya Pradesh, it is estimated that the total production of chilli in the state is likely to be around lakh bags as against the previous estimate of lakh bags for the current year. The price forecast made by the Domestic and Export Market Intelligence Cell - Tamil Nadu, revealed that the price of chilli would be ruling between Rs per quintal in February - March, The report also mentioned that the expected normal production in the current season and good domestic and export demand will keep the price to rule in the above predicted range. Thereafter, with the onset of summer season, demand for chilli may get dampened on account of closure of spot markets, due to peak summer season. On the national bourse, chilli futures would possibly maintain an uptrend taking support above 4800 levels. An extended upside may be seen towards 9100 levels, surpassing 7100 levels in the time frame from August to December. In China - the main competitor of India, there are reports that the whole output in 2013 year in XinJiang, main paprika planting area of China, is about thousand tonnes, which is about 20 thousand tonnes less than that in year of But quality is better, color is redder and asta is very high. Yearly price movement of Chilli futures Rs. /Quintal Open High Low Close

31 Annual Commentary & Outlook: Soyabean Soyabean Annual Commentary Giving a snap shot of the roller coaster ride, soybean futures on the national bourse augmented about 35% from the 3100 levels during the period from January till mid-april, buoyed by the robust demand for soymeal. As compiled by the Solvent Extractors' Association of India, the export of oilmeals during the same period was 1,633,622 MT as compared to 1,593,529 MT during Jan-Apr '12. Growing international demand for animal feed also pushed Indian oil meal exports. The major importing countries were Iran, Thailand, Vietnam & Japan. The depreciating rupee as against dollar added to the positive sentiments of the counter. During the period of May-July, soybean prices witnessed a steep downfall of about 29% from the high of 4182 levels & witnessed a low of 2973 levels. The major growing areas in Madhya Pradesh & Maharashtra witnessed good amount of monsoon showers which contributed to soil moisture, thereby giving a way for suitable situation for sowing. A better monsoon boosted the farmer's planting sentiment which eventually reflected in the planting momentum. On the supply side, as cited by the Central Organisation for Oil Industry & Trade (COOIT), last year's soybean crop revised downward to lakh tons from lakh tonnes. On the international front, as per latest International Grain Council report, global soybean output is projected to expand by 4% year-on-year in 2013/14, to a record 282 MT, on the expectations for bumper crops in South America. Thereafter from the month of August, market participants took the advantage of lower level buying and a life time low local currency as against dollar, which pushed up the soybean prices by about 35% to test the high of 4276 levels on the national bourse. There were concerns over the planting due to excessive rainfall in a couple of major soybean-growing areas. According to the survey conducted by Soybean Processors' Association (SOPA), the all India estimated yield for kharif 2013 witnessed a decline by 8.94%. On CBOT, U.S soybean futures swung between the high of 1630 to low at 1255 levels. The factors that added to the bullish sentiments were hot, dry Midwest weather threatened to erode crop yields & robust export demand for soymeal. As of November 21st, cumulative soybean sales stand at 93.5% of the USDA forecast for 2013/2014 (current) marketing year versus a 5 year average of 64.70%. On the contrary, Brazil weather looked favorable for a great start to the crop & rain in South America giving an improvisation to early crop development and yield potential. Annual Outlook Range: NCDEX: Rs CBOT: $1135-$1650 Rally in soyabean has been looking tired since past two months amid sustained supplies and bearish international trend. Though, sharp decline is unlikely in this counter on steady seasonal demand. As per the estimates given by the Central Organisation for Oil Industry & Trade (COOIT), the soybean crop for has been estimated at lakh tonnes with a yield of 837 kgs per hectare as compared to 107 lakh tonnes and yield of 1000 kgs per hectare in On the international market, the estimates of higher soybean production in major producing nations of U.S and South America will be taken as a negative force & remain in focus of the market participants. In the latest report, U.S Department of Agriculture has pegged Argentina's