SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

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SPICES

The bearish trend of turmeric futures (Apr) is likely to get extended further to test 6200-6150 amid supply pressure of new crop & estimates of higher output. The new turmeric supply is likely to enter in the spot market in this month (February). Currently, the cold storage stocks are arriving at the market to the tune of 65 - 80 bags (65 kg each) per day. Turmeric stocks in Nizamabad (both old and new crop) were estimated around 3.00 lakh bags as compared to around 2.00 lakh bags during the same period of last year. There is more room for jeera futures (Mar) to go down further towards 15500-15300 levels. On the spot markets, the prices are showing a negative reaction to the arrivals, which are sharply higher than expectations & with buyers reported to be less, a selling pressure Is getting built over the counter. Coriander futures (Apr) is expected to witness lower level buying taking support near 6400 levels. The new coriander crop, which started coming into the key wholesale market of Ramganj in Rajasthan, is being sold at a price 20% higher than last year. Cardamom futures (Feb) may enter into a correction mode to test 1500-1485 levels. On the export front, the demand is getting dull as India is out of the league because of the pesticide issue with Saudi Arabia. The market participants are pessimistic and expecting that overseas sales of cardamom slump to an 11-year low. After a year of record high exports of 5,680 tons in 2017-18, it is being anticipated that in 2018-19, this figure may be in threedigits of merely 900 tons.

BULLIONS

Bullion counter may remain on upside path as dovish comments from fed chairman, central banks buying and weaker greenback is assisting the prices higher. Worries about a slowdown in global growth, heightened geopolitical tensions and financial market volatility are also supporting gold demand. According to the World Gold Council “The biggest central bank purchases in a half century and European investors search for haven helped increase gold demand last year”. The world consumed 4,345.1 tonnes of gold in 2018, up from 4,159.9 tonnes in 2017, the WGC stated in its latest quarterly demand trends report. Driving the increase were central banks which bought 651.5 tonnes which is 74 percent more than in 2017 and the second highest annual total on record as countries including China and Poland joined Russia, Turkey and Kazakhstan in adding to their reserves. Interest from financial investors was lackluster, with exchange traded funds adding 68.9 tonnes to their holdings over the year, down 67 percent from 2017. Gold held near eightmonth highs after the Federal Reserve signalled a potential end to its monetary tightening cycle. Gold can move further higher as it can test the level of 33700 while taking support near 32800 while silver can test 42000 taking support near 39700. Federal Reserve started this year’s first FOMC meeting stated that United States growth is slower than last year as a result, ‘the case for rate increases has diminished’. Fed chairman cited reasons for a more patient approach including muted inflation, slower economic growth in the United States, China and Europe as well as uncertainty over Brexit.

OIL AND OILSEEDS

The current month contract of soybean futures has given a lower closing compared to the previous week. Such a scenario is depicting that the market participants are cautious creating fresh long positions at higher levels. In days to come, there is anticipation that the counter may witness selling pressure & the counter may go down to test 3700. Fundamentally, the uptrend has been stalled by the projections of 35% higher output to 7.20 million tons during 2018-19 (Jul-Jun) in Madhya Pradesh. In the global market, the traders would be staying cautious to take conclusions from the USDA’s final report on 2018 crop production & monthly crop supply/demand report on Feb. 8, which were delayed by the partial U.S. government shutdown that ended last week. The recovery seen in mustard futures (Feb) seems to be temporary and may face resistance near 4020-4050 levels. The continuous offloading of old stocks by traders and government agencies are continuously building selling pressure on physical markets. The left-over stock with NAFED is now close to 2.18 lakh tons. Additionally, the recent rain and less foggy days are proving to be beneficial for the mustard crop & raising the prospects of higher output this season. CPO futures (Feb) has been witnessing one sided rally for the past five weeks & still there is more room for upside till 590, if surpassed the resistance near 580 levels. Palm oil on Bursa Malaysia Derivatives is seen taking positive cues soy oil on CBOT trading at highest level in more than seven months amid reports of dry weather in South America and renewed optimism about USChina trade relations.

ENERGY COMPLEX

Crude oil prices may remain on upside path as signs of lower imports into the United States as part of efforts by OPEC to tighten the market. EIA showed a drop in Saudi crude supply to the United States. Saudi Arabia is the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), which together with some non-OPEC producers, including Russia, announced supply cuts late last year aimed at tightening the market and propping up prices. OPEC oil supply has fallen in January by the largest amount in two years, as Saudi Arabia and its Gulf allies over-delivered on group’s supply cutting pact while Iran, Libya and Venezuela registered involuntary declines. But profit booking at higher levels can be seen as despite these efforts, oil remains in ample supply, not least because of soaring U.S. crude oil production which jumped by more than 2 million bpd last year to a record 11.9 million bpd. Crude oil can test upside level of 4100 while taking support 3700 levels in MCX. On demand front, South Korea's crude oil imports in January fell 8.8% to 91.0 million barrels from a year earlier. Natural gas counter can remain on weaker side as it can dip lower towards 190. U.S. natural gas futures slipped to a four-month low last week even though arctic weather held its icy grip on the eastern half of the country for a second day as the market focused on forecasts for warmer weather this week and a smaller-than-expected weekly storage draw.

