2020 : Issue 723, Week : 17th - 21st February
A Weekly Update from SMC (For private circulation only)
2020 : Issue 723, Week : 17th - 21st February
A Weekly Update from SMC (For private circulation only)
NEY 
| Equity | 4-7 |
| Derivatives | 8-9 |
| Commodity | 10-13 |
| Currency | 14 |
| IPO | 15 |
| FD Monitor | 16 |
| Mutual Fund | 17-18 |
I
n the week gone by, global stock markets looked nervous, as investors were spooked by a sharp rise in the number of coronavirus cases in China while oil prices extended gains on hopes of more production cuts. The coronavirus outbreak in China has generated economic waves that are rocking global commodities markets and disrupting the supply networks that act as the backbone of the global economy. Several manufacturing plants in China are shut and as a result, Goldman Sachs recently cut its Q1CY20 real GDP growth forecast for China to 4 percent from 5.6 percent earlier.
Back at home, domestic markets continued to remain weak on account of weak domestic and global cues. A surprise drop in industrial output for December and a rise in January inflation to a six-year high also dampened sentiment. The index of industrial production (IIP) shrank 0.3% in December from a 1.8% expansion a month ago, while retail inflation accelerated to 7.59% in January from 7.35% in the previous month. On Friday, the Supreme Court rejected a plea by telecom operators seeking more time to settle AGR dues. This weighed on the sentiment of the banking stocks and market witnessed hiccups to close in red. Meanwhile, IMF has said that India urgently needs more ambitious structural and financial sector reform measures and a medium-term fiscal consolidation strategy due to the rising debt levels. It has projected growth to recover to 5.8% in 2020-21. While the rating agency S&P sees growth recovering to 7% in 2 years. However, it retained the country’s sovereign rating, warning that the fiscal situation is precarious. In the December quarter earnings season, results so far were in line with expectations. Going forward, the uncertainty around the coronavirus could continue to carry more weight in markets. Back at home, all eyes would be on the outcomes from the US-India strategic partnership deal when Donald Trump, President of the United States, will visit India on February 24 and 25.
On the commodity market front, CRB has rebounded; first time in seven week. Some revival in economic sentiments amid fresh buying from lower levels gave some upside. Bullion counter may trade on sideways to upside path as a mounting coronavirus death toll supported safe-haven buying in yellow metal but improved US economic data to cap the gains. Gold may rise towards 41300 while taking support near 40000 levels. Silver can test 46800 levels while taking support near 45200 levels. Crude oil prices may witness some lower levels buying on the assumption major producers will implement deeper output cuts to offset slowing demand in China, the world's secondlargest crude user. OPEC+ is considering cutting output by up to 2.3 million barrels per day in response to the demand slump. Crude oil may recover towards 3900 while taking support near 3500. Natural gas can remain on subdued path but short covering at lower levels cannot be denied. GDP and CPI of Japan, Euro-Zone ZEW Survey¸ German ZEW Survey Expectations, CPI of UK, EU and Canada, FOMC Meeting Minutes, Unemployment Rate of Australia, etc are strong triggers for commodities market this week.
SMC Global Securities Ltd. (hereinafter referred to as “SMC”) is a registered Member of National Stock Exchange of India Limited, Bombay Stock Exchange Limited and its associate is member of MCX stock Exchange Limited. It is also registered as a Depository Participant with CDSL and NSDL. Its associates merchant banker and Portfolio Manager are registered with SEBI and NBFC registered with RBI. It also has registration with AMFI as a Mutual Fund Distributor.
SMC is a SEBI registered Research Analyst having registration number INH100001849. SMC or its associates has not been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities market.
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.
The views expressed are based solely on information available publicly available/internal data/ other reliable sources believed to be true.
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
• India’s wholesale inflation rose to 3.1 per cent in January. The wholesale inflation which is measured in terms of wholesale price index (WPI) grew 2.59 per cent during the month of December 2019 and it rose to 2.76 per cent in January last year.
• India’s consumer price index rose 7.59 percent year-on-year after a 7.35 percent increase in December. In January 2019, inflation was 1.97 percent.
• India's industrial output contracted to o.3 per cent month-on-month (MoM) in December 2019 against a decline of 1.8 percent in November 2019, according to the Index of Industrial Production (IIP) data released by the Central Statistics Office.
Capital Goods
• Havells India aims to touch Rs 600-700 crore in revenues from water purifier business in the next three years. The company at present boasts of 20 products in the water purifier business segment. The portfolio is set to be strengthened further with the launch of 5 new products by April-May this year.
• Bharat Heavy Electricals has signed an MoU with Joint Stock Company Rosoboronexporr, Russia during the 5th India Russia Military Industrial conference held in Lucknow. The aim of the MOU is to cooperate and undertake joint projects and operations for Defence Systems. This will help in leveraging BHEL's strength/capabilities in the Defence Sector in association with Russian OEMs under the 'Make in India' initiative and offer indigenous support and solutions to the Indian Defence Forces.
• ABB India has won two significant orders to supply traction equipment for Chittaranjan Locomotive Works (CLW) - the manufacturing unit of the Indian Railways, and industrial drives to Megha Engineering & Infrastructures (MEIL) in their oil drilling segment.
