2019: Issue 667, Week: 21st – 25th January
A Weekly Update from SMC (For private circulation only)
NEY 
| Equity | 4-7 |
| Derivatives | 8-9 |
| Commodity | 10-13 |
| Currency | 14 |
| IPO | 15 |
| FD Monitor | 16 |
| Mutual Fund | 17-18 |
G
lobal markets witnessed sustained buying amid optimism for progress in U.S.- GChina trade talks. Rising optimism too reflected on the crude prices that slowly but steadily staged a comeback from the lows. Beige book report out of U.S. showed that while economy continues to grow at a modest pace but the optimism is waning among U.S. businesses on concerns over shutdown, trade disputes and volatile stock market. Inflation in Japan slowed again in the month of December highlighting the difficulty of reaching the central bank’s 2 per cent price goal as a result of lower energy costs. Central Bank of China pumped nearly $83 billion into the financial systems in order to address funding shortage ahead of the Chinese New Year and to let banks to lend money to companies at cheaper rates. U.K. parliament rejected Theresa May’s Brexit deal just when it is due to leave the EU in 10 weeks. Euro-area strongest economy, Germany, avoided a recession in the last quarter of 2018 and it saw slight increase in GDP.
Back at home, Industrial activity dipped to seventeen month low to 0.5 per cent for the month of November 2018. Inflation too both at consumer and wholesale level came at a low level of 2.19 per cent and 3.8 per cent respectively reflecting fall in crude prices and pressure at factory gate prices. Going next week, economic data out of China and U.S., corporate earnings, trend in global markets, investment by foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) would determine the trend in global markets. Also the market will closely watch guidance and management commentary of the companies that are coming out with their results.
On the commodity market front, bullion counter upside momentum is likely to continue further as Brexit concerns along with China slowdown concerns will keep prices on upbeat note. Britain is due to leave the EU on March 29 but investors now anticipate an extension of that deadline. Furthermore rate hike pause by FED and partial US government shutdown are also assisting the prices. Gold can test the level of 32800 taking support near 31900 while silver can move further northwards and can test 40000 levels. Crude oil prices are expected to remain on buoyant path and can test 3850 in MCX. OPEC expects 2019 global oil demand growth to slow to 1.29 million bpd from 1.5 million in 2018. In base metal counter, prices can extend its recovery on China stimulus measures and growing optimism regarding US and China trade deal. Natural gas can remain buoyant as the 8-14 days weather outlook shows mostly the cooler temperature levels across the entire region whereas the eastern counties are expected to have lower to normal temperature levels being at levels of 30%- 60% below normal temperature levels. China GDP, retail sales and industrial production along with US existing home sales, core durable goods order and new home sales data.etc are some data and events scheduled this week.
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SMC does not represent/ provide any warranty express or implied to the accuracy, contents or views expressed herein and investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.
DOMESTIC NEWS
Economy
• Consumer Price Index (CPI) inflation fell to 2.19% in December which is an 18-month low. Wholesale Price Index (WPI) Inflation fell to 3.8 percent in December compared to 4.64 percent in November 2018.
Pharmaceuticals
• Aurobindo Pharma will acquire a portfolio of seven branded oncology injectable products from US-based Spectrum Pharmaceuticals Inc in a $ 300 million deal (over Rs 2,100 crore) which includes an upfront cash payment of $ 160 million. The acquisition will help company to enter the branded oncology market in the US with a range of products which are well recognized in the segment.
Technology
• Larsen & Toubro Infotech (LTI) announced the acquisition of Ruletronics, a pure-play Pega consulting and implementation company with offices in the UK, USA, and India for $7.48 million. The acquisition will strengthen LTI’s rapidly growing digital business with a suite of capabilities in Pega implementation space around establishing BPM Roadmap & Strategy, Customer Services, RPA and Decisioning.
Capital Goods
• BHEL won an order worth Rs 565 crore from Singareni Collieries Company for setting up solar photovoltaic (SPV) power plants in Telangana. The plants are to be set up at four locations in Telangana - Ramagundam (50 MW), Yellandu (39 MW), Manuguru (30 MW) and Pegadapally (10 MW), on engineering, procurement and construction (EPC) basis. The company said with the order its solar portfolio has risen to more than 710 MW.
Auto
• Mahindra & Mahindra (M&M) has unveiled a new variant of its recently launched multi-purpose vehicle Marazzo with an eight-seat option. The new version will cost Rs 8,000 more than the M8 seven-seater version, which is tagged at Rs 13.9 lakh (ex-showroom). It comes with various features like a seven-inch touch screen infotainment system, reverse parking camera with dynamic guidelines and 17-inch alloy wheels.
Metals
• Hindustan Copper plans to augment production capacity to up to 20 million tonne per annum by 2024 through strategy which includes expansion of existing mines like Malanjkhand and reopening of closed mines. The company's current capacity of copper ore is 3.8 million tonne per annum (MTPA). The company plans to pump in Rs 5,500 crore over the next six years to scale up its output by six times, is also looking to reopen its Rakha copper mine soon.