OTHER COMMODITIES

Cotton futures (Feb) is expected to consolidate in the range of 20650-21300 levels. The upside may remain capped on account of weak demand from both yarn mills and overseas markets. Presently, the export demand is sluggish as the prices being offered at around 74-75 cents per pound are higher as compared to the global market. Day’s ahead, the talks on US-China trade situations will give direction to the cotton prices in the international market. Guar seed futures (Feb) may trade in a consolidated range of 4250-4450 levels, while guar gum futures (Feb) is expected to remain stable in the range of 8500-8800 levels. Due to lack of fundamentals & lack of clarity in direction of prices, the buyers are staying away from fresh buying. Anticipation of 60% probability of El Niño conditions to form and continue through the Northern Hemisphere spring 2019 has induced cautiousness among the market participants. However, one must keep a close look as both the counters are witnessing consolidation & open interest is declining, giving an indication of a possible trend reversal. The trend of chana futures (Mar) is bearish & hence the short covering may face resistance near 4260-4300 levels. Overall, the sentiments are weak due to higher arrivals of new crop and the rise in selling pressure by the NAFED, especially in the states of Madhya Pradesh and Rajasthan. Mentha oil (Feb) is likely to show an upside momentum & the upside may get extended towards 1635-1650, if crosses the resistance near 1595 levels. The sentiments are turning positive on account of delayed sowing due to untimely rains which may bring a considerable dip in the crop yield.

BASE METALS

In base metal counter, prices can extend its bounce back further on hope of trade deal between US and China, falling stock piles and supply concerns. China markets will remain closed for this week for national holiday. Expectations of progress in high-level trade talks between China and the United States shored up market sentiment recently. U.S. President Donald Trump will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as Trump and his top trade negotiator both cited substantial progress in two days of high-level talks. Copper may extend its recovery as it can test 448 while taking support near 420. World top copper miner Codelco said on Thursday it had struck a contract deal with the union of supervisors at its Gabriela Mistral mine in northern Chile, averting the threat of a strike. Meanwhile Lead may find support near 140 and can bounce towards 149. Aluminium can continue its bounce back and can test 141 taking support near 131 levels. Aluminium Corp of China Chalco had stopped production at an aluminium smelting plant in eastern China’s Shandong province, citing high electricity costs. Zinc can bounce further and can test 202 levels. Nickel can continue its recovery further as it can test 910 taking support near 850 levels. Vale has increasing concerns that the company may be forced to close its Brazil nickel operations as it undertakes an environmental audit. Nickel jumped more than 15% in LME in January, as inventories hover just above their lowest since 2013.

TREND SHEET

TECHNICAL RECOMMENDATIONS

COPPER MCX (FEB) contract closed at Rs. 437.6 on 31st Jan’19. The contract made its high of Rs. 475.30 on 4th Oct’18 and a low of Rs. 411.80 on 26th Dec’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 425.70. On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.68.

One can buy at Rs. 433 for a target of Rs. 445 with the stop loss of Rs. 427.

SILVER MCX (MAR) contract closed at Rs. 40439 on 31st Jan’19. The contract made its high of Rs. 44043 on 15th Jun’18 and a low of Rs. 35883 on 30th Nov’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 39621. On the daily chart, the commodity has Relative Strength Index (14-day) value of 68.43.

One can buy at Rs. 40000 for a target of Rs. 41400 with the stop loss of Rs. 39300.

SYOREF NCDEX (FEB) contract was closed at Rs. 775.80 on 31th Jan’19. The contract made its high of Rs. 782 on 17th Oct’18 and a low of Rs. 706.75 on 26th Dec’18. The 18- day Exponential Moving Average of the commodity is currently at Rs. 765.18. On the daily chart, the commodity has Relative Strength Index (14-day) value of 67.430.

One can sell at Rs. 781 for a target of Rs. 761 with the stop loss of Rs 791.

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NEWS DIGEST

• The mainland China imported only 19.2 tonnes of gold from Hong Kong in December, 49% less than the volume recorded from the previous month and 38% lower year-on-year.

• The U.S. Mint sold 65,500 ounces of American Eagle gold coins in January, up from 3,000 ounces the previous month, the highest level since January 2017.

Iranian crude oil imports by Asia's top four buyers dropped to the lowest volume in three years in 2018 amid U.S. sanctions on Tehran.

• Soybean output in Madhya Pradesh is seen rising 35.3% to 7.20 million tons during 2018-19 (Jul-Jun), according to the second advanced estimate shared by an official from the state farm department.

• Madhya Pradesh government will procure around 2.7 million tons of chana, masur and masturd harvested in 2018-19 (Jul-Jun) Rabi season for three months beginning March at minimum support prices

• India's castor oil exports slumped 23.9% on year to 40,317 tons in December. - Solvent Extractors' Association of India.

