SENTIMENT INDICATOR (NIFTY)

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FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

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SPICES

Turmeric futures (May) is likely to hover sideways in the range of 6250-6650 levels. Currently, buyers are active in the spot amid supply of new crop. The new turmeric supply in Andhra Pradesh Duggirala market has already started, however, the quantity is on the lower side because the farmers are not getting remunerative prices. Jeera futures (May) is expected to witness sell on rise & see 16700-16500, facing resistance near 17250 levels. Profit booking coupled with appreciation in rupee against dollar denting the export demand may weigh on the counter. Cardamom futures have made a new life time high of 2120.60 on the national bourse & this bullish trend may continue till 3000 levels. This is because of a smaller crop this year and expectations of further fall in production in 2019- 20 (Jul-Jun). Dry temperatures in key growing areas over the past month have led to fears that output in 2019-20 may fall to 10,000-12,000 tn from 15,000 tn in the current season, which is also down 25% from over 20,000 tn in 2017-18. Already, the cardamom price reached an all-time record of ₹3,000 a kg at the Spices Board of India’s auction centre at Puttady. The new produce is expected to arrive in the market by June/July. The total quantity is not expected to increase sharply as drought-hit plants have to be replanted. A newly planted area will provide first yield only after three years. The uptrend of coriander futures (May) has taken a pause since past four weeks, facing resistance near 7400 levels, while on the contrary taking support near 7000 levels. Going ahead, we may see another week of sideways movement within this range amid muted domestic and export demand.

BULLIONS

Bullion counter may trade with weaker bias amid stronger greenback as gold plunged to 4-month lows after the Fed’s decision to leave interest rates unchanged thereby cooling off the rate-cut bets. Gold can further decline towards 30900 levels while taking resistance near 31600 levels while silver can dip towards 36000 while taking resistance near 37600. On the domestic bourses, strength in local currency is further keeping the prices under pressure. The Federal Reserve announced last week that it is holding the benchmark interest rate steady at a target range of 2.25% to 2.5%, noting that inflation is “running below” its stated target of 2%. The central bank’s statement walked back its March view that the economy had “slowed” from the end of last 2018, noting that recent developments show that economic activity “rose at a solid rate.”According to WGC’s 2019 first Quarter Global Trends Report, worldwide gold demand increased to 1,053 tonnes in the first three months of the year, an increase of 7% compared to the first quarter of 2018.There was a 49% year-over-year increase in demand for gold-backed exchange-traded funds. The global investment trend was limited with a 1% drop in worldwide bar and coin demand and an 8% drop in Chinese investment demand. Although global investment demand was relatively tame in the first quarter, central banks were on a buying spree with global official gold purchase totaling 145.5 tonnes in the first quarter, a 68% increase compared to the first quarter of 2018. Central banks bought gold at the fastest pace since the quarter performance since 2013.

OIL AND OILSEEDS

The overall trend of soybean futures (May) is negative & hence it may witness sell on rise from 3650 levels to 3520 levels. As 2019 southwest monsoon forecast by India Meteorological Department is near normal, the market participants are expecting a bigger soybean crop this year. Moreover, the Centre has 304,090.1 tn certified soybean seeds, 30,121.5 tn higher than requirement for sowing in the upcoming kharif season beginning June. If the southwest monsoon fares well, then soybean crop is seen higher on year. Another major factor which is adding to the bearishness is the downtrend of Chicago soybean futures which is on on track for a fourth straight weekly loss on expectations of higher U.S. production and slowing demand from top buyer China dragging prices lower. At present, Commodity funds are net sellers of soybeans, soymeal and soyoil. Soy oil futures (May) is expected to follow the bearish footsteps of soybean & selling pressure may drag the counter to 722 levels, if breaks 733 levels. The supplies are increasing in the spot markets due to imports of refined soybean oil and palmolein from Nepal at zero customs duty under a concession given to the least developed nations in the SAARC region. In addition, the imported soybean oil is being sold at Rs.5,000 per ton cheaper as compared with local soybean oil. The downtrend of CPO futures (May) will prevail as there is possibility that it may test 510-500 levels in days to come. The sentiments have turned pessimistic in the Malaysian markets after the forecast that palm oil output is estimated to rise to 20 million tons in 2019, up from as much as 19.5 million tons predicted earlier.