INTERNATIONAL NEWS
• U.S. initial jobless claims fell to 213,000, a decrease of 3000 from the previous week's upwardly revised level of 216,000. Economists had expected jobless claims to dip to 220,000.
• U.S. import prices fell by 1.0 percent in December after tumbling by a revised 1.9 percent in November. Economists had expected import prices to decline by 1.3 percent compared to the 1.6 percent slump originally reported for the previous month.
• U.S. producer price index for final demand dipped by 0.2 percent in December after inching up by 0.1 percent in November. Economists had expected prices to slip by 0.1 percent.
• Eurozone construction output declined a calendar and seasonallyadjusted 0.1 percent month-on-month in November, after a 1.6 percent contraction in October. Building construction advanced by 0.1 percent, while civil engineering fell by 0.2 percent in November.
• Japan overall CPI rises 0.3% on year in December, the Ministry of Internal Affairs and Communications said. That was in line with expectations and down from 0.8 percent in November. Core consumer prices - which exclude volatiles prices of food - were up an annual 0.7 percent. That was shy of expectations for 0.8 percent and down from 0.9 percent in the previous month.
• China's exports and imports in December, Exports dropped 4.4 percent year-on-year in December, figures from the General Administration of Customs showed on Monday. That was in contrast to the 3 percent gain economists had predicted. Imports decreased 7.6 percent from a year
| Stocks | *Closing Price | Trend | Date Trend Changed | Rate Trend Changed | SUPPORT | RESISTANCE | Closing S/l |
|---|---|---|---|---|---|---|---|
| S&P BSE SENSEX* | 36387 | DOWN | 05.10.18 | 34970 | - | 36500 | |
| NIFTY50** | 10907 | DOWN | 05.10.18 | 10316 | - | 11000 | |
| NIFTY IT | 14893 | UP | 21.07.17 | 10712 | 13600 | 13400 | |
| NIFTY BANK | 27457 | UP | 30.11.18 | 26863 | 25900 | 25400 | |
| ACC*** | 1440 | UP | 16.11.18 | 1501 | - | 1430 | |
| BHARTIAIRTEL | 311 | DOWN | 25.01.18 | 453 | 340 | 350 | |
| BPCL | 354 | UP | 16.11.18 | 322 | 345 | 330 | |
| CIPLA | 509 | DOWN | 26.10.18 | 604 | 550 | 560 | |
| SBIN | 295 | UP | 02.11.18 | 286 | 270 | 260 | |
| HINDALCO | 209 | DOWN | 04.01.19 | 211 | 225 | 230 | |
| ICICI BANK | 372 | UP | 02.11.18 | 355 | 350 | 340 | INFOSYS | 731 | UP | 14.12.18 | 706 | 690 | 670 |
| ITC | 291 | UP | 11.01.19 | 295 | 280 | 275 | |
| L&T | 1318 | DOWN | 18.01.19 | 1318 | 1370 | 1390 | |
| MARUTI | 7358 | DOWN | 14.09.18 | 8627 | 7600 | 7800 | |
| NTPC | 144 | DOWN | 26.10.18 | 159 | 152 | 155 | |
| ONGC | 147 | DOWN | 05.10.18 | 147 | 155 | 158 | |
| RELIANCE | 1185 | UP | 30.11.18 | 1168 | 1100 | 1070 | |
| TATASTEEL | 471 | DOWN | 26.10.18 | 552 | 510 | 520 | |
*SENSEX has breached the resistance of 35700 **NIFTY has breached the resistance of 10700 ***ITC has broken the support of 280
Closing as on 18-01-2019
NOTES:
1) These levels should not be confused with the daily trend sheet, which is sent every morning by e-mail in the name of "Morning Mantra ".
2) Sometimes you will find the stop loss to be too far but if we change the stop loss once, we will find more strength coming into the stock. At the moment, the stop loss will be far as we are seeing the graphs on weekly basis and taking a long-term view and not a short-term view.
| Meeting Date | Company | Purpose |
|---|---|---|
| 21/01/2019 | Kotak Mah. Bank | Quarterly Results |
| 21/01/2019 | L&T Fin.Holdings | Quarterly Results |
| 22/01/2019 | Asian Paints | Quarterly Results |
| 22/01/2019 | Shree Cement | Quarterly Results,Interim Dividend |
| 22/01/2019 | Havells India | Quarterly Results |
| 22/01/2019 | TVS Motor Co. | Quarterly Results |
| 22/01/2019 | ICICI Pru Life | Quarterly Results,Interim Dividend |
| 23/01/2019 | ITC | Quarterly Results |
| 23/01/2019 | Can Fin Homes | Quarterly Results |
| 23/01/2019 | United Spirits | Quarterly Results |
| 23/01/2019 | InterglobeAviat | Quarterly Results |
| 24/01/2019 | Colgate-Palm. | Quarterly Results |
| 24/01/2019 | Reliance Power | Quarterly Results |
| 24/01/2019 | PVR | Quarterly Results |
| 24/01/2019 | Biocon | Quarterly Results |
| 24/01/2019 | UltraTechCem. | Quarterly Results |
| 24/01/2019 | Yes Bank | Quarterly Results |
| 25/01/2019 | Larsen & Toubro | Quarterly Results |
| 25/01/2019 | DewanHsg. Fin. | Quarterly Results |
| 25/01/2019 | Maruti Suzuki | Quarterly Results |
| Ex-Date | Company | Purpose |
|---|---|---|
| 23-Jan-19 | MindTree | Interim Dividend |
| 24-Jan-19 | KPIT Technologies | Composite Scheme Of Arrangement |
| 24-Jan-19 | Infosys | Special Dividend - Rs 4 Per Share |
| 24-Jan-19 | Trident | Interim Dividend |
| 25-Jan-19 | Motilal Oswal Fin. Ser. | Interim Dividend - Rs 4 Per Share |
| 28-Jan-19 | Siemens | Dividend- Rs 7/- Per Share |
| 29-Jan-19 | SHREE CEMENT | Interim Dividend |
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GUJARAT STATE FERTILIZERS AND CHEMICALS LTD.
