Godfrey Phillips India Limited (GODFRYPHLP)

Muthoot Finance Limited (MUTHOOTFIN)

WEEKLY VIEW OF THE MARKET

The Market Undertone remained bullish with support of consistent short covering from lower levels. Nifty is trading near support levels at 10750 and heavy weight sector like Banks, FMCG supporting the market trend. Sector rotation is likely to continue further. Derivative data indicates bullish scenario to continue. Nifty has multiple supports at lower levels. Various supports are 10700 & 10750 spot levels. Short covering may be seen on every dip. Option writers were active in recent rally. Put writing was seen in 10500 and 10600 strike puts. The Implied Volatility (IV) of calls closed at 14.10% while that for put options closed at 14.20%. The Nifty VIX for the week closed at 15.35% and is expected to remain sideways. Among Nifty Call options, the 11000-strike call has the highest open interest of more than 45 lakh shares and in put side 10500-strike put has the highest open interest of over 35 lakh shares in open interest respectively. The PCR OI for the week closed up at 1.21, which indicates OTM put writing. On the technical front, 10700-10750 spot levels is the support zone and current trend is likely to continue towards 10850-10900 levels.

DERIVATIVE STRATEGIES

NIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN NIFTY OPTION OI (IN QTY) (MONTHLY)

BANKNIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN BANKNIFTY OPTION OI (IN QTY) (MONTHLY)

SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

Top 10 Rollover

Bottom 10 Rollover

SPICES

Turmeric futures (Apr) may continue to take support near 6550-6480 levels & show upside momentum to test 6785-6850 levels. The spot prices are on a rising trend at the markets in Erode despite rise in arrivals. The stockists are showing good interest in procuring as they are counting on anticipation of more upside in days to come. At present, there is a good demand for new turmeric as compared to old one. On the supply side, in Maharashtra and Tamil Nadu the crop is still there in field & needs some shower otherwise yield may get affected. The downtrend of jeera futures (Mar) is likely get paused taking support near 16700 levels. This week, lower level buying may emerge in the counter & the counter is expected to move higher towards 17500 levels. Going ahead, the condition of the crop will also be a major factor to watch for because the cumin crop faces severe weed competition at all stages of crop growth because of slow growth and short stature. Secondly, the carryover stocks of jeera are seen at 200,000-300,000 bags (1 bag = 55 kg), way less than the desirable 500,000 bags. The new crop will only start arriving in February. The uptrend of coriander futures (Apr) is expected to remain intact & it may surpass 6900 levels. In between any correction due to profit booking may get limited to 6500 levels. The price outlook is bullish till the arrivals hit the markets & this year there might be a shortage. New crop arrivals will increase from mid-February as the standing crop is almost ready for harvesting in major producing belts.

BULLIONS

Bullion counter upside momentum may continue further as dovish statement from Fed Chairman, Jerome Powell confirmed slowdown in the rate hike in 2019, which might restrict the gains for the Dollar Index. Fed Chairman stated that the U.S. central bank can be patient in approving any further rate increases as officials gauge whether the U.S. economy will slow this year. However, on domestic bourses some appreciation in local currency can cap the upside. Gold can again test the level of 32500 taking support near 31700 while silver can move further northwards and can test 40100. FOMC minutes and comments from Fed officials have cemented market expectations that Fed may not consider rate hike in the near term as it awaits more clarity. Gold holdings with SPDR ETF stood at 797.706 tonnes while silver holdings with iShares ETF stood at 9755.07 tonnes. 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. Fears on slowing economic growth and the uncertainties around the Federal Reserve's monetary policy have stirred the financial markets for a few months. Risk assets took a big hit in 2018, with the stock market suffering the worst December since the Great Depression.