• As per the first advance estimates of horticulture, the production of fruits and vegetables during the current year is estimated to be 314.5 million tons, about 1 per cent more in 2017-18. – Ministry of Agriculture

WEEKLY COMMENTARY

Overall the first month of 2019 gave positive start; CRB moved up and closed above 185. It was dollar index, which nosedived and took support near 95 levels. The dollar extended losses, plumbing three-week lows after the Federal Reserve dialed back its predictions of future rate hikes this year amid increasing uncertainty over the global economic outlook. In energy counter, crude oil prices strengthened further while natural gas saw decline despite freezing weather in Midwest, which is facing the most severe cold in last 20 years. Oil prices rose for a third day on Thursday, pushed up by lower imports into the United States amid OPEC efforts to tighten the market, and as Venezuela struggles to keep up its crude exports after Washington imposed sanctions on the nation. The price rise came after a report from the U.S. Energy Information Administration (EIA) on Wednesday showed a drop in Saudi crude supply to the United States. Despite these disruptions, oil remains in ample supply, because of soaring U.S. crude oil production, which jumped by more than 2 million bpd last year to a record 11.9 million bpd. Natural gas was trading low on normal weather forecast in coming days. The latest weather forecasts continue to indicate the extreme cold will swiftly give way to above-normal temperature in coming days. Most of the industrial metals except lead performed well and saw multi week upside on positive talk between US and China. U.S. President Donald Trump said on Thursday he will meet with Chinese President Xi Jinping soon to try to seal a comprehensive trade deal as Trump and his top trade negotiator both cited substantial progress in two days of high-level talks. Gold chalked up its fifth-straight day of gains as January trading ended on Thursday, finishing higher for a fourth-straight month. That was also its best winning streak since April 2016. Silver mirrored the positive trend of gold and closed the week in green territory.

As regards agri commodities, cotton prices have softened further, despite a lower crop, on weak demand from both yarn mills and overseas markets. Uncertainty still looms over the trade truce between the US and China. This is causing a range-bound movement for cotton. Mentha saw some lower level buying. Guar counters recovered marginally on upside in crude amid better demand in spot market. Spices counter were mostly weak on bearish sentiments in physical market. Jeera turned more bearish as stockists were releasing old stocks before fresh arrivals.

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 $)

Interim Budget 2019-20

Presenting the Union Budget on February 1, government has cheered for farmers and middle class both and also aims to build next-gen infrastructure - physical as well as social - for a $10 trillion economy and to provide Ease of Living. India is poised to become a $5 trillion economy in the next five years and aspire to become a $10 trillion economy in the next eight years. Expenditure target for FY20 is set at Rs 27.84 lakh crore.

Highlights of Budget 2019-20

To cheer the farmers, finance minister announced a relief package of Rs 75,000 crore under a new scheme PM Kisaan Samman Nidhi for distressed farmers who have seen their incomes stagnate because of plunging prices, barely enough to pay for loans and input costs. It will enable farmers to earn a respectable living.

• The government has already increased MSP to fulfill its aim of doubling farm income. All 22 crops have been put under Minimum Support Price. Assured income support to small and marginal farmers PM Kisan Samman Nidhi launched.

• The government will provide Rs 6,000 per annum to farmers holding land of up to 2 hectares.

The amount will be transferred in three installments of Rs 2,000 directly to the farmers. Around 12 crore farmers will directly benefit from this scheme:

• The Finance Minister proposed higher allocation for MNREGA by 9 percent to Rs 60,000 crore for the financial year 2019-20, as a part of the NDA government's larger plan to focus specifically on the country's rural sector, amid concerns over rising agrarian crisis.

• Defense budget enhanced beyond Rs 3 lakh crore.

• Indian Railways have experienced the safest year. All unmanned level crossings eliminated. Capital support for railways proposed at Rs 64,500 crore. Railways operating ratio pegged at 95% in Budget Estimate 2019-20.

• Govt. to introduce container cargo movement to North east.

• Vande Bharat Express will provide speed, service and safety to citizens and will give a boost to Make in India.

• Govt. will set up 1 lakh digital villages in the next 5 years

• GST is the undoubtedly the biggest taxation reform implemented since Independence; through tax consolidation, India became one common market; inter-state movements became faster through e-way bills, improving Ease of Doing Business.

• GST increased in higher collection (of taxes). Interstate movement of goods has become hassle free, faster. GST has been continuously reduced, resulting in relief of Rs 80,000 crore to consumers.

• Items of daily use for poor and middle class are between 0-5 per cent Goods and Services Tax. Burden should be less on home buyers, so recommendations will be acted upon by GST Council.

• The Government also aims to expand rural industrialization using modern industrial technologies, based on Make in India approach.

• Pushing rural infrastructure in the new financial year, union budget of 2019-20 allocated Rs 19,000 crore for development of roads in rural and backward area under Pradhan Mantri Gram Sadak Yojana (PMGSY).

• FM announces tax exemption for income up to Rs 5 lakh per year

• Individuals with gross income up to Rs 6.5 lakh will not need to pay any tax if they make investments in provident funds and prescribed equities.

• Standard deduction has been increased to Rs 50,000 from Rs 40,000.

• TDS threshold on rental income raised from Rs 1,80,000 to Rs 2,40,000.

• Income tax relief on Notional Rent from unsold houses extende d to 2 years.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week