Mentha oil prices rise 18% so far in August. Should traders buy or book profits?

Mentha oil futures shot up over 4% to the day’s high of Rs 1,048.90 per kg on the MCX on Tuesday, taking the rally to 18% on a month-to-date (MTD) basis. The commodity is currently trading at a 4-month high level, riding on sentiments around the fall in output and the prices could remain firm, going ahead opine experts.

Commenting on the current surge, Anuj Gupta, Head Commodity & Currency, HDFC Securities said the rally in mentha oil futures has been on the back of crop damage due to floods in many areas where the crop is sown, including Barabanki, Chandausi and Rampur, low arrivals and growing export demands.

He advised traders to buy MCX Mentha Oil August futures at Rs 990 with a stop loss of Rs 965 and a price target between Rs 1,040 and Rs 1,060.

The low production, demand from domestic FMCG companies and exports is likely to keep prices on the up, Gupta said.

“The years 2022–23 witnessed a significant decline in the production of mentha oil, with only 41,937 MT produced compared to 48,389 MT in the previous year. This led to an increased reliance on synthetic menthol, which impacted the price of mentha oil. Looking ahead to the years 2023–24, the production of mentha oil is expected to drop even further, down to 32,259 MT. This represents a decline of over 23%, which is likely to lend further support to the prices of mentha oil,” Neha Qureshi, Senior Technical & Derivative Analyst, Anand Rathi Commodities & Currencies told ETMarkets.

She also sees the production of synthetic menthol declining by about 20%, from 4,193 MT to 3,355 MT and said that it could further prop up the prices.
The Anand Rathi analyst sees the export market benefiting from rupee depreciation and expects these factors to collectively shape a promising outlook for mentha oil’s market trajectory.On the daily chart, MCX Mentha Oil August futures are trading above the falling trend line which indicates bullishness in the counter. The 21 & 50-day Simple Moving Average (SMA) has given a positive crossover on the daily timeframe, she said.

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She recommends a buy-on-dip strategy.

Brokerage firm Geojit also has a positive view on Mentha Oil futures with support seen at Rs 924 and resistance at Rs 1,022.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)