production at million tonnes, up 1.0 million due to higher projected area. The Brazil's soybean production is also on target to reach million metric tonnes. On the demand side, China's soybean imports are forecast to exceed 67.5 million tonnes in MY13/14, up from the estimated 60 million tonnes in MY12/13. Back at home, it is estimated by the COOIT, that in season the marketable surplus for crushing would be about lakh tonnes as compared to 97 lakh tonnes in The soybean seeds that would be retained for sowing are estimated to be at 9 lakh tonnes as compared to 7.50 lakh tonnes in the previous year. The direct consumption is estimated at 3.50 lakh tonnes as compared to 2.50 lakh tonnes in On the export front, India's soymeal exports may be limited to 4 million tonnes in 2013/14 as rains during the harvest damaged the oilseed crop. Most of it would depend on the magnitude of the rupee factor, which has a direct relation with the volume of exports. As regard price outlook, in the current scenario, soybean futures are likely to feel some selling pressure with the arrivals coming into the domestic market from the fresh harvest. The counter is likely to face resistance near 4000 levels. The forward curve of soybean futures on NCDEX is in backwardation, which suggests that the soybean prices are likely to trade in the range of levels, in the first quarter of the calendar year. Going by the seasonality, buying at lower level during the month of April, would possibly be a good strategy keeping in mind a rise of about 5-6% till the month of July, supported by lean season of arrivals. Thereafter, the counter may witness a steep correction of about 10-15% till the month of September, as the fresh harvest of the crop would hit the domestic market. In the last quarter of the year, soybean prices may stabilize near 3000 levels and see some bounce back cushioned by factors such as sustained export demand & lower level buying. Taking a long term view of U.S soybean futures on CBOT, the forwards month contracts are showing a downtrend owing to the record global soybean production pegged at million tonnes, up 1.4 million due to increases for Argentina and Canada. The Soybean futures (Nov '14) is projected at $11.29/bushel, down by more than 12% as compared to the current price. Rs. /Quintal Yearly price movement of Soyabean futures Open High Low Close

32 Annual Commentary & Outlook: Mustard Mustard Annual Commentary During the first half of the year, mustard futures on NCDEX witnessed a fall of 20% from the high of 4290 levels. Due to good subsoil moisture at the time of sowing & higher sowing, a bearish trend emerged in the counter. The useful showers during the initial months of the past year & continuous favourable weather helped to increase the production. The supply side fundamentals as cited by the Solvent Extractors' Association of India in the crop survey showed that overall area had increased to lakh hectares. The yield per hectare had gone up by 24% to 1,103 kg a hectare as against the previous estimate of 893 kg. The report of COOIT's trade estimate for Rabi oilseed production and availability during season, pegged mustard output at lakh tonnes, as compared to lakh tonnes in At the beginning of the last Rabi season, the SEA of India was involved in procurement of high yielding Gujarat mustard-3 variety (GM-3) & distributed to progressive farmers in Gujarat, Rajasthan, Madhya Pradesh and Maharashtra to increase productivity of this commodity. On the demand front, currency movement as against dollar reaching at all time low, cushioned the counter & capped the downside. In the later half of the year, mustard futures managed to take support above 3000 levels. The counter gained by 28% & stabilized near 3700 levels. The export of rapeseed meal during January-October '13 increased by 10% to 760,654 MT, as compared to the same period in the year The countries like South Korea, Thailand, Indonesia, Malaysia, Taiwan & Vietnam turned out to be bigger market for India. On the international market, rapeseed futures were down by 20% during past year on NYSE Liffe in Paris, dragged down by the record harvests from Europe to Canada & Ukraine, adding to the global glut. On the international front, global rapeseed supplies estimated by Oil World are likely to reach an all-time high of 70 million tons, up 2.5% from a year earlier. Annual Outlook Range: Rs Mustard is following the footsteps of soyabean and couldn't sustain over the supply pressure. India's mustard production is expected to increase by 11% to 78 lakh tonnes as projected by the Mustard Research and Promotion Consortium (MRPC). The favorable