OIL AND OILSEEDS

The trend of soybean futures (Feb) is bullish & hence lower level buying is advised near 3550-3520, eyeing a target of 3700 levels. Recently, Iranian market has opened up for Indian soybean meal with favourable factor is rupee transactions. Iran has revised its payment mechanism for trading partners such as India, and accepts payments in rupees as well as uses the same fund to pay to India for its imports. On the contrary, the outlook for mustard futures (Feb) is bleak & the downside may get extended towards 3750-3700 levels. The selling may get intensified as the new crop is expected to hit the spot markets soon. Meanwhile, the demand side may remain dull on reports that the export of rapeseed meal to China is unlikely to resume during current financial year as procedure for registration with MoA, China is too cumbersome, lengthy and time consuming to complete all formalities. In days to come, more upside towards 553 levels can be seen in CPO futures (Jan) on the back of a weaker rupee, making imports costlier. However, investors are advised to proceed with caution as the fundamentals of palm oil in the international market have turned bearish after the Malaysian Palm Oil Board reported that Malaysia's palm oil stockpiles at the end of December rose to 3.22 million tonnes, up 6.9 percent from previous month. Ref. soy oil futures (Feb) is expected to gain for the third consecutive week & test 760 levels on account of rising soybean prices & positive gross crush margin of Rs.1,116 per ton. The rising open interest since past few weeks is also injecting optimism that prices of edible oils would gain grounds in days to come.

ENERGY COMPLEX

Crude oil prices may continue to move northwards as markets anticipates extension of supply cuts by OPEC that might tighten the supply market. Crude oil prices are expected to remain on buoyant path and can test 3900 in MCX. Meanwhile, Iran crude exports stayed lower in January and were struggling to find new buyers, and went below 1 million bpd, from regular sales of 2.5 million bpd before sanctions. Crude exports from the Middle East for the first week of 2019 increased by 4.28 million bbl w-o-w to 122.38 million bbl. The gain came on the back of higher exports from the UAE, Saudi Arabia and Oman with the Emirates recording the highest weekly gain amongst its regional counterparts. OPEC oil supply fell in December by 460,000 barrels per day, to 32.68 million bpd. The aim of the production cut is to rein in a surge in global supply, driven mostly by the United States, where production grew by nearly a fifth to over 11 million bpd in 2018. The natural gas counter can continue to hover in narrow range as the steeps downfall witnessed last month seems to have paused. Its prices can take support 200 levels and upside will remain capped near 225. U.S. natural gas prices have fallen sharply as the unusual cold weather of late November and early December has given way to warmerthan-normal temperatures in the last four weeks. The U.S. entered the peak winter demand season with gas inventories at a 15-year low, which left the natural gas markets vulnerable to unexpected bouts of cold weather.

OTHER COMMODITIES

Cotton futures (Jan) may witness a consolidation in the range of 20350-20900 levels & trade with a downside bias. Despite the fact of shortage this season, the prices are showing a negative trend due to sluggish demand. The lethargic buying has hit the entire cotton value chain, as a result of which there is a cash crunch amongst the market participants in the physical market and money has been locked up in inventories, prompting yarn manufacturers to cut prices. On the export front also, China is not buying much yarn due to which the supplies are not replenishing and the payment cycle is getting affected. Guar seed futures (Feb) is expected to break the major support near 4180 & test 4050 on the downside; while guar gum futures (Feb) will possibly descend towards 7900 levels. The guar gum and guar seed ratio has fallen to 1.97, continuously declining since November last year. This denotes that the underlying demand for guar gum is discouraging due to lower than expected export demand. According to the market participants, export of guar gum is though positive this FY 2018-19, but not sufficient to lift market sentiments. Day’s ahead, there are very less chances that chana futures (Mar) may not break the support levels of 4250 as the sentiments are still weak due to continued selling of stock at lower rates by Nafed. The latest statistic show that there is a balance of 8519.41 MT in Andhra Pradesh, 7951 MT in Telangana, 41964.76 MT in Karnataka, 144591.03 MT in Maharashtra, a whooping inventory of 1552153.52 MT in Madhya Pradesh & 467656.77 MT in Rajasthan respectively.

