2019: Issue 683, Week: 13th - 17th May
A Weekly Update from SMC (For private circulation only)
WISE M
NEY
2019: Issue 683, Week: 13th - 17th May
A Weekly Update from SMC (For private circulation only)
NEY
www.smcinvestments.co.in
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| Equity | 4-7 |
| Derivatives | 8-9 |
| Commodity | 10-13 |
| Currency | 14 |
| IPO | 15 |
| FD Monitor | 16 |
| Mutual Fund | 17-18 |
G
lobal stock markets had a patchy start to the week after US on Monday Gaccused Beijing of backtracking from commitments made during trade negotiations. Investors shunned stocks on the news that U.S. went ahead to impose more tariffs on more than $200 billion in goods from China. As expected, China immediately said to retaliate on the U.S. move thereby escalating tensions and casting shadow over the global growth. Europe’s largest economy Germany saw factory orders rising in the quarter ending March indicating that may be Euro-area is on the verge of halting its slowdown. Moreover, German 10-year government bond yields headed for their biggest weekly fall in seven weeks in a sign that a ratcheting up in U.S. & China trade tensions has exacerbated concern about the global growth outlook.
Back at home, domestic markets had also been dragged down by trade war jitters, a mixed bag of earnings numbers, weak global cues, and RIL downgrade by Morgan Stanley. Investors also remained cautious ahead of election outcome on May 23. The domestic currency continued its downhill journey as US-China trade related concerns and foreign fund outflows weighed on investor sentiments. On the macro front, the recent data shows that India's private sector expanded at the slowest pace in seven months in April amid softer growth in services activity. The Nikkei Composite Purchasing Managers' Index, or PMI, fell to 51.7 in April from 52.7 in March. Investors are advised to adopt a cautious view and keep exposures modest and limited to defensive stocks. Some of the key risk to the Indian markets are unfavorable outcome of general elections, increase in crude oil prices, weakening rupee, persistent selling by Foreign and domestic players and other global cues.
On the commodity market front, stronger greenback and trade tensions between US and China continued to keep the metals complex under pressure. Bullion counter is expected to trade with volatility as uncertainty regarding trade war between US and China will keep the investors edgy. Gold can take support near 31600 levels while taking resistance near 32400 levels while silver can take support near 36200 levels while taking resistance near 38000 levels. Crude oil may move in narrow range of 4250-4480 levels. Short term Forecast from EIA showed that it expects some tightness in global oil markets during Q2and Q3 of 2019, but anticipates that growing production in U.S. and key OPEC countries will ensure that global supplies continue to meet demand moving forward. China industrial production, retail sales along with US housing starts, building permits, industrial production, Michigan consumer sentiment and retail sales etc are few important data to be released this week which may give significant direction to the commodities.
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SMC or its associates including its relatives/analyst do not hold any financial interest/beneficial ownership of more than 1% in the company covered by Analyst. SMC or its associates and relatives does not have any material conflict of interest. SMC or its associates/analyst has not received any compensation from the company covered by Analyst during the past twelve months. The subject company has not been a client of SMC during the past twelve months. SMC or its associates has not received any compensation or other benefits from the company covered by analyst or third party in connection with the research report. The Analyst has not served as an officer, director or employee of company covered by Analyst and SMC has not been engaged in market making activity of the company covered by Analyst.
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SMC does not represent/ provide any warranty express or implied to the accuracy, contents or views expressed herein and investors are advised to independently evaluate the market conditions/risks involved before making any investment decision.
DOMESTIC NEWS
Economy
• According to a survey data from IHS Markit, India's private sector expanded at the slowest pace in seven months in April amid softer growth in services activity. The Nikkei Composite Purchasing Managers' Index, or PMI, fell to 51.7 in April from 52.7 in March. Any reading above 50 indicates an expansion in the sector.
Metal
• Jindal Steel and Power Ltd. (JSPL) has bagged a Rs 665 crore order from Rail Vikas Nigam Ltd (RVNL) to supply 89,042 tonnes of rails. This is the second big rail order in less than a year, the first-ever rail order to JSPL for supplying close to one lakh tonnes rails to Indian Railways was completed in April, 2019.
Automobile
• Maruti Suzuki India (MSI) has slashed its vehicle production by around 10 per cent across its factories in April. It is the company's third consecutive month of taking a production cut. It had also reduced production in February and March this year.
• Mahindra & Mahindra (M&M) has launched a new entry level variant of its SUV XUV500 priced at Rs 12.22 lakh (ex-showroom Delhi). The new variant would be available across the country at company dealerships with immediate effect.
• Bajaj Auto has launched a new version of its Avenger Street 160 model equipped with anti-lock braking system (ABS) priced at Rs 82,253 (exShowroom Delhi). The new Avenger Street 160 has a single channel ABS along with a roadster design headlamp with LED DRLs, new graphics with larger insignia, black alloy wheels and rubberised rear grab.
• TVS Motor Company has announced that it has invested $3.85 million (around Rs 26.69 crore) in TagBox, a supply chain IIoT and Machine Learning Platform Company as part of its Series A funding round. The company further stated that this round was completely led by TVS and its Singapore-based subsidiary TVS Motor (Singapore) Pte Limited.
