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) is on the verge of breaking the major support near 6400 & may witness more correction near 6315-6200 levels. On the supply side, at present, there is no report of new crop arrival at major markets but it may start in the coming weeks. It is being anticipated that the farmers will bring good number of new turmeric-Mysore variety for sale to Erode markets. On the contrary, demand from North India is being reported to be sluggish due to prevailing cold wave conditions. As far export demand is concerned it has also subdued. An extended bearish trend can be seen in jeera futures (Mar) as it can test 16000-15500 levels. The positive crop prospects due to favorable weather conditions have created bearish sentiments among the market participants. Crop variation of 5-10% is normal and can be compensated by the similar carry-forward stock of last season. Apart from production estimates, the prices will also take a cue from the export market. Coriander futures (Feb) is expected to trade with negative bias & test 6400-6350 levels. The market participants are cautious & keeping a close watch on the growth of the crop. The sudden change in weather over the last 2-3 days has been considered beneficial for the standing crops. The bullish trend in cardamom futures (Feb) is likely to persist taking support near 1545 levels. This season 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. Seeing this, whatever material is arriving at the auctions, at present, is being picked up by the trader.

BULLIONS

Bullion counter may remain on upside path as renewed fears about a slowdown, exacerbated by economic data from the U S and Japan and the International Monetary Fund’s latest downgrade to global growth projections assisted the bullion counter. Uncertainty about Brexit deal and Sino US trade war are another factors supporting the yellow metal market. On the Brexit front, British Prime Minister Theresa May sought to break the parliamentary deadlock over Brexit by proposing to seek further concessions from the European Union on a plan to prevent customs checks on the Irish border. Gold can move further higher as it can test the level of 32600 while taking support near 31800 while silver can test 39800 taking support near 38500. Meanwhile, uncertainty over prolonged closure of the US government might weigh on the market sentiments in turn increasing the demand for Gold. Reflecting investor appetite for gold, holdings of SPDR Gold, the largest gold-based ETF, was at its highest since June 2018. U.S. home sales tumbled to their lowest level in three years in December and house price increases slowed sharply, suggesting a further loss of momentum in the housing market. Bank of Japan cut its inflation forecasts last week, but maintained its massive stimulus programme, with Governor Haruhiko Kuroda warning of growing risks to the economy from trade protectionism and faltering global demand. Russia has overtaken China to become the world’s fifth largest official sector holder of gold as western sanctions drove buying by its central bank to record highs in 2018.

OIL AND OILSEEDS

The bullish trend of soybean futures (Feb) is likely to get dimmed as it might witness profit booking towards 3700 facing resistance near 3900 levels. There are talks that Iranian state-owned animal feed importer SLAL had last week issued international tenders to purchase 2 lakh tonnes of soymeal, to be submitted by Jan 22. The Indian market was earlier expecting that due to UN sanctions on Iran's banking and trade finance, no international firm will bid for it and as a result Indian firms will finally export the required quantity as Iran uses the rupees it receives for its crude exports to cover its animal feed demand amid US sanctions that have crimped the country's ability to import necessities. However as per market sources, an international trading firm has bid for 1.32 lakh tonnes of soymeal at Euro 377CNF Iranian port for March/April Shipment. This soymeal is of Brazil origin. Hence, if deal from Iran does not materializes then price for soymeal and soybean may fall further. Mustard futures (Feb) may consolidate in the range of 3860-3960 levels. The upside is expected to remain capped as the market is expecting fresh stocks in the coming couple of weeks. The buyer’s interest shall be minimum for the old crop and any such offloading shall keep the physical prices under bearish tone. Meanwhile, now 2.54 lakh tonnes of balance stocks are available with Nafed & the liquidation will continue in days to come. CPO futures (Feb) is likely to face resistance near 570 levels & trade with a negative bias owing to profit booking. Moreover, higher imports of palm oil to India may exert a supply pressure over the counter.