conditions such as high moisture in soil due to delayed rains, dip in temperatures & a higher minimum support price have encouraged the farmers of Rajasthan, Gujarat, Madhya Pradesh and Maharashtra to take up the Rabi crop in a large scale this season. The sowing of this winter crop has gained momentum & has raised an expectation of another bumper harvest this year. According to the latest data from the Agriculture department as on 13th December 2013, the acreage in the key-producing state of Rajasthan is higher by 2.41 lakh hectares at lakh hectares, while in Uttar Pradesh and Madhya Pradesh, it is marginally lower than the last year. Globally, as cited by the U.S Department of Agriculture, the mustard seed production is projected at a record 70.0 million tonnes, up 2.1 million tonnes due to gains for Canada and Australia. Canadian rapeseed production is raised 1.9 million tonnes to 18.0 million tonnes based on the latest survey results from Statistics Canada. Favorable conditions throughout the growing season resulted in record mustard seed yields last year. In days to come, the weather conditions in January will hold the key to the crop's output size. In the first half of the year, mustard futures will likely witness a correction towards 2700 levels on account of supply pressure from the harvest period which is from February to March, with arrivals peaking till the month of May. On the international market, the European Union farmers usually plant winter crops from August to October. The crop lies dormant over winter and is harvested in summer. During the second half of the year, the demand for the oilseed is expected to rise as the timeline shows that consumption of mustard oil improves prior days to Diwali from household, pickle industries & remains in pipeline till the winter days are off from the calendar. The counter is likely to take support near 2700 levels & see an extended upside towards 4300 level, surpassing 4000 levels. On the demand side, export scenario of rape meal is likely to remain sustained as it is being considered as a valuable component in feed for farm animals. Rs. /Quintal Yearly price movement of Mustard futures Open High Low Close

33 Annual Commentary & Outlook: Edible Oil Edible Oil Annual Commentary During 2013, crude palm oil futures on MCX outperformed among the edible oil complex rising by more than 25% making a high at levels. On the Bursa Malaysia Derivatives Exchange, the counter witnessed a rise of about 9%, taking support at 2130 levels. The ringgit fell towards per dollar, by about 12.88%, which boosted the buying from the overseas buyers. However, the upside was seen capped near 2700 levels, as output from Malaysia rose to a 13-month high of 1.97 million tonnes in October, while inventories climbed to 1.85 million tonnes, the largest since April, data from the Malaysian Palm Oil Board showed. Back at home, refined soy oil futures on the national bourse consolidated in the broader range of levels. The fundamentals that supported the rise were increasing consumption of vegetable oil, lesser availability of the competing soy oil in the domestic market & a steep fall in the rupee as against dollar, making the import costlier. The rupee hit a record low against the dollar at in August, but firmed slightly after that to settle down near levels. For the year, the rupee is down by 17.87%. Most of the India's cooking oil demand which is about million tonnes, is met from its import which comes from Malaysia and Indonesia. Overall production of the vegetable oils was almost stagnant at 8 million tonnes in , as compared to 8.1 million tonnes in , while consumption rose by 3%, due to increase in per capita consumption (3%) and population growth (1.76%). As cited by the Solvent Extractors' Association of India, India's overseas purchases of vegetable oil during Oil Year (Nov.'12 to Oct.'13) i.e. edible oil and non-edible oil in 1st quarter of the oil year was higher. However in the 2nd quarter it maintained the same level. In the 3rd quarter, import increased by 8.02%. But in 4th quarter, import is down by 9.68%. The overall import increased by 4.77% over the previous Oil Year. On the contrary, the stockpiles of cooking oils at Indian ports dropped to 14.0 lakh tonnes as compared to 15.7 lakh tonnes as on 31st October, Annual Outlook Range: Ref. Soya Rs CPO (MCX) Rs CPO (BMD) MYR Edible Oil Complex On the supply side, as per the COOIT's estimate, the vegetable oil available in season from Kharif oilseeds crop and the secondary sources are estimated at lakh tonnes as compared to lakh tonnes in The Cabinet Committee on Economic Affairs has approved the