CMP: 110.90
Target Price: 128
Upside:16%
| Face Value (Rs.) | 2.00 |
| 52 Week High/Low | 159.75/85.60 |
| M.Cap (Rs. in Cr.) | 4419.12 |
| EPS (Rs.) | 11.90 |
| P/E Ratio (times) | 9.32 |
| P/B Ratio (times) | 0.61 |
| Dividend Yield (%) | 1.98 |
| Stock Exchange | BSE |
Investment Rationale
• The company has embarked upon providing end-toend solutions, from soil testing, seed testing, water testing to conducting field demonstration, farm-youth training, micro irrigation cultivation and several other support activities for farmers in the country.
• In order to sustain competition against imported Di-Ammonium Phosphate (DAP), the company has successfully commenced production of colored DAP at Sikka unit on regular basis. Continuous usage of anti-caking agent in entire range of phosphatic production has improved the product quality further and it remains quite free flowing to the expectation of the market. Recently, the company has also started packing its imported Ammonium Phosphate Sulphate (APS) in Biaxially Oriented Polypropylene (BOPP) bags, which will enhance its preference further in the market.
• Recently, the company has entered into new market of Himachal Pradesh and also contemplating to start business in Uttrakhand from current season besides consolidating its presence into existing markets so as to expand overall volumes.
• The company plans to reduce the freight cost of farmers on fertilizers and ensure timely availability of fresh and quality material, company has launched “Door to Door” (D2D) delivery scheme in Gujarat on experimental scale, wherein fertilizers are supplied to the farmers in truck-loads free of freight cost within stipulated timeline, which has been well received by the farming community.
• It has posted almost a three-fold jump in standalone net profit to Rs 224.25 crore for the September quarter 2018-19, on strong sales. The state-run
company had clocked a net profit of Rs 79.23 crore in the same quarter of the previous financial year. It is also gearing up for selling more sulphur-based fertilisers because there is deficiency of this soil nutrient in most parts of the country.
Risk
• Major raw materials are being imported and there are limited suppliers
• Over dependency on monsoon and Government policies
Valuation
The company has an excellent marketing network across India and also has a foot-print in Africa and Canada. The company has a strong base of Agro development and Agro services, taking up several farm related out-reach activities. The company is targeting niche market fetching higher margins. Thus, it is expected that the stock will see a price target of Rs.128 in 8 to 10 months time frame on a target P/E of 10x and FY20 EPS of Rs.12.83.
NIIT LIMITED
CMP: 88.65
Target Price:111
Upside:25%
| Face Value (Rs.) | 10.00 |
| 52 Week High/Low | 357.50/189.50 |
| M.Cap (Rs. in Cr.) | 2524.72 |
| EPS (Rs.) | 33.12 |
| P/E Ratio (times) | 7.78 |
| P/B Ratio (times) | 1.47 |
| Dividend Yield (%) | 1.93 |
| Stock Exchange | BSE |
Investment Rationale
• GHCL is engaged in primarily two segments consisting of Inorganic Chemicals (mainly manufacture and sale of Soda Ash) and Home Textile division (comprising of yarn manufacturing, weaving, processing and cutting and sewing of home textiles products). It is the largest manufacturer of Soda ash and contributes to around 25% of the country’s demand.
• It is the likely beneficiary of the favorable demand supply dynamics of domestic soda ash industry in light of the tight supply situation in the Asian market due to the curtailment of capacity from China. It has sound liquidity position on account of its healthy cash flow generation from operations.
• It has its own cost competencies owing to captive mines of lignite, limestone and salt resulting in healthy operating performance along with its high brand recall value. Its cotton yarn operations also have a healthy operating efficiency aided by significant availability of relatively cheaper source of captive power.
• On the developmental front, it has envisaged a Rs. 150 crore capital allocation for volume growth and modernization in spinning and also plans an increase in the Soda Ash production by another 50,000 MT by March 2020 with a capex of Rs. 260 crores. Soda ash production increased by 9,000 tonne during Q3 FY19 owing to brownfield expansions.