BASE METALS

In base metal counter, prices can extend its recovery on growing optimism regarding US and China trade deal. U.S. officials expect China's top trade negotiator may visit Washington this month, signaling that higher-level discussions are likely to follow last week's talks with mid-level officials in Beijing as the world's two largest economies try to hammer out a deal to end a tit-for-tat tariff war. China's commerce ministry stated that trade talks with the United States were extensive and detailed, and established a foundation for the resolution of each other’s concerns. Copper may recover further towards 425 levels while taking support near 405 levels. Copper concentrate exports from Indonesia's Grasberg mine, the world's second-largest copper mine, are forecasted to plunge this year because of a lag in output as operations move from open pit to underground mining. Copper production in Chile reached 5.33 million tonnes in November, a 6% increase over the same period of the previous year. Meanwhile Lead may find strong support near 136 levels and can bounce towards 145 levels. Aluminium can witness further lower level buying as it can recover towards 135 taking support near 127 levels. U.S. plans to remove sanctions on Russian aluminium giant Rusal will be of limited benefit to consumers in the United States. Norwegian aluminium-maker Norsk Hydro aims to resume full production at its Alunorte alumina plant in Brazil within weeks or months. Zinc can bounce further and can test 180 levels. Nickel prices are also expected to continue its recent recovery as it can test 825 levels taking support near 780 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

ALUMINIUM MCX (JAN) contract closed at Rs. 130.10 on 10th Jan’19. The contract made its high of Rs. 142.50 on 10th Dec’18 and a low of Rs. 124.75 on 2nd Jan’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 131.30. On the daily chart, the commodity has Relative Strength Index (14-day) value of 45.89.

One can sell below Rs. 129.50 for a target of Rs. 125.50 with the stop loss of Rs. 131.50.

GOLD MCX (FEB) contract closed at Rs. 31880 on 10th Jan’19. The contract made its high of Rs. 32530 on 15th Oct’18 and a low of Rs. 29838 on 16th Aug’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 31640. On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.55.

One can sell at Rs. 32100 for a target of Rs. 31700 with the stop loss of Rs. 32300.

GUARGUM NCDEX (FEB) contract was closed at Rs. 8235 on 10th Jan’19. The contract made its high of Rs. 10111 on 16th Nov’18 and a low of Rs. 8181 on 10th Jan’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 8563. On the daily chart, the commodity has Relative Strength Index (14-day) value of 31.935.

One can buy at Rs. 8150 for a target of Rs. 8550 with the stop loss of Rs 7950.

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NEWS DIGEST

• Vedanta's south Indian copper smelter which was ordered to shut permanently in May got approval from India's Supreme Court to resume production by refusing to stay an order from the country's environmental court.

• Cochilco stated in a report that output from Chile could reach a record of 7.25 million tonnes as early as 2025.

• China's central bank cut RRR for banks for the fifth time in a year, freeing up $US116 billion for new lending.

• India has begun paying Iran for oil in rupees, the first such payments since US imposed new sanctions against Tehran in November.

• Malaysia's palm oil stockpiles at the end of December rose to 3.22 million tonnes, up 6.9% from previous month. - Malaysian Palm Oil Board (MPOB)

• The overall export of oilmeals during April to December 2018 is reported at 2,387,028 tons compared to 2,246,989 tons during the same period of last year i.e. up by 6%. - Solvent Extractors’ Association of India

• The Maharashtra State Cooperative Bank has agreed to extend a loan to sugar mills in the state, enabling them to immediately export about 700,000 tonnes of sugar.

• RBI has made some changes in the Gold Monetisation Scheme (GMS). Apart from individual and joint depositors, the scheme could now be availed by charitable institutions, the central government, the state government or any other entity owned by the central government or the state government.