Pharmaceutical
• The government has approved a proposal of drug firm Lupin to take more time for completion of its project at Indore special economic zone (SEZ) with proposed investment of Rs 205.69 crore. The company is setting up its pharma unit in Indore SEZ to manufacture pharmaceutical formulations metered dose inhalers and dry powderinhalers.
Miscellaneous
• Reliance Industries (RIL) through its subsidiary Reliance Brands Limited will acquire British toy retailer Hamleys for a cash consideration of £67.96 million (about Rs 620 crore) in an all-cash deal.
INTERNATIONAL NEWS
• US jobless claims dipped to 228,000, a decrease of 2,000 from the previous week's unrevised level of 230,000. Economists had expected jobless claims to drop to 220,000. Meanwhile,the Labor Department said the less volatile four-week moving average rose to 220,250, an increase of 7,750 from the previous week's unrevised average of 212,500.
• US trade deficit widened to $50.0 billion in March from a revised $49.3 billion in February. Economists had expected the deficit to widen to $50.2 billion. The wider trade deficit came as the value of imports surged up by 1.1 percent to $262.0 billion in March from $259.2 billion in February
US wholesale inventories edged down by 0.1 percent in March after climbing by an upwardly revised 0.4 percent in February. Economists had expected inventories to come in unchanged.
• US factory orders spiked by 1.9 percent in March after falling by a revised 0.3 percent in February. Economists had expected orders to surge up by 1.5 percent compared to the 0.5 percent drop originally reported for the previous month.
• Japan's consumer confidence weakened to the lowest level in more than three years in April. The consumer confidence index for households with two or more persons fell to a seasonally adjusted 40.4 in April from 40.5 in March. Economists had expected a score of 40.3.
• China's consumer price index rose 2.5 percent year-on-year in April, following a 2.3 percent increase in March, in line with economists' expectations. The latest inflation was the highest since last October.
| Stocks | *Closing Price | Trend | Date Trend Changed | Rate Trend Changed | SUPPORT | RESISTANCE | Closing S/l |
|---|---|---|---|---|---|---|---|
| S&P BSE SENSEX | 37463 | UP | 08.02.19 | 36546 | 36300 | 35300 | |
| NIFTY50 | 11279 | UP | 08.02.19 | 10944 | 10900 | 10600 | |
| NIFTY IT | 15950 | UP | 21.07.17 | 10712 | 15200 | 14800 | |
| NIFTY BANK* | 29041 | UP | 30.11.18 | 26863 | 27700 | 27000 | |
| ACC | 1602 | UP | 01.03.19 | 1482 | 1560 | 1540 | |
| BHARTIAIRTEL | 324 | UP | 15.03.19 | 338 | 300 | 290 | |
| BPCL | 363 | UP | 08.03.19 | 367 | 358 | 355 | |
| CIPLA | 556 | UP | 01.03.19 | 552 | 530 | 520 | |
| SBIN | 308 | UP | 02.11.18 | 286 | 295 | 285 | |
| HINDALCO* | 196 | UP | 05.04.19 | 215 | - | 195 | |
| ICICI BANK | 385 | UP | 02.11.18 | 355 | 370 | 360 | INFOSYS | 717 | UP | 14.12.18 | 706 | 710 | 690 |
| ITC | 298 | UP | 08.03.19 | 292 | 290 | 285 | |
| L&T | 1356 | UP | 08.03.19 | 1339 | 1320 | 1290 | |
| MARUTI | 6632 | DOWN | 26.04.19 | 6843 | 7300 | 7500 | |
| NTPC | 127 | UP | 08.03.19 | 127 | 124 | 120 | |
| ONGC | 166 | UP | 08.03.19 | 150 | 145 | 143 | |
| RELIANCE** | 1251 | UP | 30.11.18 | 1168 | - | 1250 | |
| TATASTEEL | 487 | DOWN | 10.05.19 | 487 | 515 | 530 | |
*Hindalco has broken the support of 202 **Reliance has broken the support of 1280
Closing as on 10-05-2019
NOTES:
1) These levels should not be confused with the daily trend sheet, which is sent every morning by e-mail in the name of "Morning Mantra ".
2) Sometimes you will find the stop loss to be too far but if we change the stop loss once, we will find more strength coming into the stock. At the moment, the stop loss will be far as we are seeing the graphs on weekly basis and taking a long-term view and not a short-term view.
