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WEEKLY VIEW OF THE MARKET

Indian markets witnessed see saw moves in the week gone by and settled with marginal losses with mixed sentiments. Selling pressure was seen in banking, auto and reality sector while pharma counter supported the markets up to some extent. From derivative front , the tug of war between bulls and bears kept the markets in range of 9000-9500 levels during the week. However, call writers were seen shifting to lower band which indicates limited upside into the index as of now. On higher side, 9300-9400 levels would act crucial resistance for nifty while slide below 9000 levels would add further selling pressure into the markets. The Implied Volatility (IV) of calls closed at 33.42% while that for put options closed at 34.86%. The Nifty VIX for the week closed at 38.18% and is expected to remain volatile. PCR OI for the week closed at 1.14 down as compared to last week at 1.28 which indicates more call writing than put. At the current juncture, traders should remain focussed on stock-specific moves and are advised to trade cautiously tracking global markets as volatility is likely to grip the domestic markets in the coming few sessions as well.

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 (June) is likely to find support near 5000-4900 levels. The counter is in oversold region and it is attracting the stockists to fill up their inventories at such bottom available prices. With over 60% of the units involved in processing turmeric and making value-added products started functioning, turmeric trading is nearing normalcy in Erode. More traders have started arriving and the market will be back to normal soon, and added that once all the units started functioning, demand for turmeric would go up. Jeera futures (June) is seen to trade on a bearish bath towards 13000, facing resistance near 13700 levels. It is reported that the Agriculture Produce Market Committee (AMPC) of Unjha, will resume auction of the spice seeds from this weekend in a staggered manner. Every season, March to May is considered peak season of jeera marketing in Gujarat, the largest producer of spice seed in India. This year, the crop was delayed by around two weeks due to late retreat of monsoon. However, just when arrivals started peaking, the yard was closed since March 22 due to the outbreak of novel coronavirus. So when the auctions will resume, probably the counter will witness a selling pressure, against lack of export demand. Dhaniya futures (June) will possibly descend towards 5400-5200 levels. In the present scenario, the Farmers appear to be on a selling mode to meet their financial needs to clear the outstanding dues of agriculture loans. Moreover, demand has taken a hit as departure of labour has affected the functioning of many spices industries especially in Maharashtra, Madhya Pradesh, Rajasthan, Delhi. The buyers are unable to get neither discounts, nor sellers a premium rates for their produce.

BULLIONS

Bullion counter may continue to extend its upside momentum as rising U.S.- China tensions over the coronavirus and weak economic data from U S and talks of further U.S. stimulus is assisting the prices higher. U.S. President Donald Trump is open to negotiations on another possible stimulus bill amid the pandemic, but not the one put forward by House of Representatives Democrats. Trump also signalled a further deterioration of his relationship with China over the virus, saying he has no interest in speaking to President Xi Jinping right now and going so far as to suggest he could even cut ties with Beijing. U.S. President Donald Trump stated that he opposed renegotiating the U.S.-China "Phase 1" trade deal after a Chinese state-run newspaper reported some government advisers in Beijing were urging fresh talks and possibly invalidating the agreement. SPDR Gold Trust holdings, the world's largest gold-backed exchange-traded fund stood at 1,104.72 tonnes. Gold can move towards 47500 levels while taking support near 46000 levels while silver may move higher towards 45500 levels while taking support near 42500. Federal Reserve Chair Jerome Powell's signalled bets that the U.S. central bank will pursue a negative interest-rate policy are off-base, but vowed to use its power as needed and called for additional fiscal spending to prop up the virus-hit economy. According to World Gold Council (WGC) “Higher risk and uncertainty combined with lower opportunity cost will likely be supportive of gold investment demand in 2020”. Gold, as an asset class, benefits from widespread stimulus measures because it is considered a hedge against inflation and currency debasement.

