SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

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SPICES

The overall trend of turmeric futures (April) is down & it shall continue till 5300 owing to expectations of higher output. Production is seen rising to a three-year high of 585,000 tn in 2019-20 (Jul-Jun) from 552,500 tn last year, according to trade estimates. The arrivals pressure is increasing due to a rise in incoming of new crops. About 2,100 bags of new turmeric and 1,400 bags of old turmeric are being brought for sale & the traders are also quoting lower prices. At the Erode Turmeric Merchants Salesyard, new finger turmeric was sold at ₹5,514-7,111 a quintal and root variety at ₹4,819-6,139.Jeera futures (April) may witness a consolidation in the range of 13000-13500 & the upside may remain capped. The sentiments are bearish due to weak demand from domestic stockists amid expectations of a rise in output. Production may rise 29% to 535,500 tn in 2019-20 (Oct-Sep) because of higher acreage in Rajasthan and Gujarat, the two largest producers, according to a survey by the Federation of Indian Spice Stakeholders. Coriander futures (April) is expected to trade with a downside bias in the range of 5400-6000 levels. The market participants on the spot are holding a bearish view as higher output is expected. The output is likely to rise 55% to 383,060 tn in 2019-20 (Oct-Sep) because of sufficient availability of water and conducive weather conditions. Cardamom futures (April) may plunge towards 2275-2200 levels. The market participants are citing that due the end of the current fiscal the sellers are disposing their accumulated stock. The stockists are anticipating a further reduction in prices and this is also a reason for the surge in arrivals.

BULLIONS

In Bullion counter, yellow metal may remain on weaker side as gold is likely to move towards 41000 while taking resistance near 43200 and silver can test 41500 while facing resistance near 45000. Gold prices posted their biggest weekly drop in nearly seven years, as a rout in global equities forced investors to cover margin calls. Gold sliver ratio hovered above 101 as silver underperformed by wide margin. The gold silver ratio spiked up dramatically in recent weeks following a hasty Fed decision to lower interest rates in light of the spreading coronavirus. President Trump has vowed to introduce measures aimed at staving off recession in the U.S., including a 0% payroll tax rate proposal. The Federal Reserve moved to stem a market meltdown with offers of $1.5 trillion in short-term loans that could point to more aggressive action from the central bank in coming days to stimulate the economy. Gold traders will be watching closely to see whether still more central banks follow the Federal Reserve in cutting interest rates because of the coronavirus. Japan announced a second package of measures worth about $4 billion in spending to cope with the fallout to the economy of the outbreak, focusing on support for small and mid-sized firms. The euro zone economy grew at a snail's pace in the fourth quarter, figures confirmed, as investments and consumer and government spending just offset the impact of a sharp rise in imports. Bank of England slashed interest rates by 50bps as an emergency rate cut just like Fed did in the past.

OIL AND OILSEEDS

Soybean futures (April) may go down further towards 3200-3100 levels tracking negative sentiments prevailing on CBOT & sell off in overseas market. Moreover, the spread of coronavirus has also hit soymeal exports from India. The selling may intensify in mustard futures (April) owing to increase in the pace of harvesting mustard, and this factor may drag the counter to 3750-3700 levels. Moreover, it is reported that NAFED is offloading old mustard stocks and higher fresh supplies are likely to keep the contracts bearish on the bourse in the coming days. Looking at the panic in the global markets due to outbreak of COVID-19 & market participants increasing their bearish positions in edible oils, soy oil futures (April) may continue to slide to 710-690. With social distancing, food service industry consumption for vegetable oils will be negatively affected. Global recession will also reduce consumption when people eat out less. The possibilities are higher that CPO futures (April) may revisit its previous low of 580 & may even test 570 levels. In the international market on Bursa Malaysia Derivatives, palm oil has retraced by 15% from its high owing to worsening panic over the coronavirus pandemic drove heavy selling across assets.The rising concerns sparked by the virus outbreak outweighed a drop in February stockpiles and a pickup in exports ahead of the Muslim holy month of Ramadan. Markets are worried that the pandemic will suppress palm oil consumption and crude oil prices. Some edible oils and biodiesel buyers have been waiting for a floor on palm oil prices over the past few weeks, but the volatility in crude oil has recently impacted demand for the second half the year.