| Meeting Date | Company | Purpose |
|---|---|---|
| 13/05/2019 | H D F C | Quarterly Results, Dividend |
| 13/05/2019 | ITC | Accounts, Final Dividend |
| 13/05/2019 | Karnataka Bank | Accounts, Final Dividend |
| 13/05/2019 | Vodafone Idea | Accounts |
| 14/05/2019 | Nestle India | Quarterly Results |
| 14/05/2019 | Siemens | Quarterly Results |
| 14/05/2019 | Pidilite Inds. | Accounts, Dividend |
| 15/05/2019 | Lupin | Accounts, Final Dividend |
| 15/05/2019 | Petronet LNG | Accounts, Final Dividend |
| 16/05/2019 | Hindalco Inds. | Quarterly Results, Final Dividend |
| 16/05/2019 | Bajaj Fin | Accounts, Dividend |
| 17/05/2019 | Dr Reddy's Labs | Accounts, Dividend |
| 17/05/2019 | UPL | Accounts, Dividend,Bonus Issue |
| 17/05/2019 | Bajaj Auto | Dividend, Accounts |
| 18/05/2019 | Shree Cement | Quarterly Results, Final Dividend |
| 20/05/2019 | H P C L | Accounts, Final Dividend |
| 21/05/2019 | Tech Mahindra | Quarterly Results, Dividend |
| 22/05/2019 | The Ramco Cement | Accounts, Dividend |
| 24/05/2019 | Grasim Inds | Accounts, Final Dividend |
| 27/05/2019 | Colgate-Palm. | Quarterly Results |
| 27/05/2019 | Zee Entertainmen | Accounts, Final Dividend |
| 27/05/2019 | GAIL (India) | Quarterly Results, Final Dividend |
| 29/05/2019 | M & M | Quarterly Results, Dividend, AGM |
| 30/05/2019 | Berger Paints | Quarterly Results, Dividend |
| Ex-Date | Company | Purpose |
|---|---|---|
| 23/05/2019 | DCB Bank | 10% Final Dividend |
| 24/05/2019 | Tata Global | 250% Final Dividend |
4
5
ITC LIMITED
CMP: 297.70
Target Price: 354
Upside: 19%
| Face Value (Rs.) | 1.00 |
| 52 Week High/Low | 322.70/258.90 |
| M.Cap (Rs. in Cr.) | 367513.78 |
| EPS (Rs.) | 9.72 |
| P/E Ratio (times) | 30.84 |
| P/B Ratio (times) | 7.30 |
| Dividend Yield (%) | 1.71 |
| Stock Exchange | BSE |
Investment Rationale
• Cigarettes business, which contributes ~45 percent to the total revenue, has registered a 10% increase at Rs 5,073 crore with its reported EBIT margin at 70.1% in Q3 FY19. It has recently increased price of Bristol by 6.7% while Flake Excel's rate has been raised by 11% and Capstan price was increased by 14.5%. Cigarette margins have been slightly lower on account of incremental costs related to new warnings on cigarette packs from Q2 FY19.
• FMCG business also posted modest growth owing to positive traction in branded food business, growing at the rate of 11% % YoY. Paper and Paperboard business net sales grew 20% to Rs. 1,542 Crores owing to s trong demand and c apa c it y enhancement in Value Added Paperboard and Décor segment. Capacity utilization has been scaled up at the bleached chemical thermo mechanical pulp mill. In its lifestyle retailing business, the company has restructured the vertical by re-crafting the core- portfolio and has recently sold off its lifestyle fashion brand- John Players to RIL for ~150 crores, which was a loss making vertical.
• The Company’s Hotel business is doing extremely well. The business recorded a healthy growth in Segment Revenue driven by improvement in ARR. Operations atthe recently commissioned hotels -ITC Kohenur (commissioned in Q1 FY19) and ITC Grand Goa, Resort & Spa (commissioned in Q3 FY19)- were scaled up, receiving excellent reviews from discerning guests and raising the bar of service excel. Revenue grew by at a healthy pace of 12% over
theYoY& EBITalso saw strong growth.
• Q3 FY19 was steady with Gross Revenue standing at Rs. 11,227.7 crores, representing a growth of 15% YoY driven mainly by FMCG, Agribusiness and Hotels. PBDIT stood at Rs. 4,326 Crores and Profit After Tax at Rs. 3,209 Crores.
Risk
• Increase in GST rates & ad valorem duty on Cigarettes
• Downturn in Consumption pattern
Valuation
The company has posted robust and encouraging growth numbers from its core segments & the Cigarette segment has delivered second consecutive quarter of volume growth. India remains the fastest growing major economy in the world. The pace of consumption will show up in numbers to come. Thus it is expected that the stock will see a price target of Rs. 354 in 8 to 10 months time frame on FY20E EPS of 11.3 and a 5 year average P/Ex of 31.32.
HIKAL LIMITED
CMP: 175.55
Target Price: 198
Upside: 13%
| Face Value (Rs.) | 2.00 |
| 52 Week High/Low | 207.00/135.0 |
| M.Cap (Rs. in Cr.) | 2085.02 |
| EPS (Rs.) | 8.36 |
| P/E Ratio (times) | 20.89 |
| P/B Ratio (times) | 3.20 |
| Dividend Yield (%) | 0.47 |
| Stock Exchange | BSE |
Investment Rationale
• Hikal is one of the largest suppliers of Gabapentin (CNS) in Pharma and one of the biggest players in Thiabendazole (Crop Protection).
• During FY18-19, both of its businesses have showed growth from existing and new product and management is implementing significant capital investment in both of its divisions for new capacity which will come on stream by FY 20. The Balance Sheet continues to remain strong with Net Debt to Equity of 0.79 as on March 2019.
• The company has dealt with the clients such as Merck & Co, Bayer, Syngenta, BASF, and Pfizer and management has focus to expand in both Pharma and Crop Protection segments due to Chinese supply disturbances and thus it is likely to create opportunities for Indian players both in APIs and crop protection Contract Development and Manufacturing Organization (CDMO).
• It has five manufacturing facilities at Taloja, Mahad (Maharashtra), Panoli (Gujarat) Jigani (Karnataka) and an R&D centre in Pune. More than 70 per cent of revenues are derived from export markets mainly Europe, US and Japan.