OIL AND OILSEEDS

Soybean futures (June) may continue to face resistance near 3850 levels and trade with a downside bias. The reason being is that this kharif season has brightened the prospects for soybean cultivation starting next month. The Soybean Processors Association of India estimates carryover stock to rise to 13.26 lakh tonnes at the end of September. The markets haven’t opened in many regions. But as the trade expects markets to resume operations after the lifting of the lockdown, farmers are likely to flush the market with the stocks available with them, which is about 4 million tonnes as on May 1. This is considerable quantity for the next five months. And without exports, we may be left with a good amount of carry-forward stock for the next season. Mustard futures (June) may witness a consolidation in the range of 4120-4250 levels. The upside may remain limited due to lack of cues from the spot markets. The procurement of mustard continues interrupted in Rajasthan despite closure of all 247 agricultural produce marketing committee (APMC) mandis due to the ongoing strike in the state. These mandis were observing a strike to protest against the imposition of 2 percent farmer’s welfare cess. Soy oil futures (June) may remain stable & trade with a positive bias in the range of 745-775, while CPO futures (May) is likely to trade on a positive note in the range of 585- 620 levels. The sentiments of the market participants have turned positive after U.S. exporters inked their first soybean oil export deal with China in nearly two years last week, as Beijing seeks to fulfill its purchase commitments in the Phase 1 trade agreement it signed in January.

ENERGY COMPLEX

Crude oil may witness upside movement as International Energy Agency (IEA) predicted crude stockpiles would start to shrink in second-half 2020 after surging while the coronavirus pandemic slashed fuel demand. Prices have been lifted by more signs that oil output is falling among OPEC and other major producers, a grouping known as OPEC+. But the market mood remains cautious, with the coronavirus pandemic far from over and new clusters emerging in countries where lockdowns have been eased. Crude oil can recover towards 2500 by taking support near 1600. Still, as demand increases with the easing of lockdowns to get economies going again, the IEA expects crude inventories to fall by about 5.5 million bpd in the second half of this year. OPEC+ had already agreed to cut production by nearly 10 million bpd, a record amount, and Saudi Arabia extended its planned reductions for June, pledging earlier this week to slashing production by nearly 5 million barrels per day. The Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia agreed in April to curtail their production by 9.7 million barrels per day (bpd) in May and June. Saudi Arabia, de facto leader of OPEC, also said it would cut its oil output by an additional 1 million bpd to 7.5 million bpd starting in June. Natural gas can witness some recovery as it may test 140 levels while taking support near 120 levels. The weather is expected to be warmer than normal over the next 6-10 and 8-14 days which should keep inventory withdrawals at the average rate.

OTHER COMMODITIES

Cotton futures (May) is expected to trade higher towards 16200, taking support near 15000 levels. The U.S Department of Agriculture estimates that India’s mill consumption in MY 2020/21 to be two percent higher than last year. The marginal increase is expected as textile industry operations restart and begin the process of recovery after the impact of the lockdown in MY 2019/20. On the export front, Indian exporters will witness increased competition from exporters such as the United States and Brazil, whose export orders have also been deferred/canceled and will have larger volume of unsold stocks to offload. Moreover, the imports may decline further as a weakening rupee coupled with lower demand will limit cotton imports to only high/premium grades. Chana futures (June) is likely to witness towards correction towards 4000, facing resistance near 4200 levels. The Department of Agriculture, Cooperation and Farmers Welfare stated in a latest update that sowing of pulses continues at a good pace despite the nation-wide lockdown. About 10.35 lakh ha area coverage under pulses as compared to 5.92 lakh ha. during the corresponding period of last year. The bearish momentum will possibly continue to persist over mentha oil futures (May) and in days to come, it can slide down to test 1100-1080 levels. This season, the acreage of menthe in the major grown state of Uttar Pradesh has totaled to 200,000 hectares. It is reported that the sate government is ensuring that the farmers do not face any shortage in the ongoing zaid sowing season, which is a short season between kharif (summer) and rabi (winter) season in the months of March to July. The Zaid crops are grown on irrigated land and do not depend upon monsoon for irrigation.