Pharmaceuticals
• Lupin announced the completion of an inspection carried out by the United States Food and Drug Administration (USFDA) at its Pithampur (Unit-I) facility. The inspection was carried out between 03 February 2020 and 11 February 2020. The inspection for the Pithampur (Unit-I) facility closed with two 483 observations.
• Dr Reddys Laboratories has entered into a definitive agreement with Wockhardt to acquire select divisions of its branded generics business in India and a few other international territories of Nepal, Sri Lanka, Bhutan and Maldives for a consideration of Rs.1850 crore.
• Granules India has received tentative approval from the US health regulator for its generic Colchicine capsules indicated for prevention of gout flares in adults. The US Food and Drug Administration (USFDA) has tentatively approved the abbreviated new drug application (ANDA) filed by Granules Pharmaceuticals Inc for Colchicine capsules in the strength of 0.6 mg.
• J B Chemicals & Pharmaceuticals Ltd has received Establishment Inspection Report (EIR) from the US health regulator for its manufacturing facility at Panoli, Gujarat. The company has received EIR from the United States Food and Drug Administration (USFDA) for its newly set up and commissioned solid oral dosage forms formulations manufacturing facility at Panoli, Gujarat.
Automobile
• Hero MotoCorp has introduced ‘Hero Connect', a cloud-based solution bringing smart riding experience for customers. Hero Connect, the new-age app for the new era of connected mobility, will be offered across segments with initial readiness in four models, including XPulse 200, Pleasure+, Passion XPRO and HF Deluxe.
• Mahindra & Mahindra has charted an investment of Rs 3,000 crore over the next three years for its subsidiary SsangYong as a financial break even eludes the South Korean maker of SUVs and pickup trucks amidst a slowdown in its home and export markets.
INTERNATIONAL NEWS
• US consumer price index inched up by 0.1 percent in January after rising by 0.2 percent in December. Economists had expected prices to increase by 0.2 percent.
• US initial jobless claims crept up to 205,000, an increase of 2,000 from the previous week's revised level of 203,000. Economists had expected jobless claims to rise to 210,000 from the 202,000 originally reported for the previous week.
• US employment jumped by 225,000 jobs in January following a revised increase of 147,000 jobs in December. Economists had expected employment to rise by 160,000 jobs compared to the addition of 145,000 jobs originally reported for the previous month.
• Japan Producer prices in Japan were up 0.2 percent on month in January. That exceeded expectations for a flat reading following the 0.1 percent increase in December.
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HCL TECHNOLOGIES LIMITED
CMP: 621.70
Target Price: 703
Upside: 15%
| Face Value (Rs.) | 2.00 |
| 52 Week High/Low | 620.35/497.00 |
| M.Cap (Rs. in Cr.) | 166266.27 |
| EPS (Rs.) | 38.45 |
| P/E Ratio (times) | 15.93 |
| P/B Ratio (times) | 3.64 |
| Dividend Yield (%) | 0.65 |
| Stock Exchange | BSE |
Investment Rationale
• HCL Tech expects its sales to grow between 16.5 percent and 17 percent in constant currency. Revenue Guidance is based on FY'19 (April to March) average exchange rates. The above constant currency guidance translates to 15.2% to 15.7% in US$ terms based on December 31, 2019 rates. FY’20 expected Operating Margin (EBIT) range is from 19.0% to 19.5%.
• HCL Tech has seen a surge in deal wins and the management of the company expects fourth quarter would be a stronger quarter owing to strong deal wins with increasing TCVs, accelerated pace of new customer additions and strong efforts in increasing the share from client’s wallet. The company has signed 12 transformational deals during Q3FY2020, led by key industry verticals such as Hi-Tech, Manufacturing and Financial Services.
• Two new clients each were added in the $100 million and $50 million client buckets taking the total count to 15 and 32 respectively sequentially
• It has announced the opening of two new technology delivery centers in Lithuania. These state-of-the-art centers provide leading-edge technology and digital transformation capabilities and services to clients in the Baltic, Nordic and Benelux regions. This is one of the largest technology hubs of HCL in the European region, providing end-to-end infrastructure and application development management services to its near-shore clients.
• It has launched a dedicated Google Cloud Business Unit to accelerate enterprise cloud adoption. The new extensive and strategic partnership between HCL and Google Cloud will help organizations advance their digital transformation agendas
powered by Google Cloud Platform and Google Cloud solutions.
• The employee count stood at 149173, with net addition of 11502 people in the quarter ended December 2019. On the attrition front, IT services attrition increased to 16.8% (LTM).
Risk
• Currency Fluctuation and Regulatory Compliance
• Information and Cyber Security
Valuation
Overall performance reported by the Company is quite healthy, a well-balanced capital allocation strategy through a combination of capital expenditure, dividends and acquisitions. Margin improved a tad and the deal win momentum was healthy. The company maintained its FY20 guidance reiterating a strong outlook. Thus, it is expected that the stock will see a price target of Rs.703 in 8 to 10 months time frame on current P/E of 15.93x and FY21 (E) earnings of Rs.44.12.