• In Q3 FY19, revenue was up 18% to Rs 875 crore YoY. PAT during the quarter grew 44% to Rs 102 crore. Inorganic segment revenue grew 11% benefitting from higher realization due to price increase taken to offset cost increase in last few quarters and higher trading volumes. Textile segment revenue also increased 34%,
which was due to volume growth coupled with better pricing and favorable dollar rate.
Risk
• Capacity addition by competitors
• Foreign exchange fluctuation
Valuation
GHCL has an established position in the domestic soda ash industry. It is constantly clocking EBITDA margins above 30% from past few quarters because of the ability to pass on the higher raw material/energy prices through periodic increases in product prices. Also, going ahead, its recent expansion and plans to further expand its chemicals and textile business are likely to support its overall margins and returns. The company is optimistic about the Home Textiles division with the improvement visible in last three quarters and expects better margins in FY20 on new product launches. We expect the stock to see a price target of Rs.294 in 8 to 10 months time frame on an expected P/E of 7x and FY20E earnings of Rs. 41.94.
Source: Company Website Reuters Capitaline
Above calls are recommended with a time horizon of 8 to 10 months.
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The stock closed at Rs 226.30 on 24th January, 2019. It made a 52-week low at Rs 202.05 on 17th May 2018 and a 52-week high of Rs. 259.45 on 31st January 2018. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 222.74
We can see on charts that stock has consolidated in the stiff range and formed an “Inverted Head and Shoulder” pattern on weekly charts, which is considered to be bullish. Moreover, it is likely to close on verge of breakout of same along with huge volumes. Apart from this, it also manages to trade above 100 WEMA, which also gives positive outlook for coming days, so one can initiate long in the range of 220-222 levels for the upside target of 240-245 levels with SL below 210.
The stock closed at Rs 727.75 on 24th January, 2019. It made a 52-week low at Rs 563.65 on 19th February 2018 and a 52-week high of Rs. 780.80 on 03rd October 2018. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 676.85
Short term, medium term and long term bias are positive for the stock as it is continuously trading above 200DEMA. From past few weeks, it was consolidated in the range of 640 to 770 levels with positive bias and formed a “continuation Triangle” on weekly charts, which is bullish in nature. Last week, stock gained over 2.5%, had given the breakout of pattern and also managed to close above the same. So, follow up buying is expected to continue in coming days. Therefore, one can buy in the range of 710-715 levels for the upside target of 770-790 levels with SL below 670.
Disclaimer : The analyst and its affiliates companies make no representation or warranty in relation to the accuracy, completeness or reliability of the information contained in its research. The analysis contained in the analyst research is based on numerous assumptions. Different assumptions could result in materially different results.
The analyst not any of its affiliated companies not any of their, members, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of the analysis research.
SOURCE: CAPITAL LINE
Charts by Spider Software India Ltd
Above calls are recommended with a time horizon of 1-2 months
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Nifty is again trading near weekly highs, data reflects that at current levels there is lot of outstanding short position in Nifty and Index calls and we can expect another round of short covering moving forward. As per current derivative data, Nifty can move towards 11000-11150 mark this week as the market undertone remains bullish with support of consistent short covering. Derivative data indicate bullish scenario to continue with Nifty having multiple supports at lower levels around 10800 & 10850 spot. Option writers were seen active in recent rally as put writing was seen in 10700 & 10800 strikes along with the unwinding in calls. Open interest is seen addition post expiry, which indicates long buildup. Among Nifty Call options, the 11000 strike call has the highest open interest of more than 35 lakh shares, while in put options 10700 strike hold the maximum open interest of more than 37 lakh shares. The Implied Volatility (IV) of calls was down and closed at 14.92% while that for put options closed at 14.12%. The Nifty VIX for the week closed at 16.24% and is expected to remain sideways. The PCR OI for the week closed up at 1.29 which indicates OTM put writing. On the technical front 10800-10850 spot levels is strong support zone and current trend is likely to continue towards 11000-11100 next week.
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**The highest call open interest acts as resistance and highest put open interest acts as support.
# Price rise with rise in open interest suggests long buildup | Price fall with rise in open interest suggests short buildup
# Price fall with fall in open interest suggests long unwinding | Price rise with fall in open interest suggests short covering
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Turmeric futures (Apr) has been closing lower since past 5 consecutive week & this bearish trend is likely to continue as the counter can test 6400-6350 levels. As per market source, at present, buyers are not active in the market. Prices may remain under pressure ahead with rise in new crop arrivals. Jeera futures (Mar) is expected to break the consolidation also the support near 16810 levels & plunge to test 16500-16400 levels. The fundamentals are indicating that day’s ahead the supply will remain sufficient remain owing to expectations of higher production. At present, the total stock of jeera is around 1.5 million (15 lakh) bags. By the end of February, the carry-forward stock of jeera can be around 10 lakh bags, which is more than the 5-year average of carry-forward stock. Cardamom futures have already started sky rocketing & this bullish trend is expected to get extended towards 1700-1750 levels. Apprehensions about a likely squeeze in supply following ending of harvesting of the current crop has prompted dealers to be active in the markets. Besides, there is going to be a gap in availability between now and the next crop that can be expected in late June or early July. Moreover, the preliminary estimates show that India's output of small cardamom in 2018-19 (Jul-Jun) is likely to fall around 30% from last year's 20,640 tons. Due to excessive and high-intensity rainfall and heavy winds that led to floods in highrange areas where cardamom grows, severe destruction occurred to the crop. It will take a year to come back to normal and for new plants to grow.