ENERGY COMPLEX

Crude oil prices may continue to remain under selling pressure as worries about demand for fuel being sapped by the global coronavirus outbreak. Recently prices hovers at four years low amid weak global demand and an escalation in the price war between Russia and Saudi Arabia. Crude oil may further dip towards 2100 while taking resistance near 2800. A flood of lowpriced oil into the market from Saudi Arabia and the United Arab Emirates is intensifying the pressure on prices after the collapse agreement with Russia recently. President Trump’s announcement recently that will ban all flights from Europe just added to travel restrictions across the globe and to reduce further the demand for oil. The situation in transportation and travelling is getting nasty around the world as more and more countries are closing the borders and airlines are cancelling flights across the globe. OPEC and IEA have slashed the demand expectations, with demand growth expected to be flat or negative for the rest of the year. Meanwhile growing tensions in Middle East can cap the downside. The Pentagon confirmed that the US had struck five Iran-backed militia weapons stores in Iraq, a day after a rocket attack killed two American personnel and a British soldier. Natural gas can remain on volatile path as it can move in range of 130-150. The weather is expected to be warmer than normal on the east coast of the US for the next 2-weeks and much colder than normal throughout most of the west coast. Meanwhile stocks were 796 Bcf higher than last year at this time, with most of the change in the east coast on the Midwest.

OTHER COMMODITIES

Cotton futures (March) may continue to hold on to the support near 18000 levels, while the upside may get extended towards 18500-18700 levels. The global cotton outlook remains bleak; Indian cotton has good prospects in Vietnam, Turkey and Far Eastern Countries. The domestic cotton prices have not fallen as sharply as ICE Futures because there are other markets available to India that can be explored.The coronavirus outbreak will not have much impact on exports of cotton, Cotton Association of India (CAI) has said projecting the overall shipments of the commodity for this season at 42 lakh bales. The pick-up in demand from other markets like Bangladesh will keep the exports at the same level as last year. In the international market, ICE cotton futures (May) may trade sideways in the range of 57-62 cents per pound. On the global front, the mills are on the sidelines despite the emergence of some positive signs on the economic front. The U.S net sales of cotton hitting a fresh marketing year high is showing that business of the natural fibre is started showing improvement but the bulk buyers are still adopting wait-and-see mood. Mentha oil futures (March) is expected to trade sideways to down in the range of 1140-1200 levels. The sentiments are weak due to expectations of higher acreage this season amid weak demand from domestic stockists and the pharmaceutical industry. Seasonal demand for the spice oil is declining after the winter season. Chana futures (April) is likely to trade in a broader range of 3600-3850 levels. NAFED's stock liquidation in selected states, along with availability of new domestic crop may continue to pressurize the prices.

BASE METALS

Base metal counter may remain on weaker path amid fast spreading coronavirus deepened worries about a global recession and spread turmoil across financial markets. But short covering at lower levels cannot be denied. Copper may test 410 levels while facing resistance near 430. Copper output at Codelco, the world's top copper miner, plunged 6.8% in January from a year earlier while production at BHP. AX Escondida, the world's largest copper mine, rose 10%. Copper smelting declined during February in China and Europe as the coronavirus outbreak worsened, according to an index based on satellite surveillance of copper plants. China's unwrought copper imports rose 7.2% year-on-year in the first two months of 2020, customs data showed recently as a restocking drive before Lunar New Year offset the impact of the coronavirus. Meanwhile, lead may remain in red as it can test 138 while taking resistance near 147 levels. Zinc may remain on weak bias as it can test 147 levels while facing resistance near 160. LME zinc has the largest net speculative short position on the exchange at 34% of open interest, the highest since November 2015. Automakers in China are calling on the government to help after industry-wide sales plunged 79% in February to mark their biggest ever monthly decline, with demand declined by the coronavirus outbreak. Nickel prices can slip lower towards 860 while taking resistance near 935. LME inventories of nickel climbed to 236,106 tonnes, the highest since September 2018, having more than tripled since early December last year. Aluminium prices can dip towards 134 while taking resistance near 140.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CRUDE MCX (APR) contract closed at Rs. 2321.00 on 12th Mar’2020. The contract made its high of Rs. 4186.00 on 21st Jan’2020 and a low of Rs. 2241.00 on 09th Mar’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 3116.00. On the daily chart, the commodity has Relative Strength Index (14-day) value of 24.028.