ALEMBIC PHARMACEUTICALS LIMITED
CMP: 638.30
Target Price: 756
Upside: 19%
| Face Value (Rs.) | 2.00 |
| 52 Week High/Low | 666.00/435.10 |
| M.Cap (Rs. in Cr.) | 12031.96 |
| EPS (Rs.) | 39.94 |
| P/E Ratio (times) | 15.98 |
| P/B Ratio (times) | 4.06 |
| Dividend Yield (%) | 0.86 |
| Stock Exchange | BSE |
Investment Rationale
• Alembic Pharmaceuticals Limited is engaged in developing formulations and active pharmaceutical ingredients (API). The Company focuses on antiinfective, analgesic and, cough and cold therapies. It also focuses on therapies, such as cardiology, diabetes, gynecology, gastrointestinal, orthopedic, dermatology and ophthalmology.
• The company has presence in key markets of Europe, Canada, Australia, Brazil and South Africa. The company’s business will focus on new launches across key markets. The plants have been successfully audited by key regulatory authorities across the globe.
• Recently, it has received final approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Azithromycin tablets USP, 600 mg. The approved ANDA is therapeutically equivalent to the reference listed drug product (RLD) Zithromax Tablets of Pfizer.
• The company has received eight ANDA approvals during the quarter. It has launched seven products in Q3FY20. The management has guided for more than five launches in the last quarter of the year.
• For the India business, the management has guided that once the comparable base is corrected from the next year, the domestic business is expected to grow at 10-12 percent.
• The Debt/Equity is at 0.42 which gives sufficient cushion to the company, thereby, generating a return on capital of 36%. The entity has a diverse portfolio with steady pipeline of speciality medicines wherein the International formulation
business grew 48% to Rs. 664 Crores for the Q3FY20 vis-à-vis the same quarter last year.
• During the quarter ended December 2019, company's revenue for the quarter was up 19% yoy at Rs.1209 cr from Rs.1018 cr. Net Profit for the quarter up 38% yoy to Rs.234 cr from Rs.170 cr.
Risk
• Slowdown in ANDA approvals and USFDA-related regulatory risks
• Currency fluctuation
Valuation
The management expects 10-12% domestic annual growth from FY21 on the back of ongoing restructuring of distribution patterns. For the US, with the aggressive R&D and capex, the management has signaled its long term strategy for the next five to six years. This includes a foray into niche areas like oncology, injectables, derma, etc. Thus, it is expected that the stock will see a price target of Rs.756 in 8 to 10 months time frame on a one year average P/BVx of 3.75x and FY21 BVPS of Rs.201.72.
Source: Company Website Reuters Capitaline
Above calls are recommended with a time horizon of 8 to 10 months.
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The stock closed at Rs 224.00 on 14th February 2020. It made a 52-week low of Rs 138.00 on 11th December 2019 and a 52-week high of Rs. 261.80 on 03rd April, 2019. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 186.68
As we can see on charts that stock is trading in higher highs and higher lower sort of “Rising Wedge” on weekly charts which is bullish in nature. Apart from this, it was formed an “Inverted Head and Shoulder” pattern on daily charts and has given the pattern breakout along with volumes so buying momentum can continue for coming days. Therefore, one can buy in the range of 220-222 levels for the upside target of 245-250 levels with SL below 205.
The stock closed at Rs 766.65 on 14th February, 2020. It made a 52-week low at Rs 543 on 23rd August 2019 and a 52-week high of Rs. 779.80 on 11th February, 2020. The 200 days Exponential Moving Average (DEMA) of the stock on the daily chart is currently at Rs 656.20
Short term, medium term and long term bias are looking positive for the stock as it is trading in “Rising Channel” on weekly charts. Moreover, stock is consolidating in narrow range from past few weeks along with positive bias and has closed on verge of breakout of the same with good volumes so more upside is anticipated from current levels. Therefore, one can buy in the range of 755-760 levels for the upside target of 820-830 levels with SL below 725.
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
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Indian markets remained highly volatile in the week gone by, with Nifty seen swinging in broader range of 12250-12000 levels while banknifty ended below 31000 level with loss of nearly 1% week on week basis. Most of the sectors remained under pressure during the week on back of profit booking at higher levels. However, banking stocks also witnessed sharp selloff in later part of the week after the Supreme Court rejected the plea seeking new schedule of AGR payments. On the derivative market front, a tug of war between bulls and bears was witnessed at 12200 strike where bears finally took control and added hefty open interest in 12200 call strike which hold with maximum concentration of nearly 26 lakh shares. The Implied Volatility (IV) of calls closed at 12.04% while put options closed at 13.10%. The Nifty VIX for the week closed at 13.37% and is expected to remain volatile. PCR OI for the week closed at 1.25. In coming week, it is expected that volatility is likely to grip the market with Nifty having stiff resistance at 12200 levels while banknifty is likely to take support in 30600 to 30500 zone. The bias is likely to remain bearish in coming week as far Nifty is holding below 12200, so traders should keep stock-specific action on the radar.