Bullion counter upside momentum can continue further as political uncertainty in Euro zone, Brexit concerns and slowdown in Chinese economy to keep prices upbeat. On the domestic bourses, weaker local currency is also boosting the prices higher. Gold can move further higher as it can test the level of 32800 while taking support near 31900 levels while silver can move further northwards and can test 40000 levels. The recent development in UK has increased chances of Britain leaving European Union without a deal and has also caused political uncertainty. Uncertainty in Brexit is also supporting gold prices on lower levels. UK Prime Minister Theresa May last week narrowly survived no-confidence vote sparked by the crushing defeat of her Brexit deal just weeks before UK leaves EU. SPDR Gold Trust GLD, the world's largest goldbacked exchange traded fund, stood at 797.71 tonnes. Chicago Fed President Charles Evans said the US central bank can "easily" take a patient stance toward additional interest-rate increases as it assesses the outlook for the economy amid turmoil in financial markets and muted inflation. Recent downbeat reading of factory activity data from China to US along with China’s weak trade balance data have fuelled global growth worries. World gold council expects increased market uncertainty and expansion of protectionist economic policies to make gold attractive as a hedge while it might face some hindrances from higher interest rates and a strong dollar. But the effects of these factors are expected to be limited as the US Fed has signalled a neutral stance going forward.
Soybean futures (Feb) trend is bullish & the same is likely to continue for the fourth consecutive week as it can test 3830-3870 levels. The sentiments of the market participants are extremely optimistic on the back of the market talks that India’s soy meal exports to Iran could see a considerable rise in the coming months to 500,000 tons during the next fiscal year. India’s soy meal sales to Iran are set to spike as the oil producer uses the rupees it receives for its crude exports to cover its animal feed demand. Iran has agreed to sell crude oil to India, the world’s third-largest oil consumer, in exchange for rupees after the United States reimposed sanctions on its financial sector. Looking ahead to the above fundamentals, the oil mills have started procuring the oilseed to fulfill the export orders for Iran. On the contrary, mustard futures (Feb) is looking bearish and the downside may get extended towards 3800-3770 levels. The conducive weather over the major growing regions which is proving to be beneficial for the crop & raising the prospects of a good production this season is exerting a downside pressure over the counter. As per the latest report by IMD, weather condition is expected to remain dry in coming couple of weeks, in northern hemisphere. Below normal temperature and dry weather is beneficial for the crop during maturity phase. CPO futures (Feb) is expected to trade range bound within 545-565 levels. Anticipation of escalation of imports of vegetable oils in the coming months, due to a cut in duty as mandatory under the Malaysia-India Comprehensive Economic Cooperation Agreement (MICECA) may keep the upside capped.
Crude oil prices may remain buoyant as OPEC and allies Canada’s plan to adhere to production cuts to reduce oversupply, can assist the prices higher. Russia's deputy energy minister stated that country will meet its target for curbing output by April. Saudi Minister assured the markets that there is no need for OPEC to schedule an extraordinary meeting before April and the markets are moving in right direction. EIA reported that U.S. crude production currently stands at 11.9 mbpd, up from 11.7 million bpd last week, which was already the highest national output in the world. U.S. crude exports touched the highest levels of 3.2 mbpd in history of U.S. On the Inventories front, EIA data showed that crude oil inventories fell by 2.68 mbpd compared to the expectations for a stockpile draw of 1.32 million barrels. Crude oil can continue its upside momentum as it can test 3850 in MCX taking support near 3600 levels. OPEC’s monthly report which noted that its output declined by 751,000 barrels a day last month to 31.58 million bpd, the biggest month-onmonth drop in almost two years . Meanwhile the natural gas counter may continue its volatile movement as its prices can take support 215 levels and upside will remain capped near 280. Weighing on gas price is smaller than average decline in gas stocks which has eased tightness concerns. EIA noted an 81 Bcf decline in US working gas stocks which was higher than market expectations of 77 Bcf but less than 5-year average decline of 218 Bcf.
