TransGraph Research Consulting Technology TransGraph Research Consulting Technology Commodity Price Risk Management solutions Impact of Currency on commodity markets and price outlook of currency, meal, maize and sugar June 2015

© TransGraph Consulting Pvt Ltd Slide US Dollar Index Vs ICE Brent Crude Oil

© TransGraph Consulting Pvt Ltd Slide Brazil Sugar FOB, USD/MT Vs. BRL/MT Local response to the steep fall in Global prices

© TransGraph Consulting Pvt Ltd Slide Argentina Soybean, USD/MT Vs Arg Peso/MT Local response to the steep fall in Global prices

© TransGraph Consulting Pvt Ltd Slide Since last September, the whole world is basking under the glory of US dollar. Import dependent countries, countries with negative trade balance, countries with low forex reserves suffering from the mighty dollar. Who else is left? Malaysia with positive trade balance and India with negative trade balance both are witnessing depreciation of their currencies. It is important to take view on dollar before we finalize a view on any commodity. Strong inverse relationship between USD and commodities

© TransGraph Consulting Pvt Ltd Slide PMI, IP and Interest Rates indicate supportive medium term prospects 6

© TransGraph Consulting Pvt Ltd Slide US Economy – Stronger dollar affecting trade growth 7  Trade deficit for JFM’15 widened compared to OND’14 from USD -127 billion to USD -130 billion with widening goods imports.  Lower services surplus amid stronger dollar added to the widening of deficit during the quarter.  With the deficit wider than USD -123 billion witnessed in JFM 2014, the clear impact of stronger dollar shall be a deterrent for the US Fed to hike interest rates.

© TransGraph Consulting Pvt Ltd Slide US Economy – Housing markets improving after slow start to  Housing markets have shown the improving scenario in the present quarter after sudden fall in the JFM’15 quarter signaling growth in economy which may effect the Fed’s interest rate decision later this year.

© TransGraph Consulting Pvt Ltd Slide US Economy – Improving housing and labor markets to aid improvement in Q2 growth 9  Unemployment which is one of the most important parameters is healthy.  GDP for the AMJ’15 is expected to grow at 1.2% from -0.7% recorded in the previous quarter.

© TransGraph Consulting Pvt Ltd Slide US GDP expectation revised lower for 2015  Since the first quarter GDP has turned negative (-0.70%), Fed’s targeted economic growth expectations are likely to remain undermined–limiting the central bank from bracing hawkish monetary policy.  Further, inflation on a Y/Y basis has remained at -0.11% in April’15, which too may limit the Central Bank from triggering a change in the rate cycle.  Although, labor market has improved considerably quite near the Fed’s long term target – weakness in economic activity and consumer confidence is likely to act as a dampener limiting the upside move in the greenback. 10 HeadsPeriod GDP (% Change) Jun % – 2.0%2.4%-2.7% Mar % - 2.7% Dec % - 3.0%2.5% - 3.0% Sep % - 3.0%2.6% - 2.9% Unemployment Rate in % Jun %-5.3%4.9%-5.1% Mar % - 5.2%4.9% - 5.1% Dec % - 5.3%5.0% - 5.2% Sep % - 5.6%5.1% - 5.4% Inflation (% Change) Jun %-0.8%1.6%-1.9% Mar % - 0.8%1.7% - 1.9% Dec % - 1.6%1.7% - 2.0% Sep % - 1.9%1.7% - 2.0%

© TransGraph Consulting Pvt Ltd Slide US FOMC consensus view on policy rates (Jun 2015 meeting)  Views of rate hike between 0.25%-0.50% in 2015 (15 out of 17 voting members favor at least 0.25% rate hike while 2 members do not favor rate hike this year) remain while longer term target remains around 2-3%.

© TransGraph Consulting Pvt Ltd Slide Dollar Index price outlook The Dollar Index is in corrective mode since testing 100 level in March. In coming weeks, DXY is expected to hold support of and bounce back towards in coming 2-3 months before a medium term correction towards 90 zone towards Sept-Oct’2015. Holding 90 zone as support, prices would resume long term bullish tone towards 105 in early 2016.

© TransGraph Consulting Pvt Ltd Slide Weaker EURO aiding German growth  German economy has shown the growth of 1.1% in the first quarter of  Recent business surveys and PMI numbers point to negative impact on business conditions.  Going ahead, reducing PMI and future debt repayment risk from Greece by Jul’15 is likely to remain a key downside threat. 13

© TransGraph Consulting Pvt Ltd Slide Consumer confidence 14  Rise in inflation to 0.3% in May due to rising import prices and increasing money supply indicating initial success of QE.  Improving consumer confidence should cap the downside in EUR- USD.