ENERGY COMPLEX

Crude oil prices may remain on upside path but profit booking at higher levels cannot be denied. Production cuts by OPEC nations and declining rig counts are supporting the prices while concerns over global growth are capping the gains. Crude oil can test upside level of 3950 while taking support 3650 levels in MCX. Potential U.S. sanctions on Venezuela’s crude oil exports would cut off nation from Gulf Coast refiners that are among its biggest customers, likely forcing it to send more crude to China, India or other Asian countries. Oil markets have been underpinned this year by production cuts led by the Organization of the Petroleum Exporting Countries (OPEC), aimed at reining in an emerging supply overhang. Whether OPEC's efforts will be successful will also depend on the development of oil production in the United States, where crude output jumped by 2 million barrels per day (bpd) in 2018 to an unprecedented 11.9 million bpd. The boom was largely fuelled by onshore shale oil drilling. And the US Energy Information Administration (EIA) expected shale output to rise further; it stated that output growth would slow in the coming years. Natural gas counter can remain downbeat as its prices can dip towards 200 levels while facing resistance at near 230 .US midday forecasts called for less severe weather in February than previously expected. Meanwhile, U.S. natural gas output was projected to increase to record 77.6 Bcfd in February.

OTHER COMMODITIES

Cotton futures (Jan) is likely to test 20500 levels on the downside due to lack of demand. In Gujarat, ginners are staying away from fresh buying, while in Karnataka and Telangana, the majority of them are operating in a single shift and the lack of demand from textiles mills. Meanwhile in Karnataka, about half the 300 mills have already shut down owing to lack of business. Guar seed futures (Feb) will probably remain steady taking support near 4200 levels, while guar gum futures (Feb) may remain stable above 8300 levels. A probability forecast for El Niño and La Niña (ENSO) by the IMD indicated maximum probability for ENSO neutral conditions (neither an El Niño event nor a La Niña event in February this year. Propensity towards a deficient monsoon is more during El Nino conditions & if the forecast turns to be true, then it will hamper the output of guar in 2019-20 (Oct-Sept), and positive signal to the prices. Chana futures (Mar) is expected to plunge further towards 4090 levels taking negative cues from the spot markets. A sluggish trend in chana is being witnessed in the domestic markets amid increased availability of the government stock and the rise in selling pressure of chana by the NAFED, especially in the states of Madhya Pradesh and Rajasthan. Additionally, millers are not actively engaged in buying as demand in sale counters for Chana dal and besan is poor. Sentiments are still weak as arrivals of new crop are likely to improve and also on continued selling of stock at lower rates by government agency as they are holding major old stocks.

BASE METALS

In base metal counter, prices may bounce back further on falling stock piles and supply concerns. Copper may trade on mixed path as it can face resistance near 430 levels while taking support near 410 levels. The union of supervisors at Chilean state miner Codelco’s Gabriela Mistral mine has rejected the company’s final offer for a new collective labour agreement, raising the spectre of a strike in the coming days. According to the National Bureau of Statistics “China's December refined copper output rose by 4.5 percent yearon-year to 839,000 tonnes, its highest monthly total in 2018”. Meanwhile Lead may find support near 140 and can bounce towards 149. Aluminium can continue its bounce back and can test 139 taking support near 130 levels. Meanwhile Aluminium cancelled warrants, or metal earmarked for removal from LME warehouses, have surged in the past 10 days to nearly 400,000 tonnes from 235,000 tonnes in the middle of January, accounting for around one third of the LME’s 1.3 million tonnes of stock. Nearly 3 million tonnes of (Chinese aluminium) smelting capacity has closed and inventories are drawing on a counter-seasonal basis. Zinc can bounce further and can test 192 levels. As per the ILZSG “The global zinc market deficit widened to 96,600 tonnes last November from a revised deficit of 52,000 tonnes in October”. Nickel can continue its recovery further as it can test 860 taking support near 800 levels. Global nickel market deficit narrowed to 4,900 tonnes last November from the previous month’s deficit of 10,600 tonnes.