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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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The outlook of turmeric futures (March) is bearish and it is expected to break the support near 5825 to test 5700-5600 on the lower side in days to come. The export demand has been hit by due to the outbreak of coronavirus in China. While on the supply side, the new crop arrival is expected to increase from next month. Production of turmeric in Telangana, the largest producing state, may rise to 305,000 tonnes, up 3.7 percent from 294,000 tonnes, a year ago, the state farm department's second advance estimate showed. Moreover, according to traders, the postponement of decision on MSP of turmeric in Andhra Pradesh also hit prices. The short covering in jeera futures is getting capped taking negative cues from the spot markets. The March contract is expected to descend towards 13300-13000 levels. The new jeera crop is being sold 23% lower from last year because of high moisture content in the new crop. Supply is coming from Saurashtra region with a moisture level of 12-13%, against the normal of below 8%. Currently, the weather is favourable for the crop across key growing regions in Gujarat and Rajasthan, which may lead to a rise in yield, resulting in higher production. Traders have estimated the country's jeera production in the ongoing season at 450,000-490,000 tn, compared with 385,000 tn a year ago. Coriander futures (March) is likely to trade with a negative bias in the range of 5900-6500 levels. The supply side is heavier as the new coriander has started arriving in the mandis of Rajasthan & the moisture content is very high in the new crop.
Bullion counter can trade on sideways to upside path as a mounting coronavirus death toll supported safe-haven buying in yellow metal but improved US economic data to cap the gains. Recently, China reported a record rise in deaths and thousand more infectious after using the broader definition. Investors are spooked as head of the Revolutionary Guards stated that Iran was ready to strike the United States and Israel, if they give it any reason to do so. Meanwhile, U.S. prosecutors accused Huawei of stealing trade secrets and helping Iran track protesters in its latest indictment against the Chinese company. The risk-averse sentiment in the market supported bullion, often seen as an alternative investment during times of political and financial uncertainty. Gold may rise towards 41300 while taking support near 40000.Silver can test 46800 while taking support near 45200. U.S. Treasury Secretary Steven Mnuchin stated that the negative economic impact from the virus outbreak is a one-time event that will not last beyond 2020. U.S. Federal Reserve Chair Jerome Powell reiterated his confidence in the U.S. economic outlook, even as he said he expected some drag "soon" from China's new coronavirus epidemic. Meanwhile, according to WGC, Gold demand fell 1% in 2019 as a huge rise in investment flows into ETFs and similar products was matched by the price-driven slump in consumer demand. Furthermore high local-currency prices in India coupled with a slowdown in Chinese economic growth to curb physical demand for gold in 2020.
Soybean futures (March) is likely to witness an upside momentum towards 4100-4125 levels, taking support near 3900-3850 levels. The positive sentiments coming from the international markets after the United States raised its oilseed export estimates and Chinese crop processing industry resumed production may keep the downside capped. In days to come, the market participants would be waiting for fresh news from the United States Department of Agriculture Agriculture Outlook Forum on Feb. 20-21. Back at home, all eyes would be on the outcomes from the US-India strategic partnership deal when Donald Trump, President of the United States, will visit India on February 24 and 25. It is being said that Trump has been hinting at the possibility of a bilateral trade deal with India for some time now. Mustard futures (April) is expected to take a turn around to test 4105-4140 levels taking support near 4025. White rust and stem rot diseases are reported in some key growing regions in Rajasthan, western Uttar Pradesh and southern Haryana, and this is also seen weighing on production. The average yield is expected to remain the same as the last year in 2019-20 at 1.49 tn per ha. On the demand side, crushing is likely to pick up in the coming months due to strong demand from oil millers and hopes of arrival of new crop from end of this month. Soy oil futures (March) would probably remain trapped in the range of 820-860, while CPO futures (Feb) is expected to trade sideways in the range of 715-765 levels. The fear of coronavirus taking toll over demand is still giving negative cues to the edible oil counters in the domestic as well as in the international markets.
Crude oil prices may witness some lower levels buying on the assumption that major producers will implement deeper output cuts to offset slowing demand in China, the world's second-largest crude user. Crude prices have plunged about 20% from their 2020-peaks on Jan. 8 as oversupply concerns combined with worries about large fuel demand declines in China as the country's quarantine to fight a coronavirus outbreak has halted economic activity. However, the Organization of the Petroleum Exporting Countries and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day in response to the demand slump. Energy Information Administration (EIA) on Tuesday cut its global oil demand growth forecast for this year by 310,000 bpd as the virus outbreak crimps oil consumption in China, the world's second-largest economy. On the supply side, the Organization of Petroleum Exporting Countries (OPEC) and its allies including Russia, known as OPEC+, recommended a further cut of 600,000 bpd last week to stem the oil price fall. Crude oil may recover towards 3900 while taking support near 3500. The International Energy Agency (IEA) stated that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China. Natural gas can remain on subdued path but short covering at lower levels cannot be denied. There are forecasts for colder weather and more heating demand in late February than previously expected which can lead to short covering rally. Overall it can take support near 120 levels and resistance near 145 levels.