One can buy near Rs. 2400 for a target of Rs. 2900 with the stop loss of Rs. 2150.

NATURAL GAS MCX (MAR) contract closed at Rs. 133.00 on 12th Mar’2020. The contract made its high of Rs. 158.70 on 27th Dec’19 and a low of Rs. 119.60 on 28th Feb’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 136.40. On the daily chart, the commodity has Relative Strength Index (14-day) value of 55.901.

One can buy above Rs. 135 for a target of Rs. 165 with the stop loss of Rs. 120.

COTTON MCX (MAR) contract was closed at Rs. 18020.00 on 12th Mar’2020. The contract made its high of Rs. 20650.00 on 13th Jan’2020 and a low of Rs. 17760.00 on 13th Mar’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 18653. On the daily chart, the commodity has Relative Strength Index (14-day) value of 31.898.

One can buy near Rs. 18000 for a target of Rs. 18600 with the stop loss of Rs 17700.

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NEWS DIGEST

Ÿ Sebi could soon introduce the concept of "one commodity one exchange" to increase liquidity and deepen participation of the commodity segments of stock exchanges.

Ÿ Indian sugar mills have so far contracted to export 3.5 million tonnes of sugar the in 2019/20 marketing year, mainly to Iran, Malaysia, Somalia and Sri Lanka.

Ÿ NAFED has been buying Chana in Andhra Pradesh and Karnataka under Price Support Scheme (PSS) during the 2020 Rabi season.

Ÿ The coronavirus outbreak will not have much impact on exports of cotton, Cotton Association of India (CAI) has said projecting the overall shipments of the commodity for this season at 42 lakh bales.

Ÿ Malaysia's total palm oil stocks fell 4.2% to 1.68 million tonnes in February from 1.76 million tonnes in January. - Malaysian Palm Oil Board

Ÿ WHO has described the new coronavirus as a pandemic, adding that Italy and Iran were now on the frontline of the disease and other countries would soon join them.

Ÿ The European Union will impose duties on imports of Chinese steel road wheels for the next five years after concluding that they are sold at unfairly low prices.

Ÿ CME Group Inc. will close its trading floor as exchanges alter their operations to control the spread of the coronavirus.

Ÿ Global aluminium producers have increased their offers to Japanese buyers for the second quarter by as much as 27% from the current quarter.