BASE METALS

Base metals may witness mixed movement. New bank lending in China fell less than expected in April from the previous month while growth of broad money supply quickened, as the central bank ramped up policy support for the coronavirus-ravaged economy. Recently Trump suggested he could cut ties with the China, signalling a further deterioration in the relationship that could potentially hurt sentiment and raise fears of more tariffs along with impacting metals demand. But there are hopes that more stimulus to help global economies could boost demand for metals. Copper may test 416 while taking support near 390. Fundamentals for copper are expected to be relatively strong as lockdowns in producer countries limits supply and helps to offset the drop in demand. Chile, the world’s biggest copper producer, announced a general quarantine for greater Santiago to force down a sharp resurgence of coronavirus cases. Zinc may recover towards 160 levels by taking support near 145 levels. Lead may face resistance near 140 levels while taking support near 130 levels. French metals producer Recylex its Weser-Metall lead production plant in Germany had filed for insolvency amid falling metal demand. Nickel may witness recovery towards 960 levels while taking support near 900 levels. Aluminum also may remain in narrow range of 130-138 levels. The huge costs involved in suspending and restarting aluminum smelters have mostly prevented any significant supply cuts. Aluminum stocks are likely to climb and, as was the case after the global financial crisis (GFC), stocks should remain high for several years, a key factor holding back any recovery in prices.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CRUDE OIL MCX (JUNE) contract closed at Rs. 2115 on 14th May’2020. The contract made its high of Rs. 3620 on 28th Feb’2020 and a low of Rs.1361 on 22nd Apr’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs.1749.58 On the daily chart, the commodity has Relative Strength Index (14-day) value of 58.61.

One can buy around Rs. 2000 for a target of Rs.2500 with the stop loss of Rs.1820.

SILVER MCX (JULY) contract closed at Rs. 44135 on 14th May’2020. The contract made its high of Rs. 48999 on 18th Feb’2020 and a low of Rs. 34076 on 18th Mar’2020. The 18- day Exponential Moving Average of the commodity is currently at Rs. 42780.93 on the daily chart, the commodity has Relative Strength Index (14-day) value of 67.60.

One can buy around Rs.43300 for a target of Rs. 46000 with the stop loss of Rs. 42000.

GUARGUM NCDEX (JUNE) contract was closed at Rs. 5150 on 14th May’2020. The contract made its high of Rs. 5835 on 16th Apr’2020 and a low of Rs. 4717 on 28th Apr’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 5191.88onthedailychart,thecommodityhasRelativeStrengthIndex(14-day)valueof53.4.

One can buy at Rs. 5230 for a target of Rs.5550 with the stop loss of Rs 5120.

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NEWS DIGEST

Ÿ Interest subvention and prompt repayment incentive on crop loans due from 1st March has been extended to 31st May. - Ministry of Finance.

Ÿ Additional Margin applicable on both long and short side in allthe running contracts and in contracts to be launched of Soy Bean, Refined Soy Oil and Rapeseed-Mustard Seed is withdrawnfrombeginningoftradingdayMay14,2020

Ÿ The export of oilmeals during March 2020 is provisionally reported at 177,003 tons compared to 382,852 tons in March, 2019 i.e. down by 54%. - Solvent Extractors’Association of India.

Ÿ Saudi Aramco, the world’s largest oil exporter, reduced the volume of crude it will supply to at least three buyers in Asia by as much as 30% for June.

Ÿ The Shanghai Futures Exchange (ShFE) will allow delivery of nickel briquettes against its nickel futures contracts later this year in response to rising demand for other forms ofthe metal, notably for electric vehicles (Evs).

Ÿ China’s monthly auto sales rose for the first time in almost two years as the country eased virus-related curbs and reopened for business.

Ÿ HSBC Holdings Plc suffered mark-to-market losses of about $200 million in a single day in March after gold prices in London and New York diverged dramatically.

Ÿ Iraq is cutting its oil output by around 700,000 barrels per day (bpd), a third less than required under an OPEC+ supply pact.

WEEKLY COMMENTARY

Some most awaited recovery was witnessed in commodities and the commodities indices, CRB, closed near 124. Pause in rally in dollar index amid some ease in lockdown boosted the confidence of commodities meanwhile resurgence in cases in China, South Korea and Japan limited the upside. The US dollar erased earlier losses as Fed rejected the idea of using negative interest rates as a stimulative tool, even as he sounded a gloomy note about economic growth. Gold prices rose as mounting fears about a likely deep recession prompted traders to seek the safe haven asset. Retaliation by US against China also propped up bullion counter. Silver outperformed gold last week. Silver crossed the mark of 44700 whereas gold after breaking the resistance of 46100, crossed 46700. Crude oil prices moved up as data showing a drop in U.S. stockpiles as well as a decline in output last week. EIA showed U.S. crude stockpiles declined by 745,000 barrels last week, as against expectations of over 4 million-barrel rise. Natural gas continued the fall from 162 to 122 in last two trading weeks. In the later part of the week, some buying had emerged. Base metals took correction on fears of a second wave of coronavirus infections in top metals consumer China and in South Korea amid some worse than expected data’s. IMF said it was “very likely" the Fund would cut global growth forecasts further as the pandemic was hitting many economies harder than previously projected. China’s services activity contracted for the third month in a row in April due to decreasing demand both at home and overseas amid the pandemic