A consolidation can be seen in cotton futures (Feb) in the range of 18600- 19400 levels. The exporters have not seen any increase in demand from Bangladesh and Vietnam. Everyone is waiting and watching the situation as buyers in China have requested for delay in shipments due to market uncertainty after the outbreak of coronavirus. However, amidst all the negative news, the cotton prices are expected not to witness much correction as the Cotton Corporation of India (CCI) is set to procure more than 5 million bales from farmers in 2019/20, the highest in five years. On the international market, ICE cotton futures is holding on the support near 67 cents per pound as investors are optimistic about the coronavirus epidemic being contained, easing fears of impact to Chinese economy. China reported its lowest number of new coronavirus cases in two weeks. Chana futures (March) is expected to trade sideways to up in the range of 3950-4250 levels. In the resent scenario, the counter is getting support from the lower arrivals in the spot markets. Due to falling prices, stockists have chosen to hold back their stocks of Chana, resulting in dip of arrivals by nearly 60% in February. Guar seed (March) will probably trade range bound within 3700-4050, while the short covering in guar gum (March) may continue to face resistance near 7200 levels. It is being estimated that guar derivative exports are likely to fall by about 20% in 2019- 20 (Apr-Mar). The replacement of guar gum with cheaper alternatives such as polyacrylamide, carboxymethyl cellulose, xanthan gum, and partially hydrolyzed polyacrylamide is also likely to keep demand for guar gum subdued in this financial year.
Base metal counter may remain on a weaker path but short covering at lower levels can be seen. The Chinese economy will grow at its slowest rate since the financial crisis in the first quarter, but the downturn will be short-lived, if the outbreak is contained. Copper may bounce towards 445 levels while taking support near 425. Rio Tinto operator of the giant Oyu Tolgoi copper-gold mine in Mongolia said its copper concentrate shipments to China had slowed due to efforts by the authorities to contain the spread of the coronavirus. Guangxi Nanguo Copper smelter has declared force majeure on deliveries of copper concentrate as a result of the outbreak. Meanwhile, lead may remain in red as it can test 143 while taking resistance near 153 levels. Zinc may witness some short covering towards 177 levels while taking support near 165. Zinc stocks in warehouses certified by the London Metal Exchange (LME) hit their lowest in nearly three decades, but this was deceptive because a lot of metal was being held in other depots. Stocks in warehouses monitored by the Shanghai Futures Exchange nearly doubled to 97,922 tonnes over two weeks. Nickel prices can recover towards 980 levels while taking support near 940 levels. London nickel is down by almost 8% since the start of January and back to where it was last July, when Indonesia announced it was bringing forward a ban on the export of nickel ore from 2022 to this year. The virus represents another unknown in an already complex set of calculations as to whether Indonesia's ore ban will translate into a shortage of metal. Aluminium prices can recover towards 142 levels while taking support near 136 levels. .
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CRUDE MCX (MAR) contract closed at Rs. 3702.00 on 13th Feb’2020. The contract made its high of Rs. 4604.00 on 06th Jan’2020 and a low of Rs. 3562.00 on 10th Feb’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 3765.53. On the daily chart, the commodity has Relative Strength Index (14-day) value of 43.112.
One can buy near Rs. 3690 for a target of Rs. 3960 with the stop loss of Rs. 3560.
NICKEL MCX (FEB) contract closed at Rs. 961.30 on 13th Feb’2020. The contract made its high of Rs. 1051.20 on 23rd Dec’2019 and a low of Rs. 928.60 on 28th Jan’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 959.95. On the daily chart, the commodity has Relative Strength Index (14-day) value of 43.853.
One can sell near Rs. 980 for a target of Rs. 910 with the stop loss of Rs. 1015.
CHANA NCDEX (MAR) contract was closed at Rs. 4016.00 on 13th Feb’2020. The contract made its high of Rs. 4560.00 on 11th May’19 and a low of Rs. 3847.00 on 10th Feb’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 4026.08. On the daily chart, the commodity has Relative Strength Index (14-day) value of 45.552.
One can buy near Rs. 4000 for a target of Rs. 4320 with the stop loss of Rs 3840.
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Ÿ NCDEX has filed a Draft Red Herring Prospectus with market regulator SEBI for an IPO.
Ÿ MCX circular: The members are required to collect upfront initial margins from their clients. The members will have time till ‘T+2’ working days to collect margins (except initial margins) from their clients.
Ÿ Malaysia has held its export tax for crude palm oil unchanged at 6% for March. - Malaysian Palm Oil Board
Ÿ India's mustard crop in 2019-20 (Jul-Jun) is expected to remain unchanged on year at 9.34 mln tn. - Indian Council of Agricultural Research
Ÿ NAFED has stocks of 1.6 mln tn of chana, which the agency bought under the price support scheme in the 2019-20 (Apr-Mar) rabi season.
Ÿ The food grain inventory with the government as on Feb 1 was at a fresh seven-year high of 57.8 mln tn, nearly 24% higher on year.
Ÿ Russia has yet to decide on whether to extend an agreement with OPEC and other oil producers on cutting oil output.
Ÿ China's steel industry body has asked the government for help in overcoming transport disruptions caused by curbs aimed at stopping the spread of coronavirus, as steelmakers struggle to bring in raw materials for their plants or ship out products.
Ÿ PetroChina, China's second biggest state refiner, plans to reduce its crude throughput by 320,000 barrels per day (bpd) this month versus its original plan as the Wuhan virus hits fuel demand.