TREND SHEET

TECHNICAL RECOMMENDATIONS

ZINC MCX (FEB) contract closed at Rs. 188.25 on 23rd Jan’19. The contract made its high of Rs. 200.70 on 10th Oct’18 and a low of Rs. 166.60 on 3rd Jan’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 181.05. On the daily chart, the commodity has Relative Strength Index (14-day) value of 66.21.

One can buy at Rs. 183.50 for a target of Rs. 187.50 with the stop loss of Rs. 181.50.

CRUDEOIL MCX (FEB) contract closed at Rs. 3741 on 23rd Jan’19. The contract made its high of Rs. 5689 on 4th Oct’18 and a low of Rs. 3037 on 26th Dec’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 3670. On the daily chart, the commodity has Relative Strength Index (14-day) value of 55.10.

One can sell at Rs. 3790 for a target of Rs. 3690 with the stop loss of Rs. 3840.

SYOREF NCDEX (FEB) contract was closed at Rs. 760.90 on 23rd Jan’19. The contract made its high of Rs. 782 on 17th Oct’18 and a low of Rs. 706.75 on 26th Dec’18. The 18- day Exponential Moving Average of the commodity is currently at Rs. 750.14. On the daily chart, the commodity has Relative Strength Index (14-day) value of 64.482.

One can sell at Rs. 766 for a target of Rs. 754 with the stop loss of Rs 772.

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NEWS DIGEST

• China’s economy cooled in the fourth quarter under, dragging 2018 growth to the lowest level in nearly three decades.

• U.S. oil output from seven major shale formations is expected to rise by nearly 63,000 barrels per day (bpd) in February to a record 8.179 million bpd.

• Chilean copper miner Antofagasta Plc ended the year with annual output at the higher end of its forecast, boosted by record fourth-quarter production.

• Chinese oil refiners raised their output to a record in 2018, led by state-run oil majors which maximised operations on firm profit-margins.

• SEBI has directed commodity exchanges to align trading lot size with delivery lot size to remove barriers in physical delivery of the commodity and adhere to the global standard.

• Karnataka's maize output is seen falling 33 percent on year to 3.64 million tonnes in 2018-19 (July-June) due to a sharp fall in yield, according to the second advance estimate of state's farm department.

• The Indian Sugar Mills Association (ISMA) revised downward the country's sugar output for the second time to 30.7 million tonne (MT) for the ongoing marketing year 2018-19.

• The volume of world exports of soybeans in December 2018 decreased by 5.5% as compared with the same month a year earlier and amounted to 8.37 million tons, according to experts from Oil World.

WEEKLY COMMENTARY

CRB rally cooled off after profitbooking from higher levels; it also ignored the downside in dollar index. Dollar index moved down as the partial U.S. government shutdown, now in its 34th day and has hurt investor sentiment. Global growth concerns have also pressurized commodities prices. IMF cut its 2019 and 2020 global growth forecasts, citing a bigger-than-expected slowdown in China and the Eurozone. Gold prices rose as the dollar declined due to concern that the prolonged U.S. government shutdown will limit economic growth and also the global growth is slowing. Silver saw some correction in both MCX and COMEX. White House economic adviser Kevin Hassett has said that the U.S. economy could see zero growth in the first three months if the partial government shutdown lasts for the whole quarter. Oil prices slipped as the European Union seeks to circumvent U.S. trade sanctions against Iran. Falling U.S. gasoline prices and rising crude output in the United States were also pressuring the crude market. Furthermore, U.S. crude stockpiles rose sharply last week, while gasoline and distillate inventories built. Natural gas prices were hammered, despite a forecast of colder than normal weather and inventories that are 11% below the 5-year average range for this time of year. Supply rises as dry natural gas production continues to grow. According to data from the EIA the average total supply of natural gas rose by 1% compared with the previous report week. In industrial metals, copper and nickel prices dipped whereas lead, zinc and aluminum prices got augmented. London copper prices edged down after economic growth in top metals consumer China slowed to its weakest in 28 years. Zinc prices moved upon supply tightness. The global zinc market deficit widened to 96,600 tonnes last November from a revised deficit of 52,000 tonnes in October.