• During full year FY19, it has achieved a significant mile stone by crossing Rs.100 Crores in net profit for FY19 representing as substantial growth of 34%, with revenue of 1,590 Crores, representing a healthy growth of 22%. Its Crop Protection Division has clocked a revenue growth of 19% and the Pharmaceutical Division has grown by 25%. Its EBITDAhas grown by 23%.
• The company has spent approximately Rs 500 crore during last five years to increase capacities and
recently, it has received zero observations from USFDA for audits of its Bengaluru facility which indicates high level of quality and compliance levels from the company.
Risk
• Regulatory risk
• Fluctuation in raw material prices
Valuation
The company has positive track record with existing customers to expand the relationships and target new customers. The management of the company expects approximately 25% revenues potential growth in coming years, which will be combination of its generic products and some contract manufacturing businesses for which the company is building new facilities. Expanded capacities would enable the company to increase its volumes in the high growth end user applications of products. Thus, it is expected that the stock will see a price target of Rs.198 in 8 to 10 months’time frame on an expectedP/Eof20xandFY20(E)earningsofRs.9.88.
Source: Company Website Reuters Capitaline
Above calls are recommended with a time horizon of 8 to 10 months.
6
The stock closed at Rs 675 on 10th May, 2019. It made a 52-week low of Rs 438.20 on 23rd October 2018 and a 52-week high of Rs. 691.45 on 29th March 2019. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 590.73
We can see on chart that the stock is continuously trading in higher highs and higher lows, which is bullish in nature. From past few weeks, the stock has been consolidating in narrow range and formed a “Bull Flag” pattern on weekly charts which is also considered to be bullish. Last week, stock has recovered sharply from week’s low and has managed to close near week’s high along with the volumes, which indicates that buying is aggressive for the stock. So one can initiate long in the range of 665-670 levels for the upside target of 720-730 levels with SL below 630.
The stock closed at Rs 959 on 10th May, 2019. It made a 52-week low at Rs 537.25 on 19th July 2018 and a 52-week high of Rs. 975.25 on 30th April 2019. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 807.35
We can see on chart that stock has been consolidating in the wide range of 500 - 650 levels and has formed a “Continuation Triangle”, which is bullish in nature. Last week, stock has given the breakout of pattern and also has managed to close above the same. Apart from this, it has formed a long Marubozu candlestick, which also give positive outlook for coming days. Therefore, one can buy in the range of 945-955 for the upside target of 1030-1050 levels with SL below 900.
Disclaimer : The analyst and its affiliates companies make no representation or warranty in relation to the accuracy, completeness or reliability of the information contained in its research. The analysis contained in the analyst research is based on numerous assumptions. Different assumptions could result in materially different results.
The analyst not any of its affiliated companies not any of their, members, directors, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of the analysis research.
SOURCE: CAPITAL LINE
Charts by Spider Software India Ltd
Above calls are recommended with a time horizon of 1-2 months
7
Nifty has been dragged down due to liquidation of long positions. Recent data has turned cautious and is indicating probability of further profit booking. Call writing and put unwinding were seen in recent trading sessions. Call writers were active in 11300, 11400, 11500 strike calls indicating limited upside. This clearly indicates lack of buying interest and discomfort in the market. The levels of 11200 will remain crucial for this week as indicated by option open interest concentration. If Nifty falls below the 11200 mark, it could correct to 11000 levels on the back of further selling. On the bounce, the index will face strong resistance at 11400-11450 levels. The options open interest concentration is at the 11500-strike calls with the highest open interest of above 25 lakh shares; among put options, the 11200-strike taking the total open interest to 19 lakh shares, with the highest open interest among put options. The Implied Volatility (IV) of calls closed at 27.69% while that for put options closed at 28.00%. The Nifty VIX for the week closed at 25.49% and is expected to remain volatile. The PCR OI for the week closed at 1.06, which indicates put writing. Next support is placed around 11200-11250 levels.
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**The highest call open interest acts as resistance and highest put open interest acts as support.
# Price rise with rise in open interest suggests long buildup | Price fall with rise in open interest suggests short buildup
# Price fall with fall in open interest suggests long unwinding | Price rise with fall in open interest suggests short covering
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Turmeric futures (June) is expected to trade with an upside bias, may even breach the resistance near 6690 levels & rise to test 6800-6900 levels. The sales of the yellow spice on the spot markets is increasing against the daily supplies of new crop in Erode market around 4,000 – 5,000 quintals on an average daily basis, in Warangal market, turmeric supply of about 1,200 – 1,500 quintals on an average daily basis. Apart from the arrivals, as per trade information, currently, all India turmeric stocks are reported around 14 – 16 lakh bags in the spot market. Jeera futures (June) posted strong gains in the past week & even closed above the weekly resistance near 17355 levels.This has confirmed thatthe uptrend will persistin days to come & may probably witness an upsurge towards 18000 levels. According to trade sources, cumin seed production in Syria is estimated lower at 25,000 tons this year as major part of their crop has been damaged and discolored due to heavy rains. While, in Turkey jeera production is estimated at 8,000 tons as rains have damaged 25% of the crop. The market participants are highly optimistic that this deficit in the international market would be filled by India & hence this commodity is witnessing buying spree from exporters and bulk buyers as they are expecting export demand to increase in the coming months.In cardamom futures (June) the market participants should trade with caution & avoid taking long positions as we might see profit booking towards 1900 levels. It is reported thatlarge-scale imports of cardamom are spurring into India & routed through neighboring countries, which under bilateral trade pacts attract a significantly lowerimport duty.