CRB has rebounded; first time in seven week. Some revival in economic sentiments amid fresh buying from lower levels gave some upside. Sharp upside in dollar index amid rising death tolls due to Coronavirus kept the upside capped. Gold prices hit their highest levels in 10 days on Thursday as haven buyers flocked back to the yellow metal amid a new spike in deaths and infections reported by China from its Covid-19 epidemic. The death toll in China reached 1,367. The number of confirmed cases jumped 15,152 to 59,804. Nevertheless silver traded weak in both domestic and international market. Energy pack reacted in mixed way, crude was up whereas natural gas remained weak. Oil prices were steady last week, but set for their first weekly gain in six weeks on the assumption that major producers will implement deeper output cuts to offset slowing demand in China caused by the coronavirus epidemic. Crude prices have plunged about 20% from their 2020 peaks on January 8, as oversupply concerns combined with worries about large fuel demand declines in China as the country's quarantine to fight the coronavirus outbreak has stymied economic activity. The International Energy Agency (IEA) on Thursday said that first quarter 2020 oil demand is set to fall versus a year earlier for the first time since the financial crisis in 2009 because of the coronavirus outbreak in China. Coronavirus also hit the natural gas demand. Four liquefied natural gas tankers bound for north Asia have changed destination or diverted after the coronavirus outbreak slammed gas demand in China. Base metals were trying to make base at current level; only zinc was bearish last week. The Baltic Exchange’s main sea freight index remained flat on Thursday, as higher rates for panamax vessels offset weaker rates for other vessel categories. The main index slid to a near 4-year low of 411 earlier this week.
Oil seeds and edible oil futures traded mix. Soyabean and ref soya prices amid negative international cues weakened whereas mustard prices strengthened. Brazil is forecast to produce 124.01 million mt of soybeans in the 2019-20 crop years (September-August), up 1.9% on January estimates and 8% higher year on year, amid good harvest pace and productivity. Chana saw some revival. NAFED started buying chana from growers at the minimum support price of 4,620 rupees per 100 kg for crops produced in 2018-19 (Jul-Jun) and marketed in 2019- 20 after state governments requested the Centre to arrest the fall in prices. All spices witnessed lackluster trade. Turmeric continued to trade weak as higher output along with increased standard moisture content in the arrived crop has proved to be a double whammy for price.
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Crude prices have plunged about 20% from their 2020 peaks on January 8th. The oil price started to decline during the second week of January on easing risk of supply disruptions from geopolitical tensions in the Middle East. International Monetary Fund (IMF) also further downgraded its forecast for 2020 global economic growth to 3.3%, a drop of 0.1 pp, compared to its October forecast. But the prices reacted strongly to the Coronavirus outbreak in China, given that it is the world's largest crude oil importer, and due to the possibility of it spreading further across China and around the world and brought a sell-off in market. The demand concerns from the outbreak pushed Brent and WTI to their lowest in 13 months. Despite recent gains, both benchmarks are still down more than 20% from highs reached in January.
In its latest February report, OPEC said 2020 demand for its crude will average 29.30 million barrels per day (bpd), 200,000 bpd less than previously thought. As per report, the impact of the corona virus outbreak on China’s economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth. In the report, OPEC said world oil demand will rise by 990,000 bpd this year, down 230,000 bpd from the previous forecast.
World Economy
Focus turned on Coronavirus outbreak that paralyzed the world's largest crude oil importer and also impacting negatively on the global economy and oil demand growth for 2020. China’s growth is forecast to slow down significantly in 1H20. This is also impacting other Asian economies and China’s main global trading partners. The 2020 global GDP growth forecast was revised down to 3.0%, compared to 3.1% in the previous month. The 2019 US economic growth estimate remains at 2.3%, while ongoing developments led to the expectation that 2020 US GDP growth will slow-down slightly achieving 1.9%. Euro-zone economy is also forecast to continue to decelerate in 2020.
World Oil Demand
• World oil demand growth for 2019 is now estimated at 0.91 mb/d, revised lower by around 0.02 mb/d compared to last month’s projections.
• The world is now projected to consume 100.73 mb/d in 2020, with 2H20 recording higher consumption than 1H20.
• OECD oil demand was revised down by 0.08 mb/d, mainly due to lower economic projections for OECD Asia Pacific compared with last month.
• In non-OECD, 2020 oil demand projections were also revised lower, mainly in China and Other Asia to reflect the Coronavirus and its impact on transportation fuels.
• Oil demand was revised lower by 0.15 mb/d in non-OECD in 2020 with most of the downward revisions in 1H20.
• Travel restrictions to and from China and quarantines have cut fuel usage. The two biggest Chinese refiners have said they will reduce their processing by about 940,000 barrels per day (bpd) as a result of the consumption drop, or about 7% of their 2019 processing runs.
• OPEC, Russia and other producers, a group known as OPEC+, have since Jan. 1 implemented a deal to cut output by 1.7 million bpd to support the market. Now after the corona virus outbreak, OPEC+ proposed last week a new cut of around 600,000 bpd.
