Colgate Palmolive (India) Limited (COLPAL

ICICI Prudential Life Insurance Company Limited (ICICIPRULI)

WEEKLY VIEW OF THE MARKET

Nifty 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 on the day of budget. Call writers were active in 12000, 11900, 11800 strike calls indicating limited upside. This clearly indicates lack of buying interest and discomfort in the market. The levels of 11700 will remain crucial for this week as indicated by option open interest concentration. If Nifty falls below the 11700 mark, it could correct to 11500 levels on the back of further selling. On bounce, the index will face strong resistance at 11900-11950 levels. The options open interest concentration is at the 12000-strike calls with the highest open interest of above 30 lakh shares; among put options, the 11700-strike taking the total open interest to 12 lakh shares, with the highest open interest among put options. The Implied Volatility (IV) of calls closed at 12.91% while that for put options closed at 12.22%. The Nifty VIX for the week closed at 13.53% and is expected to remain down trending. The PCR OI for the week closed at 1.16 which indicates put writing. Next support is placed around 11750-11700 levels.

DERIVATIVE STRATEGIES

NIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN NIFTY OPTION OI (IN QTY) (MONTHLY)

BANKNIFTY OPTION OI CONCENTRATION (IN QTY) (MONTHLY)

CHANGE IN BANKNIFTY OPTION OI (IN QTY) (MONTHLY)

SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

Top 10 Rollover

Bottom 10 Rollover

SPICES

Turmeric futures (Aug) may continue to remain trapped in the bearish zone of 6600-6800 levels as the sentiments are mixed amid ongoing sowing season. Good rains have been reported in Telangana & Maharashtra, due to which the pace of sowing has been seen well there. The demand side is muted due to lack of quality arrivals in the spot markets. Traders were buying limited stock for their turmeric Grinding units. They are waiting for upcountry demand. At the Erode Turmeric Merchants Association Sales yard the finger turmeric sold at Rs.5,655-7,016 a quintal, Root variety sold at Rs.5,199-6,489 a quintal, finger turmeric sold at Rs.5,888-7,089 a quintal, root variety at Rs.8,769-6,510 a quintal. A bullish trend can be seen in jeera futures (Aug), hence lower level buying is recommended eyeing 17600 levels, taking support near 17190-17070 levels. Steady domestic as well as overseas demand amid lower arrivals, are keeping the spot prices steady. Lower arrivals in the spot market are further expected to push up the prices. Arrivals in Unjha are being pegged at 6,000-7,000 bags (1 bag = 55 kg). The rally in cardamom futures (Aug) may get stalled & we might see profit booking from higher levels towards 2500-2400. Forecast of well-distributed monsoon rainfall in key growing areas of Kerala further is likely to dampen the bullish sentiment as it would support fruit formation. The average price of small cardamom was 3,259.72 rupees per kg at the auction held at Puttady in Kerala, according to the Spices Board India data. Dhaniya futures (Aug) is likely to gain towards 7300-7350 levels taking positive cues from higher export demand and low crop in the key growing areas of Rajasthan and Gujarat.

BULLIONS

Bullion counter may continue to remain on sideways path as on the one side uncertainty regarding the US China trade war; Middle East tensions and expectation of interest rate cut by Fed in upcoming meeting can support the prices but bounce back in the greenback can cap the upside. Gold can witness profit booking at higher levels as it can test 34200 by facing resistance near 35200 while silver can test 37500 while taking resistance near 39400. Last week Indian gold made lifetime high of 35100 after the increase of import duty in gold by 2.5% whereas Comex gold couldn’t give much reaction on this news. Silver was also few points shy away from 39000 marks. The U.S. Federal Reserve holds its two-day policy meeting on July 30-31 and futures are fully pricing in a 25-basis-point cut. Meanwhile the yields on U.S. benchmark 10- year Treasury notes hitting their lowest in over 2-1/2 years as euro zone yields tumbled on record lows on bets the European Central Bank’s next chief would stay a dovish course to help the euro zone economy. India's gold imports rose 12.6% in June from a year earlier to $2.69 billion amid a jump in global prices to six-year highs. The gold market saw its best price performance in three years last month, but there Interest in physical gold bullion has been lackluster for the last two months, according to the latest sales data from the U.S. Mint In June. In June, the mint sold 5,000 ounces of gold in various denominations of America Eagle gold coins; in May the mint sold only 4,000 ounces of gold.