Cotton futures (Jan) may show recovery towards 21250-21650, taking support near 20500 levels. It is reported that the arrivals are on the lower side as the farmers are holding back their produce on expectation of spike in prices in the coming days as domestic consumption remains bullish and output is seen lower than various estimates. The Cotton Association of India (CAI) has lowered country's production estimate to 33.5 million bales in the 2018/19 season that started on Oct. 1, down 1.5 percent from an earlier estimate due to scanty rainfall and pest attack curtailed per-hectare yields. Guar seed futures (Feb) has taken support near its 200 days exponential moving average of 4180 levels. This shows that going ahead the downside may remain capped & we may see more of an upside momentum towards 4500-4550 levels. Meanwhile, guar gum futures is expected to trade with an upside bias & test 8950 levels. At the spot markets, these commodities are witnessing a spurt in demand from millers and exporters anticipating a supply deficit. The exporters for major oil and gas drilling companies are on a buying spree, and are even paying a premium. This indicates that the availability of the crop is less. As per industry estimates, 30,000 tonnes of guar gum are exported every month. Chana futures (Mar) is on the verge of breaking the major support near 4250 & if happens then 4150-4100 levels can be seen in coming days. The fundamentals are still bearish as the government agencies are holding major portion of procured old crop around 22.5 lakh tonnes and is liquidating in the market due to average quality and also before arrivals of new crop.
In base metal counter, prices can extend its recovery on stimulus measures from China. Meanwhile in China, the central bank made big cash injection through open market operations. In signs of improving liquidity and Chinese banks extended far more new loans in December than expected, bringing last year's tally to a record $2.4 trillion. Furthermore the nation is said to cut taxes "on a larger scale" to help support its slowing economy. Copper may recover further towards 435 levels while taking support near 415 levels. Copper may improve further on signs the United States and top metals consumer China are closer to resolving their long-running trade dispute. Meanwhile, Lead may find strong support near 135 and can bounce towards 146. Aluminium can witness further lower level buying as it can recover towards 136 taking support near 128 levels. U.S. Senate last week rejected legislation to keep sanctions on companies linked to Russian oligarch Oleg Deripaska, including aluminum firm Rusal. The new premiums are down between 17% and 19% from a premium of $103 per tonne in the previous quarter, marking the second consecutive quarterly drop and the lowest since the fourth quarter of 2016. Zinc can bounce further and can test 186 levels. Nickel prices is also expected to continue its recent recovery as it can test 850 taking support near 800 levels. Nickel bears have been sent running for cover by this week’s ferocious squeeze on the LME. The resulting bear rout has halted a six-month downtrend in outright nickel price.
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COPPER MCX (FEB) contract closed at Rs. 423.25 on 17th Jan’19. The contract made its high of Rs. 475.30 on 4th Oct’18 and a low of Rs. 397.40 on 3rd Jan’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 418.60.On the daily chart, the commodity has Relative Strength Index (14-day) value of 56.51.
One can buy at Rs. 423 for a target of Rs. 435 with the stop loss of Rs. 417.
ZINC MCX (JAN) contract closed at Rs. 181.60 on 17th Jan’19. The contract made its high of Rs. 201.20 on 10th Oct’18 and a low of Rs. 167.20 on 3rd Jan’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 177.55. On the daily chart, the commodity has Relative Strength Index (14-day) value of 62.54.
One can buy at Rs. 180 for a target of Rs. 184 with the stop loss of Rs. 178.
JEERA NCDEX (MAR) contract was closed at Rs. 17020 on 18th Jan’19. The contract made its high of Rs. 19400 on 1st Nov’18 and a low of Rs. 16700 on 24th Dec’18. The 18- day Exponential Moving Average of the commodity is currently at Rs. 17138.57. On the daily chart, the commodity has Relative Strength Index (14-day) value of 45.368.
One can buy at Rs. 17000 for a target of Rs. 17500 with the stop loss of Rs 16750.
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• As per latest release of Solvent Extraction of Indian (SEA), Vegetable Oils (edible & non-edible) imports during December 2018 is estimated higher by 11% at 1,211,164 tons compared to 1,088,783 tons in December 2017.
• Sebi issued a consultation paper to allow trading in commodity-index-based futures.
• BSE has received markets regulator Sebi's approval to launch Gold Mini, Guarseed and Guargum future contracts on its commodity derivatives segment.
• The Export of Soybean Meal and other Soy Value Added Products during first quarter of current oil year 2018-19 i.e. during October 2018 to December 2018 was 6.74 lakh MT as against 6.90 lakh tons during the same period last year declined by 2.3% over the last year. - Soybean Processors Association of India.
• China's 2018 imports of unwrought copper rose 12.9% from a year earlier to a record annual high of 5.3 million tonnes.
• China plans to set a lower economic growth target of 6-6.5% in 2019 compared with last year’s target of around 6.5%.
• China's central bank injected a record $83 billion into the country's financial system, seeking to avoid a cash crunch that would put further pressure on the weakening economy.
