Even as the BSE Sensex briefly breached the 50,000-mark on Thursday yielding nearly 100 per cent gains for the investors from its March lows, commodities, too, created a positive momentum to emerge as strong companions to equities.

The disruptions from Covid-19, while posed uncertainty about future, did also prompt governments to extend monetary and fiscal support to the economy. This, according to analysts, triggered a collective rally in equities, bullion, metals and agri-commodities from the lockdown days.


Dissecting the relation between the rally in equities and commodities, Ajay Kedia, Director at Kedia Commodity, informed that in a rare instance, gold and equities moved in tandem as a fallout of Covid-19 uncertainty and the government push that followed.

“Equities fell sharply as businesses started getting hurt due to Covid-19. The uncertainty triggered safe-haven buying for gold. But soon after governments came up with financial package to revive the economy, which fuelled the equities rally. This is rare. What also fuelled the base metals is the resumption of industrial activities which triggered strong buying and we saw metals gaining sharply from their lows in March,” Kedia told BusinessLine.

As against the near-100 per cent rally in S&P BSE Sensex from March 2020, MCX Comdex Base Metals reported nearly 52 per cent rise, followed by about 24 per cent gain in MCX Comdex Gold index.

“Since the second quarter of 2018, we had seen perpetual buying in bullion due to various international factors including geo-political tensions, lower interest rates in the US among others. Secondly, base metals including aluminium, zinc, nickel, copper directly represent the industry or economy,” he added. Nickel futures have gained by nearly 32 per cent within a year, followed by zinc futures at 21 per cent, aluminium futures by 17 per cent and lead futures by about 10 per cent in past one year.

While industrial metals or base metals and bullion tried to match the upward momentum built by the equities, agri commodities were slow to join the rally.

Slow start to agri-comm

NCDEX Agridex, which comprises agri commodity futures, saw a fall from 1091 points in the beginning of 2020 to about 920 points by mid-March 2020. Also, MCX Comdex Composite index fell from 10,549 on January 21, 2020 to 7,927 points on March 18. However, the recovery from these 52-week lower levels was quick and sharp.

Experts attribute the strong recovery in the agri indices to the higher commodity prices led by edible oils and oilseeds and pulses including chana. Tight demand-supply conditions had stoked a rally in chana prices from about ₹3,600 a quintal to ₹5,500during October.

“Historically, it has been proved that whenever an epidemic or a pandemic strikes the world, there is overall rally in the agri commodities. And agridex index is a good barometer to measure the agri price movement. During the COVID-19 period in 2020, pulses demand had shot up, so was for the edible oils led by mustard and soyabean,” Kedia added.

From its lower levels of March 2020, NCDEX Agridex and MCX Comdex Composite exhibited sharp recovery with about 25 per cent and 35 per cent gains, respectively. Although, the gains were lesser than what was seen in the equities or industrial metals, the upside momentum in a short span of time put agri commodities on hot list for investors.