© TransGraph Consulting Pvt Ltd Slide Greece likely to make initial payment in June but future tranches remain in doubt  Greek repayment capability and upcoming debt pressure in the coming months shall keep markets on a cautious tone.  Threat of a Greek exit from the Euro zone to trigger intermittent risk-off trades in the medium term.  However, Optimism over improving economic growth expectation from 1.2% to 1.5% by EU commission and vague hopes of Greek debt payment is likely to cap weakness in euro. 15 Greece GDP 180 billion Dollars Debt 340 billion dollars (304 billion Euro) Debt to GDP:180% With out growth, how can they repay?

© TransGraph Consulting Pvt Ltd Slide ECB stimulus and Greece concerns to keep EURO under pressure in the longer term  Concisely we expect concerns over Greece debt repayment and Fed rate hike expectations is likely to weigh on euro in the medium term.  German economy has shown the growth of 1.1% in the first quarter of We expect the other economies in euro zone are likely to show the improving economic picture in second quarter.  Optimism over improving economic growth expectation from 1.2% to 1.5% by EU commission and vague hopes of Greek debt payment is likely to cap weakness in euro.  We expect Greece will make the successful payments to IMF and exit from euro zone remains a distant future.  From the longer term perspective, improving fundamentals have certainly eased concerns about a deflationary spiral  However, as the ECB continues its QE into 2016 and the Fed begins to hike policy rates (likely in late 2015), the euro should weaken further towards parity to the dollar (1) in 2016.

© TransGraph Consulting Pvt Ltd Slide EUR-USD price outlook Prices have bounced back from USD 1.04 zone and honored resistance in USD 1.14 area. Currently unfolding swing would honor resistance of USD 1.15 and correct lower towards USD 1.06 in coming 2-3 months before a final upswing towards USD Subsequently prices are expected to resume broad weakness and fall towards USD 1 and below towards end of this year.

© TransGraph Consulting Pvt Ltd Slide Indian GDP growth remains strong  Strong industry and services growth while agriculture growth contraction keeps Indian Q4 GDP stronger than expected  Manufacturing sector has recorded the growth rate of 8.4%, electricity and related sectors grown at 4.2%. Mining and quarrying has shown growth of 2.3%.  Earlier, manufacturing, mining and industrial activity remained the weakest head in Indian economic growth due to mining ban and policy paralysis.  However, with the change of leadership at the center coupled with reviving mining and focus to “make in India” has triggered improved output.  While in service sector financial, real estate and professional services recorded growth of 10.2%, trade, hotels and related segments grown at 14.1%. Construction sector has grown at 1.4% and defence services recorded growth of 0.1%. QuarterAgricultureIndustryServicesGDP growth JFM %3.65%5.57%4.89% AMJ %6.48%8.13%7.01% JAS %5.53%9.75%7.76% OND %4.64%11.73%6.60% JFM %7.17%10.26%7.50%

© TransGraph Consulting Pvt Ltd Slide Economy poised for higher growth in FY’16  Indian economy has shown the growth of 7.5% in the last quarter of FY Agriculture, forestry and fishing has recorded a negative growth rate of 1.4%.  Overall India has recorded a GDP growth rate of 7.22% for the FY when compared to 6.56% recorded in the previous year.  Growth is expected to accelerate by 7.8% during the current fiscal with revival in industrial growth aiding growth

© TransGraph Consulting Pvt Ltd Slide Highest foreign inflows recorded in but drying foreign inflows a concern in the short-term  Net outflows during the month of May 2015 amid concerns over retrospective tax.  Consistent inflow key for Rupee market in the coming months

© TransGraph Consulting Pvt Ltd Slide Medium term fundamentals support appreciation in Indian Rupee  High foreign currency reserves and lower inflation has limited the weakness in Indian rupee unlike other EM currencies. However, the subdued inflation made the RBI to cut interest rate (Repo rate) by 25 basis points to 7.25%.  Retrospective tax for foreign investors (MAT) and delay in monsoon remains the key downside risk to the Indian rupee. 21

© TransGraph Consulting Pvt Ltd Slide Trade deficit remains under control  Trade deficit for the last quarter of FY declined from USD -39 billion to USD - 32 billion mainly due to decrease in imports (Majorly gold and oil) amid stronger dollar.  For the first quarter of FY trade deficit is likely to widen as the imports are likely to grow although there is slight uptick in exports.