implementation of the National Mission on Oilseeds and Oil Palm (NMOOP) during the 12th Plan Period with financial allocation of Rs.3507 crore. This would help in enhancing production of oilseeds by 6.58 million tonnes. This would also bring additional area of 1.25 lakh hectares under Oil Palm cultivation with increase in productivity of fresh fruit bunches from 4927 kg/ha to 15,000 kg/ha and increase in collection of tree borne oilseeds to 14 lakh tonne. Implementation of the proposed Mission would enhance production of vegetable oil sources by 2.48 million tonnes from oilseeds (1.70 million tonnes), oil palm (0.60 million tonnes) and tree borne oilseeds (0.18 million tonnes) by the end of the 12th Plan Period. India being dependent on the imports from Malaysian & Indonesia to fill the gap between demand & supply, the forecast of oil imports (edible oil & non-edible oil) for the oil year (Nov-Oct) is estimated to be at 112 lakh tonnes as compared to 106 lakh tonnes in The major reason is an inverse duty structure in major exporting countries such as Malaysia and Indonesia, coupled with narrowing import duty differential between crude and refined oil. At present, the import duty on refined oils is at 7.5%, on crude edible oil is about 2.50%. Industry body Solvent Extractors Association (SEA) has been demanding a hike in import duty of refined oils to 12.50% to curb imports and protect domestic refineries. Due to inverted duty structure, Indian traders are favouring import of refined edible oil rather than of crude oils. Inverted duty structure impacts the domestic industry adversely as it has to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs low. Market participants would be keeping a close watch on the outcomes of the proposal to restructure import duty on refined edible oils and crude (vegetable) oils. Currently, the stock of edible oils as on 1st December, 2013 at various ports is estimated at 590,000 tons and about 880,000 tons in pipelines. 33

34 Annual Commentary & Outlook: Edible Oil On the demand side, as the edible oils constitutes an important component of food expenditure in Indian households, the per capita consumption is seen rising by 3 to 4% per annum. This increasing trend is driven by growing population, rising income levels and improved supply conditions. The per capita edible oil consumption in India is increasing (currently estimated at kg for MY 2012/13); however, this remains far below the estimated world average per capita consumption of 22.4 kg. Rs/10Kgs Yearly price movement of Refined soy oil futures The fundamentals of the international market show that Indonesian output will decline for the first time since Meanwhile in Malaysia, the output may decline as the recent floods have damaged several palm-growing parts. On the other hand, the Malaysian inventories at 1.98 million tonnes are still 23% lower than the 2.57 million tonnes in November Giving a spot light on the export duty, Malaysia left a tax on exports of the crude variety unchanged after stockpiles jumped to the highest since March. Indonesia raised the export tax to 12% for December from 9% in November. Regarding the price outlook, palm oil on the Bursa Malaysia Derivative is likely to maintain a support above 2100 levels. The upside may remain driven by increased use of palm-based biodiesel & versatility of palm oil through its vast applications in different industries from soaps to instant noodles & chocolate. Besides the top palm oil market like China, India, Bangladesh & Pakistan, the countries like the Middle East and North Africa are becoming the emerging markets. During the period January to October, the counter may consolidate in the range of levels, as the production is typically highest from July to October because of growing cycles. An upside may be seen in the last quarter of the year, when the output tapers off from November with January and February usually recording the lowest production Open High Low Close Yearly price movement of CPO futures (MCX) Rs/10Kgs Open High Low Close Back at home, crude palm oil futures may remain continue to face resistance near 630 levels & witness a correction due to lack of demand as it solidifies during winters. With the onset of summer season, the counter is likely to fall further towards 450 levels, breaching 540 levels, by the month of August-September in this year. On similar line, refined soy oil futures may witness a fall towards 600 levels, facing a resistance near 780 levels. In the last quarter of the year the edible oil complex may witness a rise of 10-15%, supported by the seasonal demand during winters & marriages. Market participants would also be keeping a close watch on the movement of Rupee, which will continue to influence the buying spree & the volume of imports. 34

