ICICI Prudential Life Insurance Company Limited (ICICIPRU)

Petronet LNG Limited (PETRONET)

WEEKLY VIEW OF THE MARKET

Indian markets begin September series on a positive note with Nifty once again reclaiming 11000 levels. Sharp recovery was seen from lower levels with HDFC twins, ITC and ICICIBANK emerged as top contributors. From derivative front, put writers were seen active in 10900 & 11000 strikes while marginal call writing was observed at 11100 call strike. From technical front, 10900-10850 zone should act as key support for Nifty while on higher side 11150 should be key resistance. The Implied Volatility (IV) of calls was up and closed at 15.37% while that for put options closed at 16.32%. The Nifty VIX for the week closed at 16.43% and is expected to remain volatile. PCR OI for the week closed at 1.25, which indicates OTM put writing. For coming week, we expect that as far we are holding in broader range of 10850-11150, the volatility is likely to grip the market and some more wild moves are expected in coming sessions. However, on higher side anytime closing above 11150 should trigger fresh short covering, which could move index towards 11250 levels 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

The overall trend of turmeric futures (Sept) is bearish, but currently it is holding on to the support near 6730 levels. In days to come, the counter may break the support level & witness correction towards 6600-6550 levels as it may come under the pressure of sluggish demand in spot markets and expectations of a bigger crop in the 2019-20 (Jul-Jun) season. On the demand side, exports to Iran have nearly come to a standstill since May following the expiry of the US sanctions waiver to India for six months. Without the Iranian market, Indian turmeric growers do not have any big orders in hand. In Nizamabad, the benchmark market in Telangana, the finger variety was sold around Rs.6,600 per 100 kg, while the bulb variety was at Rs.6,300. Since past two weeks, jeera futures (Sept) is facing resistance near 17100 levels, and in days to come we can see more weakness till 16500-16400 levels. The outlook is seen bearish on hopes of rise in area under the spice during the upcoming Rabi season. As crop prospects are expected to be better in the upcoming Rabi season due to favorable rains, farmers may offload their produce before the new season starts in October. Additionally, the spot market is witnessing tepid demand as rains in key growing regions led to high moisture content in the spice. Dhaniya futures (Sept) is expected to consolidate in the broader range of 5800-6100. Prices also declined due to ample of carryover stocks and as good rains in the key growing regions could encourage farmers to increase sowing area under the spice.

BULLIONS

Bullion counter may continue to remain on stronger note continuing the recent gains on safe haven buying as factors such as dovish stance by key central banks, Brexit concerns, tumbling US treasury yields coupled with increased uncertainty regarding U.S.-China trade dispute are keeping the sentiment upbeat. Christine Lagarde, the European Central Bank's next president, stated that the bank still has room to cut interest rates if needed, although this may pose financial stability risk. The U.S. 10-year Treasury yield fell to its lowest since mid-2016 at 1.443% recently. U.S. Treasury yields tumbled to multi-year lows as the latest escalation in a U.S.-China trade war hit confidence is the global economy and boosted demand for safe-haven bonds. Gold(Oct) can trade higher and can test 39800 in MCX while taking support near 38000 while silver(Dec) can test 49500 while taking support near 47000. Silver outperformed gold as gold silver ratio plunged lower from above 90 to 83 recently. The fed funds futures market now points to a 74% chance of at least a quarter-point rate cut at the Fed's September meeting, according to the CME FedWatch tool. Concerns are growing over the possibility of Britain leaving the European Union without a deal. In a dramatic move recently Britain's new Prime Minister Boris Johnson set in motion the suspension of the UK Parliament - which means MPs have much less time to debate Brexit, the process of the UK leaving the European Union. Parliament is to be suspended for five weeks ahead of 31 October, the day the UK is due to leave the EU.

