The rally in chana prices, which started in September 2014, ended last month. The chana futures contract in NCDEX plummeted 17 per cent in the first three weeks of June to about ₹4,025. However, the price has recovered sharply in the last couple of weeks and the contract trades at ₹4,455 now.

In the beginning of this month, the Rajasthan government relaxed the stock limits it imposed earlier. Following this, last week it has also exempted all the warehouses registered with Warehouse Development and Regulatory Authority from the stock limits. These two moves helped chana prices reverse higher by about 7 per cent in the last two weeks.

The sudden fall in the price in the month of June took the market by surprise. The drop in price was precipitated by a crackdown by the government on hoarding, say analysts. According to experts all those who had hoarded chana offloaded it into the market as government started inspection of warehouses.

The Rajasthan Government imposing stock limits for pulses also helped in pushing the price lower. Apart from imposing stock limits on chana, the Centre announced import of pulses to curb the price rise. Taking note of the continued escalation in the price of pulses, the government has been taking stringent action against speculators.

Mixed outlook

The third advance production estimates released by the Ministry of Agriculture show that chana production is expected to fall about 20 per cent this year to 7.59 million tonnes from 9.53 million tonnes in the previous year. This has been the key driver of prices until recently. But with prices correcting, demand picked up on bargain buying. Upcoming festive season demand could also provide support. However, the upside in prices on such a reversal could be limited, say analysts. Veeresh Hiremath, Head of Research, Karvy Comtrade, says, “The government is concerned about high retail prices, so they will take all possible steps to keep prices under check.” So the rally witnessed in the last two weeks could be shortlived.

Technical outlook

Short-term view : The contract has closed last week above its key 55-day moving average resistance poised at ₹4,442. If it can sustain higher above this hurdle, then the recent bounceback move can extend further to test the next resistance at ₹4,538, which is the 61.8 per cent Fibonacci retracement level.

Another important resistance is also at ₹4,580. These two resistances could be a cap on the upside for the contract. A reversal from these hurdles can take the contract lower once again to ₹4,200 and ₹4,100 levels.

Key short-term support for the contract is at ₹4,100. A break below this support can drag it lower to ₹4,013. The downside pressure will ease if the contract manages to breach above ₹4.600 decisively in the coming days.

It will then open doors for a fresh rally to revisit ₹4,800 levels. But such a sharp rise in price looks unlikely at the moment.

Medium-term view : Though there is room left for the NCDEX chana futures contract to decline in the coming weeks, key medium-term supports are ahead which can halt this fall.

An important trendline support is at ₹3,850 and then the 50 per cent Fibonacci retracement support level is at ₹3,753.

The downside is expected to be limited to the ₹3,850-3,753 support zone.

Fresh buying interest is likely to emerge at these levels. Therefore, a reversal from here will hold the potential to take the contract higher to ₹4,200 and ₹4,400 thereafter.

The downtrend will gather momentum if the contract breaks below ₹3,753.

The ensuing target on such a break will be ₹3,500. However, such a break and a sharp fall appear unlikely at the moment.

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