Bullion counter may trade on a volatile path as uncertainty regarding trade war between US and China will keep the investors edgy. Stronger greenback has kept the prices under pressure.Increased attention is received by yellow metal, after continuous updates on the US-China trade war scenario which is also sending global stock market lower. The U.S.-China trade war is escalating, with both sides digging in their heels and threatening new sanctions on each other. The U.S.-China trade conflict is presently overshadowing all other potential geo political issues and factors. Gold can take support near 31600 levels while taking resistance near 32400 levels while silver can take support near 36200 levels while taking resistance near 38000 levels. On the domestic bourses, weaker local currency is capping the downside. Gold got support recently as investors again sought the precious metal as insurance against a potential collapse in the U.S. - China trade deal and the impact ofthat on global growth could slow down global growth. According to WGC “Global gold demand grew to 1,053.3 tonnes in the first quarter of 2019” his constitutes a 7% rise year-on-year, largely driven by “continued growth in central bank buying, as well as growth in gold-backed exchange-traded funds (ETFs)”. Central banks bought 145.5 tonnes of gold, which is up 68% year-on-year and “representing the strongest start to a year since 2013. Gold used in applications such as electronics, wireless and LED lighting fell 3% to 79.3 tonnes. Gold demand for jewellery grew 1% y/y to 530.3 tonnes and boosted by India.
This week, we may see an extended buying opportunity in soybean futures (June) near 3650-3700 levels. The weakness in rupee against dollar & improved demand at lower price levels may push the counter to 3800-3830. The market participants are looking for a ray of opportunity after the Ministry of Commerce and Industry and General Administration of Customs of China (GACC) discussed issues related to India’s pending request for the clearance of more farm products for the Chinese market. The resultant was that the draft protocol for is expected to be finalized soon for soybean meal. On the contrary, U.S. soybean futures (July) is trading near its 10-year low & may plunge further if breaks $8 a bushel under pressure of the deepening U.SChina trade tensions loomed over the market. The deal remains uncertain whether the two sides can bridge the differences that have arisen over the past week. The trend of soy oil futures would purely depend on the signals given by the movement of Rupee against dollar, which is falling owing to escalated trade war talks between US and China, making import costlier. The June contract is expected to trade with an upside bias in the range of 722-740 levels. The same fundamental goes with CPO futures (May) which is expected to take support near 510 with downside getting capped. Mustard futures (June) is taking support near 3755 since past four weeks on the back of lower level buying. Going ahead, more upside of 3900-3950 can be seen in this counter owing to strong export demand for rapeseed Meal from top importing countries such as South Korea, Thailand, Vietnam & Kuwait.
Crude oil prices may continue to remain on sideways path as the increasing trade war tension between U.S. and China worried investors about slower crude demand, if the U.S. and China fail to reach a trade deal. Prices failed to get any support after reports that Crude oil production in OPEC inched up by a modest 30,000 bpd to 30.26 million bpd last month. However, individual output levels among the 14 OPEC members varied month on-month, with Iran's sanctions slump and Angola's drop offset by significant rises in Nigeria and Iraq and recoveries in Libya and Venezuela. Saudi Arabia, the organization's largest producer by far, held its April output at 9.82 mb/d, the lowest in over four years and well below its quota under an OPEC accord. Oil prices have had some support from signs of tighter global supply on the back of production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia. Both the Brent and WTI benchmarks have risen more than 30 percent so far this year. Global supply has also been tightened by U.S. sanctions on OPEC members Venezuela and Iran. Crude oil can take key support near 4250 levels while its upside will be capped near 4480 levels. Natural gas may remain sideways as it can move in range of 175-190 levels. Natural gas inventories have been rising and have a trajectory which points to reaching the 5-year average range. The weather is expected to be colder than normal throughout most of mid-west and the east coast, but May is generally a low demand month.
Cotton futures (Apr) is on the verge of break, the weekly support near 21435 & if it does, then we might see the counter plunging towards 20890 levels. ICE cotton futures is trading near two months low taking knee-jerk reaction from the alarming situation that the world's two largest economies may not reach a trade deal. There are talks that between U.S & China could still go several ways that China could make some concessions to prolong talks even after tariffs and retaliation. The two sides could end negotiations, given they are so far apart or China could reverse the changes and return the negotiations to where they were a week ago and work toward a deal to be signed at the G20 summit in Japan in June. Back at home, there is another concern hovering is that 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. After a long time gap, buoyancy has come to chana futures, thanks to the strong buying by the government agencies and tight supply. Day’s ahead, the June contract is expected to rally further towards 4650-4700, taking support near 4440-4385 levels. Guar seed futures (June) is expected to hover sideways in the range of 4390-4515 levels, while guar gum futures (June) may consolidate in the range of 8870-9105 levels. The declining guar seed-guar gum ratio, currently at 0.99 is giving an indication we might see selling in these counters due to sluggish demand from the millers. The volatile oil prices in the international market due to trade tensions between U.S & China may also reduce the demand for guar gum.