OIL AND OILSEEDS

Soybean futures (Sept) may regain its strength towards 3900 levels, taking support near 3700 levels. The sentiments are optimistic due to concerns over the crop. Failure to spray insecticides on soyabean has hampered growth of standing crops in some pockets of Indore, Dewas and Ujjain. Lack of flowering in crops may sharply reduce output of soybean in one of the prominent cultivating regions of state that produce about 70 per cent of the soybean production in India. The excessive water in farms reduces level of oxygen leading to mineral deficiency in plants while higher ethylene levels ha hamper growth of crop. Even many farmers have reported a significant drop in flowering in soybean. On the CBOT, U.S soybean futures (Sept) is expected to take support near $8.40 a bushel & the downside may remain capped. The optimism has again come back to the market over U.S.-China trade talks scheduled in September. The traders are also awaiting details about a giant package related to ethanol that U.S. President Donald Trump said his administration is planning to announce. Soy oil futures (Sept) will possibly hold on to the three weeks support near 750, while continue to face resistance near 765 levels. The stronger rupee against dollar, may keep the gains capped, while on the contrary the anticipated demand ahead of festivities may limit the downside. CPO futures (Sept) may consolidate in the range of 555-570 levels & maintain its upside bias. The market participants would be closely watching the data on export of the commodity by Malaysia during August, to be released by private cargo surveyors early next week.

ENERGY COMPLEX

Crude oil prices may witness further recovery on falling inventories and hurricane concerns in US but worries about a slowdown in economic growth due to the U.S.-China trade war have kept a lid on price gains. Inventories at the nation’s main delivery hub in Cushing, Oklahoma, where WTI futures are priced, slumped in penultimate week by nearly 2 million barrels to their lowest since December. The approach of Hurricane Dorian toward Florida raised fears that offshore U.S. crude producers may slow output if the storm passes into the Gulf of Mexico. China’s commerce ministry stated that the world’s two biggest economies were discussing the next round of face-to-face trade talks scheduled for September, but hopes for progress hinged on whether Washington could create favourable conditions. Crude oil may take support near 3750 levels while taking resistance near 4100 levels. Natural gas may witness further recovery as it can test 175 levels while taking support near 155 levels. U.S. natural gas futures rose to hit a one-month peak after a government report showed a weekly U.S. storage build broadly in line with estimates and on expectations for increased cooling demand due to warmerthan-normal weather. Meanwhile possible supply disruptions related to Hurricane Dorian can also support the prices at lower levels. The hurricane is closing in on Puerto Rico and is currently rated a category 1, storm with sustainable winds of 75-miles an hour. The storm is expected to increase in strength as it moves west north west, and could hit the east coast of Florida as a category 4, storm.

OTHER COMMODITIES

Cotton futures (Oct) may trade sideways in the range of 19400-19800 levels. The Foreign Agricultural Service of the US Department of Agriculture has maintained its estimate for India's cotton production for 2019-20 (Aug-Jul) at 37.2 mln bales, the agency said in a report. The acreage under the fibre in the ongoing kharif season in seen at 12.7 mln ha, slightly higher from 12.6 mln ha sown last year. The view on average cotton yield for 2019-20 has been lowered to 497 kg per ha, compared with 505 kg estimated a month ago. On the global front, all eyes would be on the hopeful tone on trade relations with the United States as Beijing and Washington during the discussion in the next round of face-to-face talks scheduled for September. Guar seed futures (Sept) is expected to take support near 4165 levels, while the upside may get extended towards 4350 levels. Rajasthan, the largest producer of guar, has recorded a 7% on-year drop in the area under the crop, as the sowing window in the ongoing kharif season has almost come to an end, data by the state farm ministry showed. The bullishness is likely to prevail in castor seed futures (Sept) and it is expected to take support near 5700 levels & rally to test 5800- 5900 levels. A smaller crop from last year and the fact that arrival of the new crop is at least six months away is increasingly leading to a vacuum in supply pipeline. The daily arrivals of the commodity have fallen gradually to 15,000- 20,000 bags (1 bag = 75 kg), from 50,000-55,000 bags at this time a year ago.