© TransGraph Consulting Pvt Ltd Slide BoP supports medium term strong fundamentals of Indian Rupee  Revision to merchandise trade balance for JFM 2015 keeping current account in deficit against our expectations of surplus  Overall BoP for stands at highest since Lower Current account deficit and continued improvement in FDI shall add another USD 48 billion in Indian Balance of Payments (USD Billion) ItemOND 2014JFM e p Current Account Merchandise trade balance Invisibles Total Current Account Capital Account FII FDI Others* Total Capital Account Balance of Payments *Note: Others include net commercial borrowings, short term loans, banking capital and other capitals 23

© TransGraph Consulting Pvt Ltd Slide Fiscal deficit – Target at 3.9% for Indian Fiscal deficit at a glance INR Crore (A) (RE) (BE) change YoY % change YoY % Revenue %4.56% Tax Revenue (net to centre) %1.25% Non-Tax Revenue %1.79% Recoveries of Loans %-1.22% Other Receipts %121.69% Total expenditure %5.73% Non-Plan Expenditure on revenue account %7.50% Plan Expenditure on revenue account %-10.05% Non-Plan Expenditure on Capital account %16.26% Plan Expenditure on Capital account %33.85% Fiscal deficit (Expenditure- Revenue) %8.39% Interest Payments %10.89% Primary deficit (FD-IP) %-1.75% Source: Indian Union budget, A=Actual, RE=Revised estimate, BE=Budget estimate 24

© TransGraph Consulting Pvt Ltd Slide USD/INR price outlook Short term Elliott wave count is indicating a prices are likely to extend current gains as minor wave C within broader corrective intermediate wave B towards INR 66 in coming 1-2 months and resume downside towards INR 62 and below towards end of the year as intermediate wave C within primary wave 4.

© TransGraph Consulting Pvt Ltd Slide Malaysia – Rising crude oil prices aiding inflation revival and rebuilding of forex reserves  Improvement in crude oil prices have halted the deterioration in forex reserves  With exports improving amid rising oil prices, forex reserves are likely to witness further increase in the near term aiding the currency.  Consumer price inflation rose to 1.8% in the month of April from 0.9% recorded in the previous month signaling improvement in growth of economy.

© TransGraph Consulting Pvt Ltd Slide Malaysia –subdued economic outlook  Economy grew by 5.6% in the first quarter of FY due to increase in private consumption, investments and improvement in manufacturing sector.  Compared to nearly 6% GDP growth in 2014, the economy is expected to grow around 5.4% in  Industrial production growth declined to 4% in April compared to 6.9% in March indicating weak manufacturing activity in the second quarter.  However, trade balance is likely to improve further in the coming months amid increasing exports.

© TransGraph Consulting Pvt Ltd Slide USD-MYR price outlook USDMYR is likely to honor resistance of MYR 3.80 and correct towards MYR in coming 2-3 months before rising towards MYR towards end of year 2015.

© TransGraph Consulting Pvt Ltd Slide Indonesian Economy – Fundamental Snapshot Indonesia Rupiah dropped to level(17 year low level) against the USD due to rising dollar demand from local importers. Foreign exchange reserves declined to USD billion in the month of May from USD billion in the preceding month, profit booking in US dollar index and stable domestic inflation expectations have checked the weakness in IDR. In the month of April, trade balance declined from USD 1.13 billion to USD 0.45 billion to. But, recovery in manufacturing activity remained supportive for economic growth.

© TransGraph Consulting Pvt Ltd Slide Indonesia growth likely to pick up in the long term Indonesia government is likely to exempt luxury tax on most goods to boost household consumption and revive faltering economic growth. Weakness in terms of trade and commodity exports coupled with continued impact of policy tightening aimed at addressing fiscal concerns is likely to result in lower economic activity. Indonesian economy is expected to grow by 4.95% in the second quarter of FY compared to 4.71% recorded in the previous quarter due to slight improvement in manufacturing activity and consumer spending. Going ahead, sluggish economic growth amid rise in unemployment rate and ease in government spending should weigh on IDR. Fed interest rate hike expectations later this year and volatile bond yields is likely to pressurize IDR in the medium term.

© TransGraph Consulting Pvt Ltd Slide USD/IDR price outlook USD/IDR pair is likely to witness steady depreciation towards and above towards third quarter of year before any significant correction.