In base metal counter, further volatility is expected to remain high as US President earlier imposed new sanctions on Iran. US President earlier last week ordered new sanctions on Iran, this time targeting the Islamic Republic’s export revenues from its industrial metals sector. China's central bank will cut RRR to release about 280 billion yuan ($41.4 billion) for some small and medium-sized banks in a move intended to help companies struggling in the face of an economic slowdown. Copper may take support near 420 while its upside is capped near 450. Copper stocks in LME-approved warehouses have double from lows of February to 230,075 tonnes. Copper production at Chile's top mines dropped sharply in the first quarter of 2019, Chilean copper commission Cochilco stated recently, amid a perfect storm of operational issues, heavy rains and falling ore grades atthe largest deposits. Meanwhile, Lead may also take support near 125 levels while taking resistance near 135 levels. Three-month lead prices were down by just under 10% since late-February, when prices last exceeded $2,000 per tonne. Nickel can dip lower towards 810 levels while facing resistance near 870 levels. Data released by INSGshowed global demand for nickel is expected to increase to 2.46 million tonnes in 2019 versus 2.33 million in 2018. Aluminium may remain sideways in range of 142-154. Zinc may remain under selling pressure as it can test 205 levels while facing resistance near 225 levels. Zinc prices are feeling the heat on concern over Chinese demand and rising supplies in the second half ofthe year as smelters restart and expand capacity.
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NICKEL MCX (MAY) contract closed at Rs. 830.70 on 9th May’19. The contract made its high of Rs. 975.70 on 6th Mar’19 and a low of Rs. 825.60 on 9th May’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 859.80.On the daily chart, the commodity has Relative Strength Index (14-day) value of 28.858.
One can sell at Rs. 860 for a target of Rs. 800 with the stop loss of Rs. 887.
SYOREF NCDEX (JUN) contract closed at Rs. 728.10 on 10th Apr’19. The contract made its high of Rs. 737.50 on 5th Mar’19 and a low of Rs. 710.65 on 1st Apr’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 724.77. On the daily chart, the commodity has Relative Strength Index (14-day) value of 58.577.
One can buy around Rs. 724 for a target of Rs. 738 with the stop loss of Rs. 717.
DHANIYA NCDEX (JUN) contract was closed at Rs. 7254.00 on 9th May’19. The contract made its high of Rs. 7676.00 on 25th Apr’19 and a low of Rs. 6183.00 on 13th Feb’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 7253.20. On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.529.
One can sell below Rs. 7120 for a target of Rs. 6900 with the stop loss of Rs 7230.
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• China's iron ore imports in April fell to the lowest level in 18 months as poor weather in Brazil.
• Hong Kong stock exchange was in official talks with Guangdong authorities on metals warehousing, a major step towards its long-held aim of expanding in mainland China.
• China's unwrought copper imports rose 3.6 percent in April from the previous month, according to data released by the General Administration of Customs.
• HKEX plans to launch dollar-denominated mini contracts for six base metals in the coming months.
• U.S. President Donald Trump’s tariff increase to 25 percent on $200 billion worth of Chinese goods took effect on 10th May, 2019.
• Production of Malaysian palm oil products for April 1-30 was down by 2.29 percent compared to the same period a month ago. - Malaysia Palm Oil Association (MPOA)
• US cotton production is likely to be at 21.77 million bales in 2019-20. - Bloomberg survey
• NAFED has successfully procured 261953.94 MT of Chana in Telangana, Maharashtra, Rajasthan, Madhya Pradesh, Andhra Pradesh and Gujarat under Price Support Scheme (PSS) during the 2019 Rabi season, as on 7th May 2019.
In the week gone by, bullions counter along with crude oil traded on volatile path amid mixed fundamentals. Increased uncertainty between US and China kept the investors nervous throughout last week. Investors again sought precious metal as insurance against a potential collapse in the U.S.- China trade deal and the impact of that on global growth could slow down global growth. SPDR Gold, the world's largest gold-backed exchange traded fund are holdings are still at their lowest level since October 2018. Base metals dipped lower last week amid US china trade tensions and fear of decline demand. Copper traded near three-month low following concerns over a potential resumption of tit-for-tat trade tariffs between the United States and China. U.S. President Donald Trump’s threat to increase tariffs on $200 billion worth of Chinese goods kept the base metals complex downbeat. Crude oil also traded in narrow range last week. U.S. crude supplies showed a larger than expected decline and the growing tension in Middle east provided support to prices. The geopolitical risk such as Russia’s oil contamination issues, Venezuelan and Iranian sanctions, along with fighting in Libya has brought back the concerns of Spare capacity which has kept crude prices supported. Meanwhile, Iran stated that it would stop complying with some of its commitments under 2015 nuclear deal, escalating tensions with the U.S. and moving closer to a breakdown of the landmark accord. EIA even reported that U.S. crude oil production is expected to rise by 1.49 million bpd in 2019 to average 12.45 million bpd, up from its previous forecast for a rise of 1.43 million bpd.
Among spices, cardamom posted a stellar performance on the back of an acute shortage in the market due to drying up of plantations. Jeera also shooted up on the news that production in Syria & Turkey has been damaged & export from India may rise in days to come. Chana & mustard also recovered from their lows supported by the higher procurement by the government agencies to cushion the prices. On the contrary, cotton plunged taking negative cues from the international market, where the counter plunged to two year low due to escalated trade war between U.S & China.
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As we all know that commodity trading in India has long history. In fact, India has started trading in commodities much before than others countries. Commodities trading in India is continuously rising. Various exchange (MCX, NCDEX, ICEX, NSE & BSE) are providing platform for commodities trading.