ENERGY COMPLEX

Crude oil prices may continue to remain on volatile path as surge in U.S. output and an expected supply increase from producer club OPEC prompted selling pressure while supply disruptions in Venezuela can give support to the prices. Rising U.S. oil production has helped offset some of the disruptions from U.S. sanctions against Iran and Venezuela. Oil prices had previously been supported by the political crisis in Venezuela, the stricter U.S. sanctions against Iran and production cuts from the OPEC. U.S. crude stockpiles rose to their highest since September 2017, jumping by 9.9 million barrels to 470.6 million barrels as production hit a record high of 12.3 mbpd. Crude oil can take key support near 4200 while its upside will be capped near 4500. U.S. crude oil production reached a record 12.3 million barrels per day (bpd) last week EIA, rising by around 2 million bpd over the past year. U.S. crude exports broke through 3 million bpd for the first time this year, according to data from the Energy Information Administration. Natural gas may remain sideways as it can move in range of 175-190. The U.S. Energy Information Administration (EIA) stated that utilities added 123 billion cubic feet (bcf) of gas to inventories during the week ended April 26. That was the biggest build this early in the injection season, according to EIA data going back to 1994. The extremely short-term weather conditions are mixed, but the near- to mid-term patterns are bearish, which likely means improving storage deficits before the summer heat arrives.

OTHER COMMODITIES

Cotton futures (Apr) is seen to go down further & test 22000-21800 levels. India's cotton imports are likely to rise by 80% this crop year (October 2018 to September 2019), due to short supply of quality material for textile mills. Drought in the major growing & poor quality of late picked crop is poor due to the paucity of moisture in the field, have restricted the spinning mills to procure this soft commodity. Further, the demand side is also dull since the export is estimated to decline to 4.7 million bales in 2018-19, from 6.9 million last year. On the other hand, U.S cotton futuresthe price setter is trading near to its seven-week low weighed down by uncertainty about US-China trade talks, while favourable planting conditions for the natural fibre in major producer Texas. Day’s ahead, the market participants would be keeping a close watch on the outcomes of the U.S-China trade war deal, as the announcement is “possible” by this Friday. Chana futures (May) is expected to witness more correction towards 4250 levels owing to increased selling pressure on the spot markets. Prices of pulses like chana, masur, urad and moong have been falling with increased arrival of the Rabi crop in mandis and the government offloading stock in the open market. Guar seed futures (May) will probably see some consolidation in the range of 4330-4430 levels, while guar gum futures (May) is likely to see some recovery towards 8950-9000 levels, taking support near 8600 levels. Various factors ranging from the onset of the South-West Monsoon likely to be delayed by a week, steady guar seed-guar gum ratio hovering near 1:2 may give cushion to these counters.

BASE METALS

In base metal counter, further selling pressure can be seen as U.S. manufacturing activity slowed to a 2- 1/2-year low in April amid a sharp drop in new orders while construction spending unexpectedly fell in March, suggesting economic growth was moderating after surging in the first quarter. China's auto sales fell again in March but the pace of decline was the smallest in seven months. Copper may slip lower towards 415 while its upside is capped near 440. China's refined copper cathodes imports rose to 279,630 tonnes in March, up more than 30% from February. Copper is getting some support after EV maker Tesla expecting a global shortage in copper due to under-investment in the mining sectors. Meanwhile Lead may also take support near 128 levels while taking resistance near 137 levels. Nickel can dip lower towards 810 levels while facing resistance near 870 levels. Aluminium may remain sideways in range of 140-154 levels.LME aluminium inventories surged by 92,350 tonnes to 1,227,650 and have climbed by a fifth over the past week to the highest level since February 25. Zinc may remain under selling pressure as it can test 205 while facing resistance near 225. Zinc prices hit their lowest since mid-March on worries about global demand and as inventories climbed, but other metals were supported by hopes that a US-China trade deal would be agreed. Zinc cash is trading at a premium of $120/ton over the 3 Month contract, the highest since early December last year when it touched $125 a tonne.

