Godrej Consumer Products Limited (GODREJCP)

ICICI Prudential Life Insurance Company Limited (ICICIPRU)

WEEKLY VIEW OF THE MARKET

Indian markets remained volatile during last week with Nifty ending in the midst of marginal losses while Bank nifty closed with nearly 1% gains. During the week, majorly stock specific action remained under focus. On derivative front, the tug of war was seen among bulls and bears as call writers at 11600 strikes while put writers at 11500 strikes majorly kept the markets volatile. From the technical front, however, we expect that volatility will likely to grip market and any dip should be used to create fresh longs. The Implied Volatility (IV) of calls was up and closed at 14.90% while that for put options closed at 15.85%. The Nifty VIX for the week closed at 16.24% and is expected to remain volatile. PCR OI for the week closed at 1.03 which points towards put writing and is positive for markets. From technical front now Nifty and bank nifty both the indices are comfortably trading above its short and long term moving averages which suggest that current trend is likely to continue towards more upside. On higher side 11650 levels should act immediate hurdle for Nifty above which we can witness further short covering from call writers towards 11700-11750 levels in coming sessions.

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

The short covering was seen in turmeric futures (Nov) and the commodity is likely to face resistance near 6200 levels. On the spot markets, the buyers are purchasing limited stocks; on an average 55% of the arrivals are being sold. Also on the supply side, only few bags of Salem Finger turmeric are arriving for sale at Regulated Marketing Committee. At the Erode Turmeric Merchants Association Sales yard, the finger turmeric was sold at Rs.5,500-6,906 a quintal, root variety Rs.5,008-6,455. Jeera futures (Nov) may remain trapped in the sideways to bearish zone of 16000-16700 levels. Spot jeera prices are trading on the lower side at the major Unjha market amid sluggish trade. While prices remained steady at the Rajkot market. Arrivals are steady around 8,000 bags and 500 bags at Unjha and Rajkot respectively. According to traders, both the buyers and sellers were very less in the market. There was no export demand. Trading was seen only on the basis of sporadic local demand. Dhaniya futures (Nov) is looking bullish as it can head towards 7000-7200 levels. The sentiments are positive due to robust demand in contrast with lower production this year and depleting stocks. Cardamom futures (Nov) is expected to take support near its 200 days moving average of 2580 levels & the downside may remain capped. According to traders, growers are holding their stock, which has resulted in low arrivals. In the last 10 days, prices have come down by around Rs.600 per kg and the current average is hovering around Rs.2300 per kg. The prices are expected to witness a recovery amid arrivals of good quality capsules at the auctions.

BULLIONS

Bullion counter may witness upside momentum as expectation of rate cut in this week meeting i.e on 30th Oct and uncertainty regarding Brexit can give prices underlying support. Weak U.S. economic data has spurred expectations for another interest rate cut by the Federal Reserve. Gold can test 38900 while taking support near 37900 while silver can test 47500 while taking support near 45500. In making the rate cuts, Fed officials have stated that they are largely in response to fears of global slowing, U.S.-China tariffs and tame inflation rather than an indication that the U.S. economy is in trouble. New orders for key U.S.-made capital goods fell more than expected in September and shipments also declined a sign that business investment remains soft amid the fallout from the U.S.-China trade war. Meanwhile ECB held rates unchanged and continued its bond purchase program of €20billion per month. EU member states delayed a decision on whether to grant Britain a three-month Brexit extension, while Prime Minister Boris Johnson stated that if the deadline is deferred to the end of January he would call an election by Dec.12 to break Britain’s Brexit impasse. China’s net gold imports via Hong Kong fell 9% in September from the previous month mainly due to softer demand and possible measures by Beijing to prop up the yuan. From last year Diwali till now gold has given superior return as global growth worries, monetary policy easing by central banks, trade spat between China and U.S and duty hike on imports have pushed gold prices up sharply.