Cotton and cotton oil seeds cake rose from lower levels. Global cotton consumption is likely to fall 11.8%. CCI has revised its bulk discount slabs for the bales of quality cotton stock procured in 2018-19 (Oct-Sep) and 2019-20 marketing years. ICE cotton futures rose to a near one-week high on Thursday helped by a positive US government export sales report that included sales to China and on hopes of more demand from the top consumer. CPO moved up from lower levels on surge in crude prices, nevertheless buying was limited. Palm oil prices have room to fall further and are getting close to the cost of production. China’s vegetable oil imports are going to shrink this year because of higher crushing of oilseeds locally. Soybean sentiments remained weak on forecasts of good weather in the Midwest likely to support big crops pressured futures, but hopes of a pick-up in Chinese export purchases helped limit losses. SEAof India has compiled the export data for export of oilmeals for the month of March 2020. The export of oilmeals during March 2020 is provisionally reported at 177,003 tons compared to 382,852 tons in March, 2019 i.e. down by 54%.

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 $)

Global stimulus packages to spur the economy

The happiness & excitement of New Year 2020 had disappeared immediately as the most deadly coronavirus originated from city Wuhan of China started to expand and had taken nearly 90% of world in its grip. The worst crisis has forced the world economy under global lockdown and is disrupting supply chains, depressing consumer demand and putting millions out of work. The current global downturn is expected to be the worst since the 1930s with U.S. unemployment soaring to 33 million since the middle of March and the EU announcing it is expecting its collective GDP to shrink by 7.4 percent this year. The IMF’s April projection for a 3% contraction the global economy would mark the steepest downturn since the Great Depression of the 1930s. IMF also warned that outcomes could be far worse, depending on the course of the pandemic.

The growing steps of stimulus

Global responses to combat with coronavirus and to pull back the corona hit economy on track of growth are quite different compared to economic size. Central banks and governments have unveiled an estimated $15 trillion of stimulus already to shield their economies from the coronavirus pandemic. The sum equates to about 17% of an $87 trillion global economy last year. Central banks will also buy more bonds; with some saying there is no cap on purchases.

U.S. has committed to the largest rescue package of any country in pure dollar terms over three congressional stimulus phases ($8.3 billion, $192 billion and $2.5 trillion). But in term of percentage, the U.S. measures are estimated 13 percent of GDP and it is actually trails Japan's measures which equate to just over 21 percent of GDP. It has outlined USD 1.1 trillion recovery package and plans for further spending. In Europe where Spain and Italy have endured devastating coronavius outbreaks, the size of stimulus packages are estimated to be 7.3 percent and 5.7 percent of GDP respectively. Germany has announced a spending of around USD 815 billion, equal to 10.7 per cent of its GDP. Italy has announced an Euro 750 billion (around USD 815 billion) package.

Mega-stimulus for Atma-Nirbhar Bharat Abhiyan

In India, relatively lesser spread of corona than other developed countries, the government also come with a mega-stimulus package. The initial stimulus package of Rs 1.7 lakh crore in March, followed by liquidity measures by the RBI and now, the stimulus package of Rs 20 lakh crore may help the Indian economy towards a vertical (V-shape) recovery. India’s Atma-nirbhar Bharat Abhiyan or Self-reliant India Mission is about 10 per cent of India’s GDP in 2019-20 and would rank behind Japan, the US, Sweden, Australia and Germany. The UN has welcomed India's Covid-19 megastimulus package, even as it slashed India’s growth rate for this fiscal year to 1.2 per cent. By this mega-stimulus package, the Indian government has tried to balance between supply side of the economy and demand constraints.

The pace and strength of the recovery from the current crisis not only hinges on the efficacy of public health measures in slowing the spread of the virus, but also on the ability of countries to protect jobs and incomes, particularly of the most vulnerable members of our societies.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week