BASE METALS

Base metal counter is expected to trade on mixed path except Nickel, which may improve further on supply concerns. Copper may trade sideways as it can find support near 440 levels while facing resistance near 452 levels. China’s Jiangxi Copper Co produced 749,300 tonnes of refined copper cathode in January-June, up 3.5% from a year earlier, and 102,000 tonnes of copper concentrate during the period, up 0.2% year-on-year. Lack of any clear moves to resolve the protracted U.S.-China trade conflict can weigh on the demand outlook for the red metal. Meanwhile, Lead may also remain muted in narrow range of 150-160 levels. Zinc may witness recovery towards as it can test 188 levels while taking support near 180 levels. Nickel prices can move with upside bias as it can test 1280 levels while taking support near 1150 levels. Shanghai nickel prices hit a record high, as a waste spill at a nickel plant in Papua New Guinea sparked fear of some supply shortage. The premium for cash nickel over the three-month contract on the London Metal Exchange (LME) has spiked to a 10-year high of $99 a tonne, signalling tight nearby supply. Nickel inventories in LME-approved warehouses have been increasing slightly in August, but are hovering around a six-year low level, while ShFE nickel stocks rose to their highest since June 2018 last week. Aluminium may trade with sideways to weak bias as it can take support near 135 levels while facing resistance near 143 levels. China Hongqiao, the world’s biggest aluminium producer, cut its 2019 production guidance by up to 300,000 tonnes, or almost 5%.

TREND SHEET

TECHNICAL RECOMMENDATIONS

NICKEL MCX (SEP) contract closed at Rs. 1166.00 on 29th Aug’19. The contract made its high of Rs. 1184.50 on 30th Aug’19 and a low of Rs. 974.10 on 29th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 1040.00. On the daily chart, the commodity has Relative Strength Index (14-day) value of 81.062.

One can buy near Rs. 1180 for a target of Rs. 1300 with the stop loss of Rs. 1130.

NATURAL GAS MCX (SEP) contract closed at Rs. 165.60 on 29th Aug’19. The contract made its high of Rs. 188.00 on 29th May’19 and a low of Rs. 144.60 on 5th Aug’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 159.20. On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.760.

One can buy near Rs. 158 for a target of Rs. 176 with the stop loss of Rs. 149.

DHANIYA NCDEX (SEP) contract was closed at Rs. 5939.00 on 29th Aug’19. The contract made its high of Rs. 7397.00 on 16th Jul’19 and a low of Rs. 5756.00 on 26th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 6514.20. On the daily chart, the commodity has Relative Strength Index (14-day) value of 36.317.

One can buy above Rs. 6025 for a target of Rs. 6600 with the stop loss of Rs 5750.

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NEWS DIGEST

• NCDEXhas modified the name of Guar Gum (Symbol: GUARGUM5) to Guar Gum Refined Splits effective from Sept 03, 2019 in all running contracts and yet to be launched contracts.

• MCX has partially modified in the contract specifications viz.’tolerance limit’ in delivery unit of Lead Mini (1MT) futures contracts of 1 MT with tolerance limit of + / - 10% to + / - 15%.

• MCX has introduced staggered delivery of 5 trading days in cotton, mentha oil & RBD palmolein from October 2019 onwards & in cardamom, castor seed, pepper from November onwards.

• The Dalian Commodity Exchange (DCE) has speed up the listing of styrene, liquefied petroleum gas, live pig and dry chili futures as well as iron ore options.

• The Steel Users Federation of India has signed a MoU with the BSE to help the later launch futures trading in steel.

• China has partially lifted restrictions on imports of gold, loosening curbs that had stopped an estimated 300-500 tonnes of the metal from entering the country since May.

Indonesia's nickel miners association (APNI) stated that it will continue asking the government to stick to its 2022 timetable for a nickel ore export ban.

• Chilean miner Antofagasta Plc reported a 44% jump in first-half profit, benefiting from higher copper sales.

• China's primary aluminium output defied low prices to rise for a second straight month to a record high in December as falling alumina costs boosted margins.