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| 10th FEB | Euro zone Sentix Investor Confidence slips in February. |
| 12th FEB | Domestic Retail inflation rises to 7.59% in January on higher food prices. |
| 13th FEB | US deficit surged 25% in fiscal 2020 and is $1.1 trillion over the past year. |
| 13th FEB | UK PM Boris Johnson reshuffled his core cabinet ahead of UK Budget on March 11. |
| 13th FEB | Pound surged to week high amid stimulus expectations after Rishi Sunak took office of new UK Chancellor. |
| 13th FEB | Indian Finance Ministry to seek Cabinet nod for credit guarantee fund. |
Indian rupee continues the losing streak by two tenth percent in week ended this Thursday. Despite the severe outbreak which triggered major Asian currencies to fall sharply, Indian rupee and Philippines Peso somehow held against the ripple effect as both the economies are largely driven by domestic consumption. Meanwhile rupee was slightly tilted negative after domestic inflation for January printed at 68 months high to 7.59% versus 7.35% in December. Notably the core inflation rose to 4.1% which can trigger RBI to change their accommodative stance soon than markets anticipate. Additionally Factory activity for January plunged by three tenth percent versus positive figure in December especially the electricity generation output which is one of the leading indicator in timelier survey fell by 0.1% against 4.8% rise in the same period in 2018. On global front, Pound surged to week high after dramatic move by Boris Johnson reshuffled his core cabinet ahead of UK Budget on March 11. Sajid Javid stepped down from Chancellor Seat after not accepting certain conditions set out by PM Johnson. Going forward next week, timelier survey from eurozone will be important to monitor in the wake of coronavirus outbreak impact.
USDINR is likely to stay above 71.20 and move higher towards 71.80 in the next week.
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USD/INR (FEB) contract closed at 71.4000 on 13-Feb-2020. The contract made its high 71.5475 on 10-Feb-2020 and a low of 71.2850 on 11-Feb-2020 (Weekly Basis). The 21-day Exponential Moving Average of the USD/INR is currently at 71.47.
On the daily chart, the USD/INR has Relative Strength Index (14-day) value of 47.9. One can buy at 71.30 for the target of 71.80 with the stop loss of 70.80
EUR/INR (FEB) contract closed 77.7075 on 13-Feb-2020. The contract made its high of 79.0000 on 10-Feb-2020 and a low 77.6550 on 13-Feb-2020 (Weekly Basis). The 21-day Exponential Moving Average of the EUR/INR is currently at 78.69
On the daily chart, EUR/INR has Relative Strength Index (14-day) value of 23.43. One can sell at 77.70 for a target of 76.80 with the stop loss of 78.10.
GBP/INR (FEB) contract closed at 92.7450 on 13-Feb-2020. The contract made its high of 92.8500 on 13-Feb-2020 and a low of 92.0700 on 10-Feb-2020 (Weekly Basis). The 21-day Exponential Moving Average of the GBP/INR is currently at 93.07.
On the daily chart, GBP/INR has Relative Strength Index (14-day) value of 50.43. One can buy at 92.50 for a target of 93.60 with the stop loss of 92.10.
JPY/INR (FEB) contract closed at 65.1400 on 13-Feb-2020. The contract made its high of 65.2000 on 11-Feb-2020 and a low of 64.8200 on 12-Feb-2020 (Weekly Basis). The 21-day Exponential Moving Average of the JPY/INR is currently at 65.34.
On the daily chart, JPY/INR has Relative Strength Index (14-day) value of 43.60. One can buy at 65.10 for a target of 65.80 with the stop loss of 64.70
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SBI Cards IPO gets SEBI nod; launch by February end
The Securities and Exchange Board of India (SEBI) has given its in-principle approval for the initial public offering (IPO) of SBI Cards and Payment Services, a subsidiary of the country's largest lender State Bank of India. The company is likely to raise approximately Rs 5,500-6,000 crore through its IPO, sources said, adding that the IPO would value the company at approximately Rs 55,000-60,000 crore. SBI Cards is likely to launch its IPO towards the end of February. As per the DRHP filed with SEBI in November last year, the public issue comprises a fresh issue of Rs 500 crore and an offer for sale of up to 13,05,26,798 equity shares. The offer for sale includes up to 3,72,93,371 equity shares by SBI and up to 9,32,33,427 equity shares by CA Rover Holdings. SBI Cards intends to use the proceeds of the fresh issue for augmenting its capital base to meet future capital requirements. State Bank of India holds a 74 percent stake in SBI Cards and the rest is held by CA Rover Holdings, an affiliate of Carlyle Asia Partners IV. The book running lead managers to the issue are Kotak Mahindra Capital Company, Axis Capital, DSP Merrill Lynch, HSBC Securities and Capital Markets (India), Nomura Financial Advisory and Securities (India) and SBI Capital Markets.