OIL AND OILSEEDS

Soybean futures (Nov) will probably trade sideways to up in the range of 3730- 3850 levels. Overall, the bias will be on the positive side as the excessive rains this year is likely to lower the production for the year 2019 to 89.941 Lakh tonnes (+- 5%), lesser by 19.391 lakh tonnes (-17.7%) as compared to final estimates for kharif 2018. Average yield for the year 2019 is estimated as 836 kg/hectare as against 1009 kg/hectare during the year 2018. As of now, the market would be focusing on the arrivals of soybean from the kharif season. On the CBOT, U.S soybean futures (Nov) is expected to take support near 9.20, while face resistance 9.54 levels. In breaking news reported by Bloomberg, China is returning to the U.S. soybean market, and other major farm commodities and would spend some $20 billion over the next 12 months. All of this depends on President Trump and Xi Jinping signing the Phase 1 deal, expected by the market at the APEC Summit in Chile next month. The bullish trend is likely to prevail in mustard futures (Nov) & it has an upside potential to reach 4400 levels. The restricted arrivals from growing belts and demand from oil mills for crushing to meet the demand of winter season are mainly lifting the sentiments. In news, the Cabinet Committee on Economic Affairs has approved the increase MSP of Rapeseed & Mustard by Rs. 225 per quintal. CPO futures (Nov) may regain towards 590-600, while soy oil futures (Nov) can see an upside target of 775-780 levels respectively. Malaysian palm oil is trending bullish on account of implementation of the biofuels mandates in the form of palm oil.

ENERGY COMPLEX

Crude oil prices may witness range bound movement as drop in stockpiles supported its prices while renewed concerns about fuel demand in light of gloomy economic growth forecasts can cap the upside. Crude oil may face resistance near 4150 while taking support near 3800 levels. Meanwhile Saudi Arabia, OPEC’s de facto leader, wants to focus first on boosting adherence to the group’s production-reduction pact with Russia and other non-members, an alliance known as OPEC+, before committing to more cuts. The prospects of deeper production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies also helped support the market. OPEC, Russia and other producers have since January implemented a deal to cut oil output by 1.2 million barrels per day (bpd) until March 2020 to support the market. Natural gas may witness further recovery on colder than normal weather is forecasted to cover most of U.S. which will increase heating demand ahead of the beginning of the withdrawal season as it can test 185 while taking support near 165. There is a disturbance in the Gulf of Mexico which now has approximately a 60% chance of beginning a tropical cyclone according to the National Oceanic Atmospheric Administration. Natural gas storage injections in the United States have outpaced the previous five-year average so far during the 2019 injection season as a result of rising natural gas production. U.S. Energy Information Administration reported that domestic supplies of natural gas rose by 87 billion cubic feet for the week ended Oct. 18.

OTHER COMMODITIES

Cotton futures (Nov) may trade sideways to down in the range of 18970-19400 levels. Cotton traders across the nation are currently facing a huge dilemma over crop size and the likely behavior of prices in the coming months. The arrivals are expected to gather momentum in days to come. Also, the realistic estimate of the crop size may be available around November 10-15. The market participants are estimating cotton production ranging from 330 lakh bales on the lower side to 370 lakh bales on the higher side. In the international market, ICE cotton futures (Dec) is expected to face resistance near 66 cents per pound & trade in a sideways zone. The two sides are working to try to agree on a text for a “Phase 1” trade agreement announced by U.S. President Donald Trump on Oct. 11, in time for him to sign it with China’s President Xi Jinping next month at a summit in Chile. Chana futures (Nov) may witness profit booking towards 4400-4370, after the recent upside due to festive buying. The fundamental factor that may act as a catalyst is that the sowing has started in small pockets in the state of Madhya Pradesh. Mentha oil futures (Oct) may continue to hold on to the support near 1200 level for the third consecutive week. In days to come, we may see more of an upside coupled with lower level buying from the pharma industries for medicinal purpose ahead of winter season. Secondly, Mentha oil stocks at MCXaccredited warehouses were at 347950.75 Kgs at end of last week, lesser by - 30241.544 Kgs as compared to its previous week, according to data from the bourse.