WEEKLY COMMENTARY

The horror show in financial market, which we haven’t seen in decades, completely shook the entire world. We saw global market carnage and equities gave the worst performance since Wall Street's "Black Monday" crash of 1987. Nothing worked in front of the free fall of market, whether it is stimulus or rate cut by Fed or many Central banks. Commodities signaled this mayhem ahead of equities and worked as leading indicator. Fed took drastic action on Thursday as the stock market meltdown accelerated, pledging to inject as much as $1.5 trillion into U.S. market, nevertheless travel ban by US injected selling pressure. Dollar index stood tall as investors scrambled for the world's most liquid currency amid deepening panic about the coronavirus while the euro nursed losses after ECB disappointed by not cutting rates. Here in India, rupee hit the low above 74.5 on historic fall in equity market, which saw a free fall of more than 20% in NIfty. Bullion counter lost the tag of safe haven buying for the time being and noticed massive fall. Gold prices plunged more than $60 per ounce on Thursday as investors cashed out their long positions in a scramble to cover margins and losses on Wall Street amid the U.S. ban on most incoming European travelers. Silver too performed weak on bearish base metals and gold. In energy counter, crude saw massive fall of more than 30%, it was the deepest fall since 1991, when crude fell by 32% after airstrike by US on Kuwait. Crude made a low of $27.34 in NYMEX and Rs 2151 on MCX. Natural gas tried to maintain some upside on value buying from the lows. Oil fell a third day as the horror show for crude investors continued on Friday amid panic about evaporating demand from the coronavirus pandemic, with Brent set for its biggest weekly loss since 1991 and U.S. crude heading for its worst week since 2008. WTI is set to drop 25% last week, the most since the week of Dec. 19, 2008, when it fell 27% at the height of the Global Financial Crisis. As travel bans, cancelled events and other economic disruptions hit the base metals hard and they remained traded in weak territory. Additionally, a flood of cheap supply coming onto the market from Saudi Arabia and the United Arab Emirates compounded pressure on prices. The Gulf Arab producers are raising production as they go on the offensive in an oil price war with Russia. Agri commodities were not immune to this fall and most of them nosedived for the same reason. Oil seeds and edible oil prices dragged down on weak international market whereas limited export of spices kept the spices counter in lower trading zone. Guar saw many lower circuits on free fall in crude prices.

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 $)

Corona virus put global economy on quarantine

The ongoing spread of the new coronavirus has become one of the biggest threats to the global economy and financial markets. The virus, first detected in the Chinese city of Wuhan last December, has infected more than 110,000 people in at least 110 countries and territories globally, according to the World Health Organization. Of those infected, more than 4,000 people have died, according to WHO data.

Fears of the coronavirus impact on the global economy have rocked markets worldwide, plunging stock prices and bond yields. China, the mainland so far, has locked down cities, restricted movements of millions and suspended business operations — moves that will slow down the world’s second-largest economy and drag down the global economy along the way. Fear surrounding the impact on the global economy has hurt investor sentiment and brought down stock prices in major markets.

Downgrades in economic forecasts

The outbreak has led major institutions and banks to cut their forecasts for the global economy. In a March report, the OECD downgraded its 2020 growth forecasts for almost all economies. According to the report, China’s gross domestic product growth is expected to grow by 4.9% this year, slower than the earlier forecast of 5.7%. Meanwhile, the global economy is expected to grow by 2.4% in 2020 — down from the 2.9% projected earlier.

Slowdown in manufacturing & Services activity

The manufacturing sector in China has been hit hard by the virus outbreak. Factories in China are taking longer than expected to resume operations. The outbreak has also hit the country’s services industry as reduced consumer spending hurt retail stores, restaurants and aviation. This has hurt countries with close economic links to China, many of which are Asia Pacific economies such as Vietnam, Singapore and South Korea. It means that global manufacturing activity could remain subdued for longer. The services sector and factory manufacturing in the U.S., the world’s largest consumer market, also contracted in February, as customers held back from placing orders amid global economic uncertainty and the corona virus outbreak.

Oil prices plunging

A reduction in global economic activity has lowered the demand for oil, taking oil prices to multi-year lows. The recent disagreement on production cuts between OPEC and its allies caused the latest plunge in oil prices. The benchmark brent prices declined more than 50% this year so for.

Safe haven in Gold

Gold prices is benefitting most on increasing bets of an interest rate cut by global central banks to mitigate the economic impact from the fast-spreading corona virus outbreak. Gold prices in comex climbed more than 7.5% this year till date. The Fed had already slashed its benchmark interest rate in an emergency move last week. Markets are also pricing in a rate cut by the Bank of England on 26 March. The rate cut led to Treasury yields plunging, which is historically good for the price of gold. The 10-year yield fell its historic low of around 0.3% and the yellow metal could soon test $1,700 an ounce.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week