35 Annual Commentary & Outlook: Sugar Sugar Annual Commentary Since the beginning of the year, sugar prices at the spot market as well as on the national bourse witnessed a steep downside, prices fell by more than 15%. Mill level rates for S-grade dropped below Rs 2,800 a quintal on the lower side, while on NCDEX the counter tested low at 2680 levels. The factors such as lack of demand and mounting selling pressure dragged down the sweetener prices throughout the year. At the spot market, the upcountry buyers sourced their needs locally hence producers were forced to sell in the local markets. The stockists preferred to keep themselves away from bulk buying, as the supplies were ample. Moreover, the counter remained subdued as the mills continuously sold sugar to cut stocks & preferred to import cheap sugar from the various foreign destinations even though there was self-sufficiency within the country. The average production cost was calculated at around Rs. 36,000/tonne while the market price hovered around Rs 31,000-32,000/tonne, handing over a net loss of Rs 4000/tonne. The estimated output was about 24 million tonne, leaving 1.5 million tonne in excess after meeting the domestic demand of 22.5 million tonne. On the other hand, exports have been negligible in the season. However, in mid-year the Centre decided to raise the Customs duty on sugar to 15% to discourage overseas buying. During the past year, in major developments, the government relaxed its penal norm of automatically converting unsold sugar into levy sugar in the given period of release from December to March. This outcome eased the pressure on mills to sell their sugar quota within the given timeframe, checking the crash in sugar prices. Secondly, the government gave freedom to sugar factories to sell their open market quota. Lastly, Cabinet Committee on Economic Affairs (CCEA) finally decided to decontrol sugar with certain riders. Taking into account, all the bearish fundamentals, the season ended on bearish note with carry-forward stocks of 8.8 million tonnes. On the international market, sugar prices in New York had dropped to a 3-1/2-year low, pressurized by rising prospects for higher output in Brazil. are at cents a pound, the longest slump of by 114% since February As cited by the U.S. Department of Agriculture, the global stockpiles are likely to reach an all-time high of million metric tonnes in the marketing period ending in Apart from the supply side, there is U.P issue also which can give significant impact on the prices. The current year sugar season ( ) in Uttar Pradesh began with an arrangement of mills agreeing to pay farmers Rs.280 per quintal in two installments i.e Rs.260 per quintal immediately and Rs.20 per quintal before the end of present crushing season. The Government approved modalities for providing interest-free loans worth Rs 6,600 crore to the sugar industry for payment of cane price arrears. This year, market participants will be closely eyeing on the proposal to link the sugarcane price with the sugar prices in the next crushing season. The Rangarajan Committee appointed by the Central Government, has recommended adoption of either of the following two formulas: a) Cane price should be 70% of the revenue realized from sugar, bagasse, molasses and press mud, or b) Cane price should be 75% of the revenue realized from sugar only (giving 5% weightage to revenue from the first stage by-products). Regarding the price outlook of sugar futures on NCDEX, in mid-term till the month of May, the counter may extend its fall towards 2400 levels, breaching Globally, a selling pressure is likely to mount during this period as supplies would be in its peak due to Brazil's sugar cane harvest season which runs from April to June. Thereafter till the year end the factors such as lower level buying, seasonal demand during summer season, followed by festivities will possibly give lend support, on account of which sugar futures may test 3200 levels. Rs. /Quintal Yearly price movement of Sugar futures 250 Annual Outlook Range: Rs The sweetening agent, sugar may continue to trap in bearish zone on smoother supply side amid the steady demand, like The seasonal demand during summer may limit the downside. On the supply side, the marketing year began with carry-forward stocks of 8.8 million tonnes, near to 5 year high. It is expected that by the close of the season on Sept. 30, 2014, the inventory may surge further to 10 million tonnes. The demand side fundamentals reveal that annual sugar consumption is of around 23 million tonnes & there is an opportunity to export 3 to 4 million tonnes. However, the export window seems to be bleak as the sugar prices in New York Open High Low Close