BASE METALS

Base metal counter may witness range bound movement except Nickel which can move further upside on supply concerns. Copper may trade sideways as it can face resistance near 445 levels and support near 430 levels. Codelco had resumed normal operations after an umbrella group representing all its unions struck a deal with government officials. Meanwhile, Lead may also remain sideways as it can move range of 150-158 levels. Zinc may witness lower level buying as it can test 190 levels while taking support near 182 levels. Nickel prices can move with upside bias as it can test 1260 levels while taking support near 1170. Nickel plant in Indonesia would start operation ahead of schedule in the first half of 2020, and it reiterated production targets for this year. Nickel prices got support following shut down of a nickel project in Papua New Guinea after a slurry spill. Papua New Guinea has closed Metallurgical Corporation of China’s Ramu nickel operations in the country for spilling slurry into a bay in August and “for not adhering to remedial measures”. French miner and metals producer Eramet stated its Weda Bay Nickel plant in Indonesia would start operation ahead of schedule in the first half of 2020, and it reiterated production targets for this year. Aluminum can trade with sideways to weak bias as it can test 125 levels while facing resistance near 138 levels. United Company Rusal reported only a small rise in third-quarter aluminum sales from the previous quarter, pressured by a weaker market for the metal.

TREND SHEET

TECHNICAL RECOMMENDATIONS

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NEWS DIGEST

• India hopes to sign energy deals with Saudi Arabia that include its participation in India's strategic petroleum reserve, during Prime Minister Narendra Modi's visit to the kingdom this week.

• MCX has launched a contract with delivery-based settlement and a one-gram trade lot. This means retail investors have another way to buy a gram of gold, stored in vault facilities of one's choice.

• China's nickel ore imports in September rose 24.6% from the previous month to their highest since at least 2016.

• Chile's Codelco had resumed normal operations after its unionized workers struck a deal with government officials.

• According to the International Nickel Study Group “global output of nickel is expected to increase to 2.48 million tonnes in 2020 versus 2.37 million tonnes in 2019”.

• International Copper Study Group stated that the market would return to a surplus of 281,000 tonnes in 2020 after a 320,000 tonne shortfall this year.

• China is willing to buy as much as $20 billion of US farm goods in the first year if a phase-one trade deal is signed with the US, Bloomberg reported.

• The Cabinet Committee on Economic Affairs (CCEA) has approved the increase in the MSP for all mandated Rabi Crops of 2019-20 to be marketed in Rabi Marketing Season (RMS) 2020-21.

• The government has brought commodity options trading and settlement on a par with equities, paving the way for new norms for farmers and small and medium enterprises to step up hedging. Commodity options can now be settled directly.

WEEKLY COMMENTARY

In the week gone by, CRB strengthened further on some positive movements in bullion, energy and in some agri commodities. Even few base metals saw revival despite weaker economic data. Dollar index gained marginally from the lower level of 97 on Brexit issue after a downfall of two week. The European Central Bank left short term interest rates unchanged. The central bank also kept its forward guidance unchanged, suggesting that its main interest rates will remain at their current or lower levels until there’s strong evidence of a pickup in prices. A surprise weekly drawdown in U.S. crude stocks and OPEC jawboning about deeper production cuts have suddenly energized dreary trading in oil, pushing prices to three-week highs. Also supporting crude prices was a Reuters report from Wednesday hinting at the likelihood that attendees at the OPEC meeting set for December may considering deeper cuts than the 1.2-million-barrelsper-day cut agreed by the cartel and its key ally Russia almost a year back. On MCX, it crossed 4000 mark. Natural Gas continued it gradual upside move. In base metals, nickel saw some strong move on some bullish indications. LME on-warrant stocks sit at 30.2kt last, close to decade lows. Copper prices cooled off on some positive talk. Codelco suggests that Chuquicamata mine is running normally and unions at El Teniente mine have agreed to talks and dropped plans to halt operations. Aluminum saw sharp fall after a breaking down from a consolidation zone in MCX. Rio Tinto indicated it is to review its operations including the closure of Tiwai Point in New Zealand due to low Ali prices and high costs. Report is suggesting that this closure could help tighten the market as it accounts for 0.5% of global supply. On weaker than expected economic data’s gold and silver prices moved up. Once again it came above the mark of $1500.