Base-Metals
Base metals, which are presently available for trading on exchange's platform are as Lead, Zinc, Aluminium, and Nickel & Copper. Base metals trading have been increased tremendously after the operation of commodity future exchanges. Options contracts are only available with Zinc & Copper on MCX.
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The table mentioned above clears the picture that base metal volumes are much more than Energy & Bullion segment in India. Base metals are extensively used in the world, for example, Aluminium is the second most used metal in the world. Applications of aluminium metals are mainly in electric cars, construction, transport, packaging, and utensils. Taking the example of copper, India is in the list of top 20 major producers, whereas Chile holds the number one position in the world. In India, demand for copper is mainly from the telecom sector, electrical sector, engineering, building and construction, transport and consumer durables. Same as above all other base metals are commonly used. Lead is used mainly in the battery industry. Demand for Zinc is mainly from the construction, automobile, electrical and machinery industries, manufacture of fertilizers and galvanizing of iron and steel.
Trading technique
We suggest pair trading in Base metals, which are a market natural trading strategy; it allows a trader to make money effectively in any market condition: Sideways market, Bearish market, Bullish Market. Pair trade is done between those underlying who have almost similar characteristics, similar applications, similar regulatory constraints and similar client base. There are numerous ways to define these relationships between underlying; most familiar is based on Price spread. Look at the present scenario pair trade in Lead & Zinc look very attractive. Lead & Zinc price spread has tested 12-year record low (96.50) as the Zinc prices surged this year on the back of soaring demand & low supply. The growing demand for Zinc is mainly from emerging countries or emerging markets. The main reason behind this is that major Player are shifting their manufacturing activities in emerging economies owing to the factors including cheap labour, easy availability of raw material, low transportation cost and less rigorous government regulations on mining. But on the other hand LME inventories in Zinc halves and reached a low level since 1998, producing huge rigidity in the refined market and thus making Zinc the second-best performer this year. Inventories of both Zinc and Lead are near-decade low, however, the large inflows in zinc inventories are expected to meet supply demand.
Based on Present Scenario I expect the Sell Zinc & buy Lead in Pair trade. Presently it is trading at (84.30) and it is expected that it became narrow towards (60) to (55) by end of this year.
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| 6th MAY | Trump vowed tariff hike on Chinese goods, escalating tension in trade talks. |
| 7th MAY | RBI's voluntary retention route sees muted response from foreign investors. |
| 7th MAY | U.S. fed funds rate hit near six-week low. |
| 8th MAY | RBI plans more forex swaps, steps to inject cash, says officials. |
| 8th MAY | Japan's labor shortage eats away at back-breaking work culture. |
| 8th MAY | RBI warns finance panel of more slippages by states. |
It’s a tariff week organized by Tariff Man – President Trump. Last Sunday Trump twitter feeds sparked the global financial markets stating that US is set to go to impose 25% hike in tariff from 10% of $200Bn worth of Chinese imported goods and further $325 bn worth of goods which is remain untaxed will be taxed at the rate of 25% shortly. Indian Rupee and other Asian emerging currencies followed the risk-off sentiment. Indian equity posted outflows amounted Rs 2753 crs in the month of May (MTD) and foreign investors pulled-out over $350 million from Chinese markets over the same period as investors turned highly negative on anticipation of bilateral trade failures between US-CHINA. China’s retaliation stand still remains soft as challenges for China remains high. Admittedly China required semiconductor and Boeing Aircraft from US which are difficult to find alternative suppliers, however Airbus can be the choice but under present scenario, they too ask for higher purchasing cost. Further more if PBoC thinks to slide down Yuan to make exports goods cheaper in overseas markets, simultaneously Oil imports will become headwind to deal with. On the contrary Atlanta’s Fed Bostic warned about a possible pass-through inflation for American users after US tariff hikes. Ironically it will be over to Fed’s Chair Jerome Powel now to deal with trade uncertainty and a possible upbeat in core inflation. USDINR is likely to stay above 69.60 and move higher towards 70.40
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USD/INR (MAY) contract closed at 70.1075 on 9th May’ 19. The contract made its high of 70.1950 on 9th May’19 and a low of 69.4850 on 7th May’19 (Weekly Basis). The 14-day Exponential Moving Average of the USD/INR is currently at 69.78
On the daily chart, the USD/INR has Relative Strength Index (14-day) value of 51.67. One can buy at 70 for the target of 70.60 with the stop loss of 69.70.
EUR/INR (MAY) contract closed at 78.5850 on 9th May’ 19. The contract made its high of 78.69 on 9th May’19 and a low of 77.92 on 6th May’19 (Weekly Basis). The 14-day Exponential Moving Average of the EUR/INR is currently at 78.36
On the daily chart, EUR/INR has Relative Strength Index (14-day) value of 51.25. One can buy at 78.45 for a target of 79.05 with the stop loss of 78.15.
GBP/INR (MAY) contract closed at 91.1375 on 9th May’ 19. The contract made its high of 91.4975 on 6th May’19 and a low of 90.65 on 6th May’19 (Weekly Basis). The 14-day Exponential Moving Average of the GBP/INR is currently at 90.99
On the daily chart, GBP/INR has Relative Strength Index (14-day) value of 50.41. One can buy at 90.95 for a target of 91.55 with the stop loss of 90.65.