OIL AND OILSEEDS

Soybean futures is giving a lower closing since past three months on account of various factors ranging from lower meal exports amid a stronger rupee rising from 70.64 to 68.46 against U.S Dollar. This bearish trend is likely to continue & the August contract may face resistance near 3690, while the downside may get extended towards 3550-3500 levels. In days to come, the area under sowing may catch a rapid pace as the monsoon is progressing well in the major growing regions & also the farmers may get interested to grow more of this oilseed after the announcement of raising the minimum support price by Rs.311 per 100 kg to Rs.3,710 per quintal. U.S soybean futures (Aug) is expected to take support near $8.70 per bushel & trade on a steadier path as compared to previous weeks. After the Presidents Donald Trump and Xi Jinping struck a truce at the Group of 20 summit in Osaka, China is considering buying some U.S. agricultural products as a gesture of goodwill amid the resumption of trade talks. Mustard futures (Aug) is not being able to breach the resistance near 4000 & going ahead, we may see weakness towards 3890-3875. This softness is attributed to the slowdown of the demand for the oilseed by the millers, which is getting reflecting in the fact that mills in India crushed 13% lower in June from a month ago. The downtrend may again emerge in CPO futures (July) towards 500-495 levels, while soy oil futures (Aug) may come down to test 730-727, facing resistance near 744 levels. In the Union Budget, the Finance Minister mentioned that the country is aiming oilseed self sufficiency, to help cut import bill.

ENERGY COMPLEX

Crude oil prices may continue to witness further selling pressure pressured by concerns over the outlook for global economic growth despite the extension of production cut by OPEC and non OPEC members and Middle East tensions. Crude oil may dip further towards 3700 levels while taking resistance near 4150 levels in near term. Weakness in the oil market came despite ongoing tensions in the Middle East, threatening supply routes. British Royal Marines seized a giant Iranian oil tanker in Gibraltar last week for trying to take oil to Syria in violation of EU sanctions, a dramatic step that drew Tehran's fury and could escalate its confrontation with the West. The Organization of the Petroleum Exporting Countries and other producers such as Russia, a group known as OPEC+, agreed to extend oil supply cuts until March 2020 as members overcame differences to try to prop up prices. Natural gas may witness lower level buying as it can test 170 while taking support near 152. Elsewhere, recovery in oil exports from Venezuela in June and growth in Argentinian output in May kept a lid on prices. Forecasts for higher demand this week and record liquefied natural gas (LNG) exports over the next two weeks can support the prices. Natural gas consumption increased in 2018, reaching a new record consumption level of 82.1 billion cubic feet per day, according to the EIA. Natural gas consumption has increased in 8 of the past 10 years. Growth in natural gas consumption has largely been driven by increased consumption in the electric power sector.

OTHER COMMODITIES

Cotton futures (July) may trade sideways in the range of 21000-21700 levels. The market participants are cautious & closely watching the sowing progress at home as well as in U.S. The USDA estimates that in India’s marketing year (MY) 2019/20 cotton production at 29.3 million 480 lb. bales with a planted area of 12.5 million hectares. The rapid pace of advance of the monsoon towards the rest of the country is expected to lead to favorable rains. The nationwide average yields for MY 2019/20 around 510 kilograms per hectare, above average historical yield levels. Castor seed futures (Aug) is expected to maintain its upside course & may head to test 5800, taking support near 5600 levels. Prices of castor seed in the key markets of Gujarat are trading higher on account of elevated demand from domestic stockists amid a decline in arrivals. The market participants are closely watching the fall in the acreage of the oilseed. The latest statistics show that acreage of Kharif castor crop was at 2,039 ha, down 72% on year, according to the latest data from farm ministry. Mentha futures (July) is expected to witness a U-turn recovery from lower levels towards 1275-1295, taking support near 1220 levels. The arrivals on the spot markets will probably slow down as farmers have stopped harvesting the new crop due to heavy rainfall in the key growing areas of the state. Additionally, lower inventory and good export demand for the newlyharvested oil will also act as a catalyst to fuel the upcoming uptrend. There are talks in the market that farmers are holding back stocks right now as they feel prices will rise to 1,800 rupees a kg by Aug-Sep..