© TransGraph Consulting Pvt Ltd Slide ICE Brent Crude Oil Futures…..Elliott wave count ICE Brent crude oil prices are likely to hold above USD 58 and extend higher towards USD ahead of turning lower towards USD 50 in the coming 4-5 months time frame.

© TransGraph Consulting Pvt Ltd Slide ICE Sugar 11 Futures ICE Sugar 11 Futures prices are within a long term down trend and are lacking any renewed buying interests while hovering between 13cents - 12cents. From Elliott wave perspective the minor wave ‘e’ of intermediate wave “C” of corrective wave “Y” of a complex corrective structure is underway. Hence extension of further weakness towards cents is expected in coming couple of months.

© TransGraph Consulting Pvt Ltd Slide S-30 Kolhapur Sugar Kolhapur Spot prices are in a long term downside corrective phase since April 2012 high of INR According to Preferred Elliott Wave counts, Sugar Kolhapur Spot price is under going minor wave ‘5’ of intermediate wave “5” of the primary correction “ABC”. While under going minor wave '3', prices are likely to test lower level of INR 2120/2100 in coming couple of months before turning positive towards INR 2400.

© TransGraph Consulting Pvt Ltd Slide M-30 Muzaffarnagar Spot Sugar Muzaffarnagar Spot prices are in downside corrective phase since Sept.2012 high of INR According to Preferred Elliott Wave counts, Sugar Muzaffarnagar Spot price is under going intermediate wave ‘3’ of the Primary corrective wave “C” of “ABC” correction. While under going intermediate wave ‘3', prices are expected to test lower levels of INR 2300 in coming couple of months.

© TransGraph Consulting Pvt Ltd Slide CME Corn Futures 36 CME Corn futures prices are likely to have limited potential above Usc 380 on any gains and turn lower towards USc 300 in the coming 3-4 months time frame. Subsequently prices trend could turn positive.

© TransGraph Consulting Pvt Ltd Slide Maize Nizamabad Spot Price, INR/Qtl. 37 Maize Nizamabad Spot Prices are trading on positive notes with gradual rise since Oct Prices are expected to continue its positive trend and may test higher levels of INR by July/Aug 2015, followed by a downside move towards INR 1250 by Oct./Nov/2015.

© TransGraph Consulting Pvt Ltd Slide CME Soy Bean Futures, Continuation Cents/bu. CME Soybean prices CMP of cents (July’15 Contract), post making a low of cents in the first week of Oct 2014 and traded higher for couple of months and turned lower thereafter. Going forward prices are likely find resistance below 980 cents and trade on sideways to weak note towards 850 cents and lower in the coming 2-3 months.

© TransGraph Consulting Pvt Ltd Slide CME Soy Bean Nov 2015 Futures, Cents/bu. CME Soybean prices CMP of cents (Nov ’15 Contract), post finding resistance near cents in Nov 2014 are trading lower and making lower lows and lower highs within the falling channel. Going forward prices are likely find resistance below cents and trade on sideways to weak note towards 850 cents in the coming 2-3 months.

© TransGraph Consulting Pvt Ltd Slide CME Soy-meal futures prices CMP at USD (July-15 Futures) post finding support at USD in the first week of October 2014 rallied sharply and tested high of USD 417 and turned lower thereafter. Going ahead prices are likely to find resistance below USD 330 and trade on sideways to weak note towards USD in the coming 2-3 months. CME Soy Meal Futures, Conti USD/Short Ton.

© TransGraph Consulting Pvt Ltd Slide CME Soy-meal Dec 2015 Futures prices CMP at USD post finding resistance near USD in Nov 2014 are trading on sideways to weak note, forming lower lows and lower highs within the falling channel. Going ahead prices are likely to find resistance below USD 310 and trade on sideways to weak note towards USD in the coming 2-3 months. CME Soy Meal Dec 2015 Futures, USD/Short Ton.

© TransGraph Consulting Pvt Ltd Slide NCDEX Soybean futures, INR/Qtl NCDEX Soybean Future prices (CMP – 3805) post finding resistance near 78.6% retracement of the previous fall at INR4412 are turning lower in the last one and half month. Going ahead prices are likely to hold below INR 3900 and trade on sideways to weak note towards INR in the coming 2-3 months.

© TransGraph Consulting Pvt Ltd Slide Soy Meal F.O.R. Kandla, INR/MT Soy meal FOR Kandla (CMP-35300) fell sharply in the last five weeks after finding resistance near INR in May Currently prices are trading lower after finding resistance around 70.7% retracement of the previous fall. Going ahead, prices are likely to stay below INR and trade lower towards in the coming 2-3 months.

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