Mentha oil spikes 8% in 3 days. Is there more juice left for traders?

NEW DELHI: Mentha oil jumped nearly 6 per cent on Friday to touch a one-year peak due to unfavourable weather conditions causing a delay in arrival.

On the Multi Commodity Exchange (MCX), mentha oil futures (June 30) surged as much as 5.66 per cent to Rs 1,040 per kilogram – a level last seen on June 11, 2020 – before giving up some of those gains.

The contract closed with a gain of Rs 50.70 or 5.15 per cent at Rs 1,035, having moved between Rs 1,023.6 and Rs 1,040 earlier in the day.

Mentha oil has taken its rally to 7.53 per cent in three consecutive days. The commodity has been in a broader uptrend since June 2, when it had quoted at Rs 912 per kg. With Friday’s jump, mentha oil again turned positive for Calendar 2021.

In the spot market, mentha oil quoted at Rs 1,157.20 a kg.

Analysts expect a pickup in demand with the unlocking of pandemic-related restrictions in different parts of the country.

“The handsome gains seen in the past three days are majorly due to weather conditions in the key sowing area of Uttar Pradesh causing a delay in arrivals in the market,” Ajay Kedia, Founder and Director of Mumbai-based Kedia Advisory, told ETMarkets.

“On Monday, we can see some fall/profit booking in the commodity due to clear weather conditions over the weekend,” he said.

He said the revival of the domestic fragrance industry is positive for mentha oil, and the reduction in the lot size from this month has led to more active trades in the commodity.

How to trade mentha oil

Kedia recommends buying mentha oil July futures on dips towards Rs 1,030 for a target of Rs 1,120 from a week’s perspective with a stop loss at Rs 1,000.

NS Ramaswamy, Head of Commodities at Ventura Securities, suggests going long on the MCX mentha oil contract in the range of Rs 1,050-1,040 for a target of Rs 1,250, and then Rs 1,350. He recommends a stop loss below Rs 900.

Mentha oil is used by industries such as pharmaceuticals and FMCG for manufacturing soaps, sanitizers and cough syrups. It is also used heavily in the pan masala business. Besides, mentha also commands high demand in the production of cosmetics and confectionery goods.

Uttar Pradesh is the top mentha-producing state of the country, which is the world’s largest producer and exporter of mentha oil.