• Crude oil output from the United States is expected to rise to a new record of more than 12 million barrels per day (bpd) this year and to climb to nearly 13 million bpd next year
In the week gone by, bullion counter continued its upside rally as gold prices in MCX crossed the key level of 32300 while silver crossed 39500 owing to political uncertainty in Euro zone and Brexit concerns. Further, factors such as extended partial shutdown of US government and possible pause on interest rate hike also gave underlying support to the bullion market. Dollar index recovered towards 96 taking support at 95 which kept the local currency rupee under pressure. Subdued domestic growth and uncertainty ahead of general elections has also dented the outlook for Indian currency. Base metals saw some fresh buying as Nickel led the recovery followed by zinc and aluminium. Nickel crossed the key level of 830 last week. Treasury Secretary Steven Mnuchin and some Trump administration officials are pushing for the US to lift tariffs on Chinese goods to calm worried investors and get Beijing on board with a larger trade deal. China’s move to inject liquidity into financial system boosted expectations of higher demand. The PBoC is injecting 250 billion yuan ($37 billion) through seven-day reverse bond repurchase agreements and 150 billion yuan through 28-day reverse repos. Natural gas was the pick of the commodities last week as it surged sharply higher amid colder weather conditions and tested 260 levels in MCX. The price was up early on colder than normal weather which is forecast to cover most of the United States for the next 8-14 days. In crude oil, prices continued its recovery for third consecutive week as it crossed $52.7 in NYMEX and 3750 in MCX. OPEC cut oil output sharply in December before a new accord to limit supply took effect suggesting that producers have made a strong start to averting a glut in 2019 as a slowing economy curbs demand. The biggest drop in OPEC supply last month came from Saudi Arabia and amounted to 468,000 bpd.
In agri counter, Soybean prices continued its rally upside as it crossed the key level of 3780 on strong global market and high meal demand from Iran. Cotton prices ended in green as its prices edged higher in Punjab, Haryana and upper Rajasthan due to shortage in this season & positive global cues. Chana traded with bearish bias amid weaker sentiments due to continued selling of stock at lower rates by Nafed. Nafed has sold around 4.69 lakh tonnes of Chana as on January 10, 2019 in various states from the total procured quantity of 27.22 lakh tonnes. In spices; turmeric witnessed selling pressure in the prices owing to higher arrivals whereas jeera bounced back on less the carryover stocks.
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After getting permission from market regulator Sebi, MCX has taken steps to modify the optional delivery of zinc and aluminium to compulsory delivery mechanism. Now aluminium and zinc contracts both have become ‘compulsory deliverable instead of ‘both options’ (cash and delivery). SEBI has further permitted the exchange to implement the said modifications for aluminium March and April futures contracts and for the Zinc April contract provided these contracts have no open interest.
As of now, all metal contracts (except gold and silver) and all energy contracts are settled in cash. The meaning thereby, the differences between contracts purchase and settlement price is settled in cash but without delivery. Now Sebi has been emphasizing on physical delivery settlement because as Sebi wants to reduce the distinction between cash market and derivative market to control speculation & volatility in the market. India has been producing these commodities. So, physical settlement can be done in India. If contracts have to be settled by delivery, domestic prices will be needed. Till now, the settlement price for most metals contracts is derived from the London Metal Exchange, the benchmark in these commodities.
Benefit of compulsory delivery
• The main benefit of having compulsory delivery is that it will curb excessive speculation.
• Another benefit of having compulsory delivery will be that as of now the cash settlement of commodity contracts is based on LME prices. But now in Zinc and Aluminium they will be based on local prices and also factor in taxes, freight and warehousing costs.
• Commodity derivatives are also hedging tool for those holding actual commodity, while speculators who traded without holding the underlying commodity impart liquidity to the counter by taking on the risk of the hedger.
• Compulsory delivery needs more warehouses, grading system, assaying. So It will promote warehousing for metals. LME is also in talks with Indian companies to set up warehouses in the country. LME has more than 500 warehouses in the U.S., Europe and Asia.
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| 21st JAN | RBI has started two quarterly surveys of manufacturing, services, infra sectors. |
| 21st JAN | IMF cut its projection for global growth to 3.5% in 2019. |
| 21st JAN | Goldman Sachs sees India rate cut next month as inflation slows. |
| 22nd JAN | RBI reluctant to change FPI portfolio limits introduced last year |
| 22nd JAN | US Secterary of State, Pompeo voices optimism on U.S.-China trade. |
| 23rd JAN | BOJ maintained massive stimulus as Kuroda warns of growing risks. |
| 23rd JAN | France said Iran-EU trade mechanism should be established in 'coming days' |
| 23rd JAN | PM Conte sees Italian economy surging from mid-2019. |
Last week, rupee traded with weakness on signs of slowdown in domestic as well as global economies. Even after the rise in Indian bond yields last week, rupee still wasn’t able to capitalize on intra-market relationship which exists between bonds and currencies. Crude oil sustained on the higher side which again is a concern for INR and weighed higher than other factors affecting it. Indian and US inflation slows down further which makes a case for rate cut by RBI, eventually the weakness in INR deepened further. Industry leaders also demanded cut in key lending rates during a meet with RBI governor. The key news flow was from UK where the suspense on Brexit is still persists. Meanwhile on the cross currency front, it was a mixed week where Euro and Yen depreciated on weak economic numbers while sterling appreciated on short covering ahead of cessation on Brexit. Next week, the lack of news flow from domestic markets could keep the currency in a range but rise in Crude oil price could impact INR negatively, also the statements from finance ministry will hold importance. Expect USDINR to stay above 70.70 and gradually move towards 71.90.