It was a strong week for oil seeds and edible oil futures; especially CPO and RM Seed. The Cabinet Committee on Economic Affairs (CCEA) on Wednesday decided to increase to the MSP for mustard and rapeseed was increased by Rs 225 per quintal to Rs 4425, while that of gram went up by 5.5 per cent to Rs 4875 a quintal over the previous season. Malaysian palm oil futures surged for a third straight session to hit a 16 month-high on Thursday, supported by expectations that exports in October could be higher than a month earlier. Some spices caught the attention with its sharp upside, and Dhaniya and turmeric were one of them. Spot coriander prices are quoting higher at the Ramganj and Baran markets in Rajasthan due to increase in demand at existing lower levels. While prices are also steady at other major markets in, Rajasthan, Gujarat and Madhya Pradesh.

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 $)

MSPs for all rabi crops in crop year 2019-20 (July-June)

In a major announcement for farmers ahead of Diwali, the government on 23th October hiked the Minimum Support Price (MSP) of rabi or winter crops of crop year 2019-20 to be marketed in 2020-21 season. The MSP rise has been announced by the Union Cabinet is based on the recommendations laid down by the Commission for Agricultural Costs and Prices (CACP).

The increase in MSP for Rabi marketing Season(RMS) 2020-21 is in line with the principle of fixing the MSPs at a level of at least 1.5 times of the all India weighted average cost of production (CoP), which was announced in the Union Budget 2018-19. Cost of production is one of the important factors in the determination of MSPs. This year's increase in MSP of Rabi crops for marketing Season 2020-21 provides return over all India weighted average cost of production is 109 per cent for wheat; 66 per cent for barley; 74 per cent for gram: 76 per cent for lentil; 90% for rapeseed & mustard and 50 per cent for safflower.

The Minimum Support Prices for all rabi crops of 2019-20 season to be marketed in 2020-21 is as follows:

• The government increased the Minimum Support Price (MSP) for wheat by Rs 85 to Rs 1,925 a quintal and for pulses by up to Rs 325 per quintal

• Barley MSP has also been increased by Rs 85 to Rs 1,525 per quintal for the current year from Rs 1,440 per quintal last year.

• To encourage cultivation of pulses, the highest increase in MSP has been recommended for lentil (Rs. 325 per quintal). The support price of masoor has been increased to Rs 4,800 per quintal for this year from Rs 4,475 per quintal last year.

• Similarly, the MSP of gram has been hiked by Rs 255 to Rs 4,875 per quintal for this year from Rs 4,620 per quintal last year.

• Among oilseeds, rapeseed/mustard MSP has been increased by Rs 225 to Rs 4,425 per quintal for 2019-20 rabi crop from Rs 4,200 per quintal during 2018-19.

• The minimum support price of safflower has been hiked by Rs 270 to Rs 5,215 per quintal for the current year from Rs 4,945 per quintal last year.

MSP has an important role

he MSP policy would have a favorable impact on farm income that will led to an economic growth as it assured farmers of a minimum of 50 percent as margin of profit. It is one of the important and progressive steps towards doubling farmers' income by 2022 and improving their welfare substantively. The implementation of Minimum Support Prices (MSP) will increase the income of farmers and purchasing capacity, which will have an impact on wider economic activity.

However the MSP hikes is expected to widen the fiscal deficit. The move may stoke inflation; prompt the Reserve Bank of India (RBI) to hike interest rate. It may also hit exports of wheat and Rapeseed meal badly as the domestic prices of these crops may go beyond international prices.

Currency Table

News Flows of last week