36 Annual Commentary & Outlook: Wheat Wheat Annual Commentary During the past year, wheat futures on the national bourse had been on a roller-coaster ride. The counter fell from high of 1595 levels to 1370 levels during the first quarter & then against it made a high of 1688 levels. The announcement of Rs 65 per quintal hike in the support price of wheat to Rs 1,350 per quintal, raised the prospects of higher output. In March, farmers in India began to harvest the sixth consecutive wheat crop that was expected to exceed demand. India, the world's second-biggest wheat grower, had produced a record output of million tonnes. On November 1, India's wheat stocks stood at 34 million tonnes, three times more than the target for the Oct-Dec quarter. The carryover of centrally held wheat stocks still grew by 4.2 million tonnes on a year-over-year basis, to 24.2 million tonnes, the highest since 2001/02. However, the record fall in rupee to levels emerged as a positive fundamental factor for the counter. Wheat futures rebounded, pushed by the higher exports. As cited by the International Grain Council, during the 2012/13 (Apr/Mar) marketing year, India's wheat shipments soared to 6.7 million tonnes. Furthermore, to push more exports the Government has reduced the floor price for wheat exports by $40 a tonne to $260. This step was taken to make Indian wheat shipments more viable in the global market. Indian wheat competes with grain from the Black Sea region. On the Chicago Board of Trade, wheat tumbled by 16% in the past year. As estimated by the United Nations' Food & Agriculture Organization, the global wheat harvest was seen at a record of million tonnes. According to U.S Dept. of Agriculture, world wheat stocks were projected at 2.2 million tonnes higher with the biggest increases for the European Union, Canada and Argentina. Annual Outlook Range: Rs This essential commodity may give a sigh of relief to the consumers as smooth supply should be able to satisfy the appetite of consumers without difficulty. Although, seasonality may give chance to both bulls and bears with limited swings in the prices. In , India is likely to achieve wheat production target of 92.5 million tonnes, as the storage water level in country's 85 major reservoirs is the highest in the last 10 years. As reported, the water level in the reservoirs was 78% or Billion Cubic Metres (BCM) of the BCM capacity, as on November 27, Moreover, acting on the recommendations of the Commission for Agricultural Costs and Prices, the Government has fixed Minimum Support Price (MSP) of wheat for the Agricultural Year (July-June) at Rs.1350 per quintal. The farmers of Madhya Pradesh are encouraged to take up wheat cultivation this year attracted by the additional bonus the State Government. On the export front, buoyed by better response the state entities such as MMTC (Metals and Minerals Trading Corporation of India), STC (State Trading Corporation) and PEC Ltd (A Premier International Trading Company) have invited bids to ship out 6.5 lakh tonnes. This is to take advantage of current global prices, also lower availability from Russia and Ukraine on account of severe winter. The government has reduced the base price for export from $300 a tonne to $260 a tonne to clear the heft stocks from the warehouses, before the arrival of the new crop. As cited by the USDA (U.S. Department of Agriculture), MY 2013/14 wheat exports are likely to reach 6.0 million metric tonnes. According to Food Corporation of India, wheat stocks in state godowns were estimated at 34 million tonnes as on November 1, against the requirement of 14 million tonnes. Since inception, looking at the uptrend in Wheat futures on the national bourse, quoting at 1685 levels, near the all time high of 1700 levels is expected to trade with an upside bias. However, during the first three months of the year, the counter may witness some correction as the supplies from the harvest of Rabi crop may exert a downside pressure. Thereafter, till the month of July, it may consolidate taking support above 1450 levels with upside getting capped on account of harvest in major producing countries such as China, U.S & EU-25. By the year end, factors such as lower level buying, seasonal demand during marriage season demand & festivities may add to the upside momentum for 1900 levels. In 2014, wheat prices internationally may witness a bearish movement, thanks to the strong global supplies. As cited by the International Grain Council, looking ahead to 2014/15, winter wheat planting is nearly complete in the northern hemisphere, and the global wheat harvested area is projected to expand by 1.4%, to about 223 million hectares. The forecast for world wheat production has been pegged at 698 million tonnes, total use is anticipated at 692 million tonnes, world trade is seen at 142 million tonnes and the end-season stocks projection is estimated at 181 million tonnes. Rs. /Quintal Yearly price movement of Wheat futures Open High Low Close