WEEKLY COMMENTARY

With some rebound in energy and other counters, CRB gave closing above 181 levels after a few back of downside. Upside in dollar index though limited the upside. The U.S. dollar was higher, above 98 last week as U.S. economic growth slowed as expected and comments from China helped ease trade war tensions. Trump has repeatedly called for the Fed to pursue a more aggressive path of policy easing. For the same reason, prices of the safe-haven gold traded lower. Gold traded lower whereas silver rally stole the show and made a high of 47440 on MCX. Overall metals scored impressive gains in August, with gold poised for a fourth consecutive monthly rise and saw three week nonstop rally. Energy counter gave some strong performance and oil saw biggest weekly gains since early July, boosted by a decline in U.S inventories and a looming hurricane in Florida, while new signs of trade talks between the United States and China emerged. The approach of Hurricane Dorian toward Florida has raised fears that offshore U.S. crude producers may shutter output, if the storm passes into the Gulf of Mexico over the weekend. Worries about a slowdown in economic growth due to the trade war between the United States and China and the impact on oil demand, kept a lid on price gains. Natural gas prices were at their highest level in a month and are up about 10% from a multi-year low earlier in August. Natural gas prices and related ETFs continued to burn up as traders braced for possible disruptions to normal supply with Hurricane Dorian expected to intensify and make landfall over Florida. Base metals performed mix, nickel and lead prices strengthened, copper and zinc were sideways while aluminum became weaker.

In oil seeds pack, only soyabean futures gained up rest of the commodities saw some selling pressure. The overall trend of soyabean is up due to concerns about the crop in parts of Maharashtra. Mustard was down on weak demand from oil millers amid steady arrivals. Rising area under kharif oilseeds and favourable weather conditions is also weighing on the sentiment. In spices, turmeric, cardamom and dhaniya all traded weak, it was only Jeera futures which gave some buying opportunities to the traders owing to steady demand from overseas buyers. Dhaniya futures were under pressure due to weak international demand for India demand when Russia, Ukraine and Bulgaria are delivering their produce at lower price. Pulses traded lower. In news, the National Agricultural Cooperative Marketing Federation rejected all the bids it received from traders for purchase of chana in the e-auction. Castor saw some good gain on technical bounce back.

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 $)

Kharif crops Sowing ........on recovery mode

After a weak start in June, the mid- monsoon months have posted a strong come back to compensate the 33% rainfall deficit and cross the average mark by 2% as on August 21. Rainfall in August has filled up major reservoirs with 25% more water than the 10- year average and finally improved sowing. The revival in monsoon has changed the farm situation that looked grim in June when authorities were planning drought-relief measures as rainfall was one-third less than normal and reservoirs were depleting. Now the deficit in crop planting is fast reducing since the last 30 days. However, according to the farm ministry data, sowing of crops in 2019-20 (Jul-Jun) kharif season were so far 4.2% lower on year at 92.6 mln ha.

The Major concern remains around the sowing of paddy, a water intensive crop, is lagging nearly 11% in this season. Paddy acreage is at 30.14 mln ha so far against 33.84 mln ha covered during the same period of 2018.

Although area under pulses was at 12.09 mln ha so far, down from 12.53 mln ha sown a year ago, the data showed. However, area under kharif pulses is higher than the normal area forthe season of 11.98 mln ha and the current weatheris favourable for higher yield of most kharif crops this season. The fall in oilseed acreage is less than 1% on year at 16.36 mln ha while area under cereals was largely unchanged at 15.9 mln ha.

The sowing of key kharif crops compared with the year-ago level:

Sowing of all major kharif crops lagged on year due to a delay in the arrival of monsoon over most parts of the country. Rainfall in July is crucial for sowing of kharif crops as those sown beyond early August tend to have lower yields. The India Meteorological Department sees rainfall in August to be at 99% of the long-period average. August rains are crucial for kharif crops sown earlier as sufficient rains may lead to a higher yield. So far in August, rains have been 35.4% higher than the normal for the period, according to data from the weather bureau. Excess rainfall in some regions is a positive from the view of reservoir and groundwater level but could destroy the production of certain crops.

In April, the government had set 2019-20 (Jul-Jun) food grain production target at a record 291.1 mln tn, nearly 3% higher than last year's output of 283.4 mln tn.

INTERNATIONAL COMMODITY PRICES