JPY/INR (MAY) contract closed at 63.8550 on 9th May’ 19. The contract made its high of 64.0575 on 9th May’19 and a low of 62.5250 on 6th May’19 (Weekly Basis). The 14-day Exponential Moving Average of the JPY/INR is currently at 62.95
On the daily chart, JPY/INR has Relative Strength Index (14-day) value of 63.87. One can sell at 64.30 for a target of 63.70 with the stop loss of 64.60.
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Neogen Chemicals debuts with 17% premium at Rs 251
Speciality chemicals maker Neogen Chemicals lsited with 16.7 percent premium on May 8, after a strong response to its initial public offer. The stock listed at Rs 251 on the BSE, against issue price of Rs 215. Neogen Chemicals is a manufacturer of bromine-based and lithium-based speciality chemicals. The Rs 132-crore public offer was opened for subscription during April 24-26 and was oversubscribed 41.18 times. The offer price band was fixed at Rs 212-215 per share. The IPO comprised of a fresh issue of up to Rs 70 crore and an offer-for-sale of up to 29 lakh equity shares.
EaseMyTrip looks to raise up to Rs 750cr via IPO; books Axis Capital, JM Financial as bankers
EaseMyTrip.com is close to becoming the first online travel aggregator to list on the domestic bourses. The Delhi-headquartered firm has engaged Axis Capital and JM Financial as merchant bankers for its proposed initial public offering (IPO). The company is likely to raise between Rs 500 crore and Rs 750 crore via the IPO, though a final call on the issue size has not been taken. The DRHP will be filed in June. EaseMyTrip was founded in May 2008 by the Pitti brothers (Nishant and Rikant Pitti). It provides air tickets, hotel bookings, bus bookings, holiday packages and white label services and has overseas branches in Dubai, Bangkok, Maldives and Singapore. According to its website, EaseMyTrip has 7.5 million direct consumers, a B2B network of 42,000 travel agents, 1,200 franchise outlets, 1,600 distributors and 640 white label solutions.
IRCTC draft RHP likely to be filed with Sebi next month
The catering unit of Indian Railways IRCTC is likely to file the draft red herring prospectus for its₹400 crore IPO next month with market regulator Sebi. The IPO is expected by August-end. Last month, the government raised about ₹480 crore by selling 12.12 per cent stake in Rail Vikas Nigam Ltd (RVNL). In April 2017, the Cabinet Committee on Economic Affairs had approved listing of five railway companies -- IRCON International, RITES, RVNL, IRFC and IRCTC. Of them IRCON International and RITES were listed in 2018-19.
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* Interest Rate may be revised by company from time to time. Please confirm Interest rates before submitting the application.
* For Application of Rs.50 Lac & above, Contact to Head Office.
* Email us at fd@smcindiaonline.com
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Inflows into equity MFs slump 61% in April; FMPs register Rs 17,644 cr outflow
Net inflows into equity mutual funds plunged 61 per cent to Rs 4,609 crore in April compared to the previous month, as volatility in stock markets and uncertainty over outcome of general elections impacted investor sentiments. In March, net inflows into equity funds stood at Rs 11,756 crore. Latest data from the Association of Mutual Funds in India (AMFI) showed that net inflows into these funds dropped 60.79 per cent in April compared to the previous month. The average Assets Under Management (AUM) of the mutual funds rose to Rs 25.27 lakh crore in April. In the same month a year ago, the same was at Rs 23.25 lakh crore. The Fixed Maturity Plans (FMPs) witnessed a net outflow of Rs 17,644 crore last month while net outflow from debt-oriented schemes stood at Rs 18,949.76 crore, as per AMFI. Net AUM in FMPs stood at Rs 1,41,170 crore in April. FMPs are close-ended mutual fund schemes that invest in debt instruments
SIP inflows hit an all-time high in April
Assets under management (AUM) of the mutual fund industry stood at Rs 24.8 lakh crore at April-end, up four percent month-on month (MoM) , data from Association of Mutual Funds in India (AMFI) showed. Equity systematic investment plans (SIPs) stood out in the crowd, racing to an all-time high. MFs saw a total investment of Rs 1,00,460 crore in April, mainly driven by large inflows into liquid and money market funds, while flows into equity funds moderated. Exchange-traded funds (ETFs) saw capital outflows though.
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Note:Indicative corpus are including Growth & Dividend option . The above mentioned data is on the basis of 08/08/2019 Beta, Sharpe and Standard Deviation are calculated on the basis of period: 1 year, frequency: Weekly Friday, RF: 7%
*Mutual Fund investments are subject to market risks, read all scheme related documents carefully
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Mr. S C Aggarwal (CMD, SMC Group) and Mr. Mahesh C Gupta (Vice CMD, SMC Group) along with SMC Employees during ‘Abhinandan’- Orientation Program held on 2nd, 3rd & 4th May, 2019 at SMC Head office, New Delhi.
Mr. D K Aggarwal (CMD, SMC Investments & Senior VP – PHD Chamber of Commerce) with Ambassadors, High Commissioners and Senior Government officials from over 75 Countries during The 35th Edition of Ambassadors' Meet organised by PHD Chamber of Commerce held on Wednesday, 24th April, 2019 at the Taj Palace Hotel, New Delhi.
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