NCDEX Files IPO Papers with SEBI to Rise upto Rs 500 Crore
The National Commodity and Derivatives Exchange Ltd. has filed a draft red herring prospectus with Securities and Exchange Board of India for an initial public offering. The NCDEX IPO comprises a fresh issue worth up to Rs 100 crore and an offer for sale of up to 14,453,774 shares, according to the company’s DRHP. The issue is expected to raise Rs 500 crore, including fresh offering. The selling shareholders include Build India Capital Advisors LLP, Canara Bank, Indian Farmers Fertiliser Cooperative Ltd., Investcorp Private Equity Fund I (formerly known as IDFC Private Equity Fund III), Jaypee Capital Services Ltd., National Bank for Agriculture and Rural Development, Oman India Joint Investment Fund and Punjab National Bank, it said. The company plans to use the IPO proceeds towards contribution to core settlement guarantee fund and towards net worth requirements of National Commodity Clearing Ltd. and general corporate purposes. ICICI Securities and SBI Capital Markets are the book running lead managers to the NCDEX IPO. The agricultural commodity exchange offers services across the entire post-harvest agricultural commodities value chain by utilising a varied presence, which has enabled it to create a wide network of stakeholders and market participants. It also engages in research, training and building awareness in agricultural commodities market through NCDEX Institute of Commodity Markets and Research. NCDEX shares are proposed to be listed on the BSE and NSE.
LIC IPO: Talks with government underway, says Chairman M.R Kumar
Life Insurance Corporation of India (LIC) is all set to begin the process of initial public offering (IPO) where the government will divest a portion of its 100 percent stake. Finance minister Nirmala Sitharaman in her Budget speech had said that the government will divest its stake in LIC through an IPO. It is likely that LIC will be listed on the stock exchanges in the second half of FY21. However, LIC Chairman M.R Kumar said that he was not entirely surprised by the decision since this option was under consideration for the last three to five years.
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* For Application of Rs.50 Lac & above, Contact to Head Office.
* Email us at fd@smcindiaonline.com
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AMFI monthly report: Equity funds inflows up 70% in Jan; mid-caps lead the way
The 43-player mutual fund industry witnessed inflows of Rs 7,548 crore in equity schemes in January, up 70 percent from December. According to the data on the Association of Mutual Funds in India (AMFI), equity schemes had reported inflows of Rs 4,432 crore in December. Barring, contra fund category and dividend yield in the equity schemes category, all categories witnessed inflows in the month of January. In January, the contra fund saw outflows of Rs 735 crore, while dividend yields reported outflows worth Rs 63 crore of outflows. Within the equity schemes, mid-cap funds category witnessed the highest inflows worth Rs 1,798 crore. Fund managers attributed the inflows in the mid-cap space to attractive valuations and bottoming concerns in the mid-cap category. On the debt funds, credit risk funds continued to suffer with outflows of Rs 1,215 crore in January 2020 as against outflows of Rs 1,191 crore in December 2019. "Credit default events in NBFCs are taking a toll on the credit risk funds. Investors feel more money will be lost if there is no recovery from the beleaguered companies. So investors are pulling out the money," said a head of fixed income from a private fund house. The back-to-back downgrade of debt instruments from IL&FS and Dewan Housing Finance (DHFL), Reliance Home Finance by rating agencies has hurt credit risk funds since the troubles surfaced in June 2018. On the other hand, in the same category, liquid funds that are used by companies to park surplus cash witnessed inflows of Rs 59,682 in January compared to outflows Rs Rs 71,158 crore in December.
Indians have Rs 3.24 lakh crore invested via mutual fund SIPs
The assets under management (AUM) of mutual fund companies that has come through systematic investment plans (SIPs) touched Rs 3.24 lakh crore in January, an increase of Rs 7,846 crore from a month ago, according to data from Association of Mutual Funds in India (AMFI). In the current financial year (2019-2020), the total inflows through SIPs stood at Rs 82,929 crore, AMFI CEO NS Venkatesh said. Currently, mutual funds have about 3.03 crore SIP folios through which investors regularly invest in schemes. In January, the mutual fund industry saw 12.07 lakh new SIP folios added, while 5.95 lakh SIP accounts were closed or matured.
Sundaram Mutual Fund to launch balanced advantage fund on February 14
Sundaram Mutual Fund will launch a dynamic asset allocation fund called Sundaram Balanced Advantage Fund on February 14, which will remain open for subscription until February 28, the fund house said at a press meet held in Mumbai to announce the launch of this scheme. The open-ended fund scheme will provide accrual income and capital appreciation by dynamically managing the asset allocation between equity, fixed income, REITs (Real Estate Investment Trusts) InvITs (Infrastructure Investment Trusts) and equity derivatives. According to S Krishnakumar, Chief Investment OfficerEquity, Sundaram Mutual Fund, “Depending on prevailing market and economic conditions, the fund manager will decide asset allocation across these asset classes without giving up tax-efficiency.”
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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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Some glimpse of SMC's Participation in ANMI's 11th International Convention "Redefining Capital Markets: A Must for $5 trillion Economy" held on 15th February, 2020 at Hotel The Lalit, New Delhi.
Dr. D K Aggarwal (CMD, SMC Investments & President, PHDCCI) presenting the memento Talk on 'Out of the Box' 09th December, 2019 at PHD House, New Delhi.
Mr. Rajesh Sharma (AVP, Sub-Broker Marketing, SMC Global) addressing the audience during an Investor Awareness Program organized by SMC in association with Multi Commodity Exchange (MCX) on 24th January, 2020 at Hotel Lemonade, Alwar.
Winner of Maximum "Account Opening Scheme" SMC felicitated with Gifts VIVO Mobile & Alexa Echo Smart Speaker.
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