In agri soya counter, both refined soya oil and soyabean prices saw a pause in rally on profitbooking from higher side. CPO was unstoppable though on better demand and strong technical. While mustard seed caught up rally of this counter finally and witnessed some buying momentum. Weak demand for mentha oil in domestic and overseas markets, high availability of stocks and talk of import of the synthetic variant kept prices subdued. Spot coriander prices edged higher at major markets in Gujarat, Rajasthan and Madhya Pradesh due to better buying, tracking firmness in futures.

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 $)

Diverting its weakness in strength by using palm oil imports

Recently the government of India has cut import duties on crude and refined palm oil from Southeast Asian countries to comply with preferential trade pacts with them. The duties have been cut to provide tariff concessions under the IndiaASEAN Free Trade Agreement. The extra tariff concessions also given to Malaysia under the India-Malaysia Comprehensive Economic Cooperation Agreement (IMCECA) established on 24 September 2010. Under this preferential tariff pact, the bound rate for India’s import is 50% for refined palm oil and 40% for its crude version, effective from Jan 1, 2019.

The duty on crude palm oil from Malaysia, Indonesia and other members of the Association of South East Asian Nations was cut to 40 per cent from 44 per cent, while the tax on refined palm oil was cut to 45 per cent from 54 per cent if imported from Malaysia and to 50 per cent, if purchased from Indonesia or other member-nations of Asian, the ministry of finance said in a notification. The government had last increased import duties on edible oils in March 2018 to control imports of cheaper edible oils, and safeguard the interests of domestic refiners and oilseed farmers. Higher duties in India had been hurting exports of Southeast Asian countries.

India is the world’s largest importer of palm oil, while Indonesia and Malaysia are the leading producers. According to Solvent Extractors Association, the country’s edible oil consumption is estimated at 23.5 million tonnes for 2018-19. India imports 60 per cent — 15.5 million tons annually — of its edible oil requirements, largely from Malaysia, Indonesia followed by soyabean oil from Argentina and Brazil, sunflower oil from Ukraine and Russia and canola oil from Canada. India's domestic palm oil production is only 3,00,000 tonnes and imports 8 million tonnes of palm oil annually.

Even this, with the rupee strengthening to Rs 69.50 from Rs 74.40 against the dollar and international markets at a 6-7 year low, edible oil prices in India were at the lowest. Beside this, with the difference between crude and refined palm oil reducing from 10 per cent to now 5 per cent, refineries in the country is also facing a difficult time.

Nevertheless, the governments of Indonesia and Malaysia have requested India to reduce the taxes on import of palm oils, but the Indian government is also considering the safeguard of domestic stakeholders and will not lower it below the bound rates. However, Indian government is evaluating a request by Indonesia to keep import duties on refined products at the same level as Malaysia. In return, Indonesia has offered to buy sugar and rice from India. Indonesia is a net importer of rice, while India is one of the top exporters of rice as well as sugar.

Indonesia has suggested a trading arrangement under the India-ASEAN free trade agreement (FTA) so that import duty on refined palm oil and sugar is harmonised to 45 per cent and 5 per cent, respectively, to facilitate trade. Indonesia is working on an agreement with India to buy rice to get over its temporary deficit of the cereal. India is willing to sell 500,000 tonnes of rice to Indonesia, but also wants Indonesia to cut its export duty on crude palm oil which has threatened the India’s refining industry.

Thus the current bargaining to export rice & sugar to south-east Asian country using its dependence on palm oil imports indicate India is diverting its weakness in strength.

INTERNATIONAL COMMODITY PRICES

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News Flows of last week