TREND SHEET

TECHNICAL RECOMMENDATIONS

NICKEL MCX (MAY) contract closed at Rs. 846.20 on 2nd May’19. The contract made its high of Rs. 932.00 on 4th Jan’19 and a low of Rs. 842.20 on 3rd May’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 877.16.On the daily chart, the commodity has Relative Strength Index (14-day) value of 28.784.

One can sell at Rs. 865 for a target of Rs. 825 with the stop loss of Rs. 885.

LEAD MCX (MAY) contract closed at Rs. 131.10 on 3rd Apr’19. The contract made its high of Rs. 143.15 on 29th Mar’19 and a low of Rs. 126.60 on 1st May’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 135.29. On the daily chart, the commodity has Relative Strength Index (14-day) value of 34.387.

One can buy around Rs. 126 for a target of Rs. 134 with the stop loss of Rs. 121.

COCUDAKL NCDEX (MAY) contract was closed at Rs. 2521.00 on 2nd May’19. The contract made its high of Rs. 2535.00 on 2nd May’19 and a low of Rs. 1961.50 on 1st Mar’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 2435.60. On the daily chart, the commodity has Relative Strength Index (14-day) value of 67.485.

One can sell near Rs. 2530 for a target of Rs. 2400 with the stop loss of Rs 2590.

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NEWS DIGEST

• Euro zone factory activity contracted for a third month in April, hurt by weak global demand, rising trade protectionism and concerns over Britain's upcoming departure from the European Union.

• Venezuela's state-run PDVSA exported 1.06 million barrels per day (bpd) of crude and refined products last month, an eight percent increase from March.

• Russia's oil production fell to 11.23 million barrels per day (bpd) in April from 11.3 million bpd in March.

• Refined copper imports slowed over February and March but the first-quarter total of 839,000 tonnes was down by only a marginal 1.6 percent on 2018.

• Malaysia has deferred its export duty on crude palm oil until Dec 31 this year.

• The Centre has 304,090.1 tn certified soybean seeds, 30,121.5 tn higher than requirement for sowing in the upcoming kharif season beginning June. No shortage of quality and normal seeds is seen this year

• As on April 30, 2019, NAFED has successfully procured 145740.40 MT of Chana at Minimum Support Price of Rs.4,620.

• The France based agency strategie grains has lowered its forecast for 2019 European Union rapeseed harvest to 18.85 million tonnes in 2019, down from the earlier estimate of 19.32 million tonnes a month ago.