37 Annual Commentary & Outlook: Kapas Kapas Annual Commentary During the first half of the year, Kapas futures swung between gains and losses due to mixed fundamentals. The counter witnessed a high of 1100 levels, as registration for exporting cotton yarn was seen at a high of at least two years, owing to the burgeoning demand from Bangladesh and China. The Cotton Advisory Board scaled up the export and import estimates for the commodity for cotton year (October-September). However, by the year end, the commodity headed down towards 920 levels. The Cotton Corporation of India began selling its stocks built through market intervention operations as part of the Government efforts to hold the natural fibre's price line. Adding to the bearish sentiments, cotton exports dropped by 31% to 9.8 million bales in marketing year, but imports rose slightly to 1.47 million bales in the same period. China's slow purchase hit the cotton prices globally, sending the prices to a 10-month low as investors and traders fretted that China was gearing up to release cotton from its stockpile. China cut its purchases of domestic cotton for state reserves in 2013 to 731,050 tonnes, down 41% compared with the same period last year, according to data from the China Cotton Information Center. Bearish sentiments took a grip on the counter and estimates also showed that the India's output would climb to a record as above-average monsoon rainfall increased planting. Cotton Advisory Board (CAB) revised India's cotton production estimate upwards to 34 million bales for from 26.5 million bales. Annual Outlook Range: Rs The fundamentals of the domestic market as cited by the Cotton Association of India show that the Indian cotton output for (Oct-Sep) has been estimated at million bales. It includes a carryover stock of cotton on Oct 1 at 4.3 million bales and imports at 1.5 million bales. The cotton yield in India is expected to be only 540 kg per hectare in , slightly higher than last year's yield of 517 kg per hectare. In , the total demand has been pegged at 30.0 million bales, which would leave a surplus of 13.8 million bales next season. On the demand side, much will depend on China's import policies, movement of rupee as against dollar, competitive pricing and adequate supplies, which are expected to sustain interest in Indian cotton among foreign buyers. As regards China, MY13/14 imports are forecast down significantly at 2.2 million tonnes as massive state stocks, import constraints and slowing consumption would influence a slowing down of demand. In the supply side, the total cotton reserves of China are expected to grow as the country continues to purchase under its price support program. In a related note, a modification of the government cotton support policy is currently under consideration and may be announced in Based on a recent survey by China's National Cotton Market Monitoring Network, MY13/14 cotton production is estimated at 6.67 million tonnes, down by 12.30% as compared to MY12/13. The average yield is forecasted down by 9.30% to 1,415 Kg per hectare due to unfavorable weather impacts. Regarding the price outlook, cotton prices on the domestic market during the initial months of the year may remain range bound with upside getting capped, as the commodity would be amidst the peak arrival season & limited buying from mills. However, Kapas futures on NCDEX (Apr) is expected to take support above 850 levels. In the current scenario, the farmers are holding back their produce in expectation of getting a better price of about Rs 1,000 a 20 kg. During the period from March till September, the counter may witness a downfall by about 6% moving in lock steps with the seasonality pattern of cotton futures traded on the Intercontinental Exchange (ICE). The counter may also get pressurized by China's cotton auction from its stockpile. As cited by the International Cotton Advisory Committee (ICAC), Beijing will sell about 2-3 million tonnes of cotton from its huge state reserves. Adding to the bearish fundamental, the world demand & supply situation as estimated by the International Cotton Advisory Committee, would witness a record global cotton inventories by the end of the 2013/14 crop year. The world inventories will total 20.3 million tonnes by July 31 next year, 10% higher than inventories in the previous season. By the end of the calendar year, from September till December, factors such as seasonal demand and lean season of arrivals in the domestic market may prove beneficial to the investors. The seasonality pattern shows that during this period Kapas futures get expensive by about 9%. Rs/20Kgs Yearly price movement of Kapas futures Open High Low Close