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USD/INR (JAN) contract closed at 71.0875 on 17th Jan’ 19. The contract made its high of 71.4775 on 17th Jan’19 and a low of 70.5225 on 14th Jan’ 18 (Weekly Basis). The 14-day Exponential Moving Average of the USD/INR is currently at 70.74
On the daily chart, the USD/INR has Relative Strength Index (14-day) value of 53.25. One can buy at 70.75 for the target of 71.35 with the stop loss of 70.45.
EUR/INR (JAN) contract closed at 81.1025 on 17th Jan’ 19. The contract made its high of 81.7975 on 15th Jan’19 and a low of 81 on 14th Jan’19 (Weekly Basis). The 14-day Exponential Moving Average of the EUR/INR is currently at 81.03
On the daily chart, EUR/INR has Relative Strength Index (14-day) value of 49.26. One can sell at 81.50 for a target of 80.90 with the stop loss of 81.80.
GBP/INR (JAN) contract closed at 91.5925 on 17th Jan’ 19. The contract made its high of 92.02 on 17th Jan’19 and a low of 90.51 on 14th Jan’18 (Weekly Basis). The 14-day Exponential Moving Average of the GBP/INR is currently at 90.49
On the daily chart, GBP/INR has Relative Strength Index (14-day) value of 62.47. One can sell below 92 for a target of 91 with the stop loss of 92.50.
JPY/INR (JAN) contract closed at 65.3875 on 17th Jan’ 19. The contract made its high of 65.90 on 15th Jan’19 and a low of 65.2650 on 14th Jan’19 (Weekly Basis). The 14-day Exponential Moving Average of the JPY/INR is currently at 65
On the daily chart, JPY/INR has Relative Strength Index (14-day) value of 60.90. One can buy at 64.70 for a target of 65.30 with the stop loss of 64.40.
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Reliance General Insurance looks to renew its IPO plan
Reliance General Insurance is renewing its Rs 1,500-2,000 crore initial public offering (IPO) plan after the deadline for its previous attempt lapsed in a difficult market. The wholly-owned unit of Reliance Capital has sought ‘revalidation’ from the Insurance Regulatory & Development Authority of India (IRDA) for it. The company would file a fresh DRHP (draft red herring prospectus) with the Securities & Exchange Board of India (Sebi) once the insurance regulator revalidates the plan. The earlier Sebi approval for an IPO had lapsed on November 29, 2018.
IPO drought to end as Polycab, Chalet Hotels, others gear up for share sales
After a three-month drought in the Indian primary market, several companies, including cables and consumer electronic goods maker Polycab Wires Pvt. Ltd and hotel operator Chalet Hotels Ltd, are gearing up for their public offers. In 2018, 24 companies raised Rs. 30,959 crore through their initial public offerings (IPOs), while 2017 witnessed 36 companies raising Rs. 67,147 crore through public floats. However, between October and December 2018, companies had desisted from launching IPOs, considering the highly volatile stock market.
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* Interest Rate may be revised by company from time to time. Please confirm Interest rates before submitting the application.
* For Application of Rs.50 Lac & above, Contact to Head Office.
* Email us at fd@smcindiaonline.com
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Sebi issues norms for mutual funds investments in derivatives
Markets regulator Sebi has decided to allow mutual funds to write call options subject to certain conditions. Generally, call options refer to an agreement that gives a buyer the right to purchase an asset at a specified price within a particular time period. Currently, mutual fund schemes are permitted to undertake transactions in equity derivatives but cannot write options or purchase instruments with embedded written options. In a circular, Sebi said mutual fund schemes (except Index Funds and ETFs) can write call options only under a covered call strategy for constituent stocks of Nifty 50 and Sensex indices. "The total notional value (taking into account strike price as well as premium value) of call options written by a scheme shall not exceed 15 per cent of the total market value of equity shares held in that scheme," it said. Further, the total number of shares underlying the call options written should not exceed 30 per cent of the unencumbered shares of a particular company held in the scheme. "In no case, a scheme shall write a call option without holding the underlying equity shares. A call option can be written only on shares which are not hedged using other derivative contracts," the circular said. According to Sebi, the call option written should be marked to market daily and the respective gains or losses factored into the daily net asset value of the respective scheme until the position closes or expires.
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Note:Indicative corpus are including Growth & Dividend option . The above mentioned data is on the basis of 08/08/2019 Beta, Sharpe and Standard Deviation are calculated on the basis of period: 1 year, frequency: Weekly Friday, RF: 7%
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully
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Mr. S C Aggarwal (CMD, SMC Group) presenting the memento to Mr. Ashish Kumar Chauhan (Managing Director & CEO, Bombay Stock Exchange) during the ASSOCATION OF NATIONAL EXCHANGES MEMBERS OF INDIA (ANMI) 10th International Convention - "Capital Markets in the Age of Disruption" held on 12th January, 2019 at Hotel Grand Hyatt, Mumbai.
Mr. D K Aggarwal (CMD, SMC Investments & Senior VP – PHD Chamber of Commerce) during the Conference on “Transforming Urban Mobility in India & Role of Electric Vehicles” Thursday, 29th November, 2018 at PHD House, New Delhi.
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