WEEKLY COMMENTARY

Corrections deepened in commodities owing to some weaker economic data; and investors ignored the fall in dollar index. CRB saw further fall. Dollar index surrendered its previous gain on dovish statement by Powell. Fed Chairman Jerome Powell said the central bank’s “policy stance is appropriate right now” and that they “don’t see a strong case for moving in either direction.” ETF outflows amid the expectation that U.S. and China may announce a trade deal next Friday also supported risk sentiment and put pressure on the safe-haven gold. Major dip was on Thursday; a day after the Federal Reserve stood pat on monetary policy and indicated that interest rates would likely to remain on hold for an extended period. Silver followed the footsteps of gold and closed the week in negative territory. Crude oil prices fell sharply as stockpiles in the U.S. rose to their highest level since 2017. U.S. crude stockpiles last week rose to their highest since September 2017, jumping by 9.9 million barrels to 470.6 barrels, as production set a record high of 12.3 million barrels per day. Trump statement to increase the output crashed crude prices. Base metals were mostly bearish on weaker data. U.S. manufacturing activity slowed to a 2-1/2-year low in April amid a sharp drop in new orders while construction spending unexpectedly fell in March, suggesting economic growth was moderating after surging in the first quarter. Additionally, investors were closely monitoring developments in the U.S.-China trade front. Oil seeds and edible oil futures saw sharp fall on higher production news from Indonesia and Malaysia. The fundamentals cite that Malaysia's palm oil output is forecast to rise to 20 million tonnes in 2019, up from as much as 19.5 million tonnes forecast earlier. The buying pace of stockists and the millers are sluggish in the current scenario due to surplus imported veg oil stocks at domestic front along with bearish global market keeping the overall sentiments on lower end. There was no respite in chana and its prices fell down on weak spot market trend. Guar seed recovered from the low on lower levels buying. Mentha was facing the resistance of 1400 and from there it saw gradual downside on technical weakness amid poor offtake in physical market. In spices, jeera saw some breather in rally after a continuous nine week remarkable rally fueled by better export demand. Coriander and turmeric also witnessed correction in the prices; it was only cardamom which trade in upper circuits with very thin volume.

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 $)

Ambitious target for food grains ....Can double the farmers’ income

The government has set an ambitious food grains target of 291.1 million tonnes for 2019-20, nearly 2.6 per cent more than the previous year’s 283.7 million tonnes, as favorable monsoon is anticipated in the current season.

Agricultural Ministry sources at the National Kharif Campaign conference on 25 April 2019 said that the target fixed for rice is 116 million tonnes, 3 million tonnes more than it was in 2018-19 and wheat production target is set at 100.5 million tonnes that is slightly higher than the previous year’s 100 million tonnes. However, according to the second advance estimates for 2018-19, output of rice is estimated to be 115.6 million tones and that of wheat is 99.12 million tonnes.

The Centre, on the other hand, is hoping to have a considerable 10 % increase in production of pulses at 26.3 million tonnes, as against the target of 24 million tonnes last year. With regard to coarse cereals, the Ministry has maintained its targets for jowar, bajra, small millets and barley at exactly the same level as last year, but hopes to increase the production of maize, projecting a 1.6 million tonnes increase to hit a production of 28.9 million tonnes from both kharif and rabi seasons together. This has pushed up the overall coarse cereal target to 48.3 million tonnes in the coming year as against 46.7 million tonnes in the previous year. Target for maize in the current year is 28.9 million tonnes and that for bajra & jowar are 9.5 million tonnes and 4.9 million tonnes in that order.

Oilseeds output, however are expected to be 36.1 million tonnes (36 million tonnes in 2018-19). So is with cotton, whose tentative target for 2019-20 is 35.75 million bales of 170 kg each, slightly higher than 35.5 million bales in 2018-19. But, as per the 2nd advance estimates, the expected oilseeds production in 2018-19 was 31.5 million tonnes and that of cotton was 30 million bales.

The targeted sugarcane output, on the other hand, is 385.5 million tonnes, almost 30 million tonnes more than the previous year, but just 5 million tonnes more than that was projected in the 2018-19 2nd advance estimates.

Can Double the Farmers’ Income

The latest target is good news in the sense that despite all their problems, the government is sincere to fulfill their promise of doubling of farmers’ income by the year 2022. To fulfill the target, the government is taking all the necessary steps to increase the farm production that directly linked with farmers’ income.

While higher production of food grains and non-food crops like cotton and sugarcane suggest a recovery in agriculture is underway, but record harvests over the last few years have caused a glut in production, leading to a crash in farm prices, leaving farmers in the lurch. The price nosedive to below minimum support price (MSP) while the lack of sufficient procurement center in all over the country has increase the misery of farmers.

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