38 Annual Commentary & Outlook: Chana Chana Annual Commentary During the past year, a downtrend persisted over chana futures as the counter witnessed a massive fall of more than 25%. The bearish fundamental factors such as slack buying support in export as well as local markets, higher arrivals of other pulses and yields going up in Madhya Pradesh pressurized added to the downside sentiments. On the supply side, the output of pulses in , was million tonnes, the best so far. In the beginning of the second quarter, lower level buying along with disequilibrium between demand & supply triggered a price increase in the counter. With a steady decline in arrival and enthusiastic buying support from millers, an upside momentum was seen in chana futures with a high of 4127 levels. Later during the year, profit booking from higher levels, lower demand from flour mills, cheaper availability from Australian, Canada, Tanzania & hopes of better sowing sent the commodity to 2500 levels. Amid report of favourable crop prospect and with harvesting of new chana crop, a panic button was seen among the stockists. Moreover, the government extended the ban on export of pulses by one more year, but allowed outbound shipments of kabuli chana, organic pulses and lentils with some riders. However, by the end of the year, chana futures stabilized near 3000 levels, supported by seasonal and marriage season demand & by a weaker rupee that gained strength as against dollar, touching its lowest at levels. Annual Outlook Range: Rs Chana futures on NCDEX are hovering near 2940 levels, down by more than 40% from its life time high of 4999 levels. The counter is facing a resistance near 3250 levels. The factors such as adequate carryover stock, arrival of new crops in the global market and continuous flow of imported chana in the domestic market are keeping a lid over gains. In the days to come, market participants would be keeping a close watch over the rupee movement as against dollar. A depreciating local currency makes imports costlier. India's annual demand of pulses is about million tonnes and growing. In , the demand for pulses is projected at million tonnes, an increase of more than 6%. On the contrary, Government of India has set production target of pulses for the year at 19 million tonnes. Hence, the deficit would likely to be bridged through imports. As per the first advance estimates of production of Kharif crops given by Ministry of Agriculture, the production of Kharif Pulses is pegged at 6.01 million tonnes, higher than the average production by 0.42 million tonnes mainly due to higher than average production of tur and urad. In the latest statistics, as the sowing of Rabi season (March Harvest) enters its last leg, the area sown under pulses in has been at lakh hectares, as compared to lakh hectares during same period last year. A good southwest monsoon & filled reservoirs in the country have pushed the prospects of a higher output. The present storage is 122% of last year's storage and 123% of last 10 years average storage during the same period. The spot prices at Delhi chana market is quoting near 3000 levels, the lowest in two years on account of selling pressure from the stockiest before the new crop hits the market in the month of February this year. On the national bourse, chana futures are likely to remain stable taking support above 2400 levels. The forwards contracts on NCDEX are in a contango, which shows an uptrend & that the commodity is quoting higher in the months ahead. The upside may get extended towards 3800 levels, surpassing 3400 levels. On the international market, the average price is forecast to decline, for the third consecutive year, due to higher world and Canadian supply. For , production of chickpeas is estimated to rise by 6% to 171 kilo tonnes & supply is estimated to rise by 29% from last year due to the large carryover stocks. Yearly price movement of Chana futures Rs. /Quintal Open High Low Close

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