WEEKLY COMMENTARY

In the week gone by, commodity market witnessed good moves and CRB jumped above 185. Earlier CRB has made a low of 174.22 on correction. Dollar index hit the low of 95, which also propped up commodities prices last week. Dollar fell versus its major peers, as investors grew increasingly confident that the U.S. Federal Reserve may hit the pause button on monetary tightening this year. Fed Chairman Jerome Powell repeated on Thursday the U.S. central bank has the ability to be patient on monetary policy given that inflation remains stable. Base metals saw some fresh buying but again upside was capped due to lack of concrete details from the United States and China on any progress in their trade dispute after a three-day meeting in Beijing. The two sides are more than halfway through a 90-day truce agreed by U.S. President Donald Trump and his Chinese counterpart Xi Jinping. Crude jumped on Wednesday by 5%. The rally came as China said trade talks with the U.S. were “extensive and detailed,” and that both sides agreed to continue to keep in close contact. In NYMEX, it breached the mark of 52 levels and in MCX, it crossed 3700 levels. Iran's crude exports in November plummeted to below 1 million barrels per day, from regular sales of 2.5 million bpd before sanctions were imposed in May. Natural gas bounced back from the lower levels on fresh buying amid decline in inventory. The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stockpiles decreased by 91 billion cubic feet for the week ending January 4. Gold prices edged up after the U.S. dollar slipped amid growing expectations that the U.S. Federal Reserve would halt its rate tightening cycle in 2019. It was continuous four week upside journey of gold whereas silver prices slipped on profitbooking. The inverse correlation between gold and the US 10-year yield is currently at its strongest in 12 months. .

In agri counter, guar prices nosedived despite higher crude prices. Mentha tried to trade in upper zone but the rally seems to be tired at higher levels. In spices; turmeric and cardamom witnessed further upside in the prices on lesser availability whereas jeera gave up its gain on low export demand amid some quality issue. Cotton prices slipped in Punjab, Haryana and upper Rajasthan as buyers remained cautious, tracking overnight weakness in US futures. Edible oil and oil seeds traded negative; tracking losses in US soyoil and on a stronger Ringgit. Ringgit is set for its biggest weekly gain since March as a rally in crude prices eases concern about Malaysia’s fiscal position.

NCDEX TOP GAINERS & LOSERS (% Change)

WEEKLY STOCK POSITIONS IN WAREHOUSE (NCDEX)

MCX TOP GAINERS & LOSERS (% Change)

WEEKLY STOCK POSITIONS IN WAREHOUSE (MCX)

SPOT PRICES (% change)

WEEKLY STOCK POSITIONS IN LME (IN TONNES)

PRICES OF COMMODITIES IN LME/ COMEX/ NYMEX (in US $)

Gold Buying by Central Banks........Amazing love affairs

There is a famous saying: ‘A friend in need is friend indeed’. Gold is a ‘must have’ financial asset indeed’. Not only investors, but also nation’s central banks try to hoard gold in times of crisis as gold is playing a new role in the changing international financial environment.

Love affair of global central banks with gold is amazing

Central banks across the world are aggressively adding gold to their foreign exchange (forex) reserves. According to data from the World Gold Council (WGC), the net gold purchases by central banks till November 2018 stood at 480 tonnes–the highest since 2015. Notably, the central-banks buying have also become geographically more diverse as several new countries adding gold for the first time in decades. According to the WGC, Poland and Hungary are the first EU nations to buy gold since the start of the century. In the case of Hungary, the central bank hiked its gold reserves from 3.1 tonnes to 31.5 tonnes, all in October, its first purchases since 1986.

In 2018, the big players have been Russia, Turkey and Kazakhstan.

• According to the World Gold Council, Russia has continued to buy gold along the lines of 50 to 60 tonnes per quarter, with 159.8 tonnes up to the third quarter. The country has slightly bought above 200 tonnes annually over the last three years.

9 Kazakhstan has been buying 30 to 40 tonnes a year.

• Turkey has bought 54.7 tonnes up to the third quarter of 2018, including 18 ton in the third quarter due to its lot of economic problems.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week