BASE METALS

Base metal counter can trade on weaker path. Top U.S. and Chinese representatives are arranging to talk again this week, U.S. administration officials stated, in a move to try to resolve a year-long trade war that has been weighing on global growth and metals demand. Copper may further dip towards 430 levels while taking resistance near 450 levels. Red metal witnessed first weekly fall in four, due to tepid demand outlook and rising supplies. Inventories in warehouses tracked by ShFE have been falling in recent months but were still up 23% so far this year. Meanwhile, Lead may trade sideways as it can face resistance near 159 while taking support near 146 levels. Zinc may trade with weak bias as it can test 188 levels while taking resistance near 202 levels. Zinc prices fell recently as rising Chinese production and a collapse in the premium for cash metal on the LME pointed to a better supplied market. Rising Chinese output, rumours that zinc is moving from Chinese bonded storehouses into the LME warehouse system and a big fall in the premium for LME cash zinc were pushing prices lower. Higher output by Chinese smelters is expected to end a deficit that according to the International Lead and Zinc Study Group (ILZSG) amounted to 97,000 tonnes during the first four months of this year. Nickel can also witness profit booking towards 850 levels. Aluminium can test 135 levels while taking resistance near 147 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

MENTHA OIL MCX (JUL) contract closed at Rs. 1232.00 on 04th Jul’19. The contract made its high of Rs. 1372.50 on 18th Jun’19 and a low of Rs. 1170.00 on 04th Feb’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 1342.80. On the daily chart, the commodity has Relative Strength Index (14-day) value of 37.393.

One can buy above Rs. 1235 for a target of Rs. 1290 with the stop loss of Rs. 1211.

NATURAL GAS MCX (JUL) contract closed at Rs. 156.00 on 04th Jul’19. The contract made its high of Rs. 193.90 on 26th Apr’19 and a low of Rs. 150.40 on 20th Jun’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 169.40. On the daily chart, the commodity has Relative Strength Index (14-day) value of 41.900.

One can buy above Rs. 152 for a target of Rs. 165 with the stop loss of Rs. 146.

JEERA NCDEX (AUG) contract was closed at Rs. 17,270.00 on 04th Jul’19. The contract made its high of Rs. 18,100.00 on 4th Jun’19 and a low of Rs. 17,070.00 on 2nd Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 17375. On the daily chart, the commodity has Relative Strength Index (14-day) value of 45.939.

One can buy near Rs. 17100 for a target of Rs. 17700 with the stop loss of Rs 16800.

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NEWS DIGEST

• The Economic Survey for 2018-19 (Apr-Mar) highlighted India’s FY20 GDP growth at 7.0%.

• The Union Cabinet approved an increase in the MSP of most Kharif crops.

• India's commodity derivatives turnover from five exchanges rose 11% on year to 19.36 trillion rupees in Apr-Jun.

• NCDEX will launch unprocessed whole raw moong futures on 8th July, 2019.

• NAFED has offered 252,300 tn chana for sale in Madhya Pradesh via electronic auctions. Of the total quantity, 143,300 tn chana will be auctioned via NCDEX e-Markets Ltd every day between 1200 IST and 1245 IST.

• Since Jun 1, the country has received 145.4 mm rainfall, 27% below the normal weighted average of 199.7 mm for the period.

• European Union leaders nominated IMF chief Christine Lagarde as Mario Draghi’s replacement at the helm of the European Central Bank after marathon talks that have exposed deep divisions in the bloc.

• Chile’s Codelco, the world’s top copper miner Chuquicamata mine was fully operational after a twoweek long strike that had docked output from the sprawling deposit came to an end.

• During its 175th meeting, the OPEC gave its nod for extension of production cut till March 2020

WEEKLY COMMENTARY

In the week gone by, some correction was witnessed in CRB after a continuous upside of three weeks. The week was full of event risk. Domestic market was conscious ahead of the Union Budget, which was scheduled on Friday; participants were waiting for further cues in terms of policy measures. Appreciation in INR locked the price movement though rising crude oil prices and foreign fund outflows weighed on the domestic currency and restricted its rise. Positive outcome from China and US in G 20 couldn’t lift up the market as per expectation and market took a dip on growth concern. OPEC meet was scheduled on 1st and 2nd July and they came on consensus that they will continue the production cut till March, 2020. Despite production cut decision market reacted in negative way and hit the downside of around 5%. Growth concern thwarted the news of production cut here. The EIA showed crude stockpiles fell 1.1 million barrels in the week ending June 28, below expectations of a draw of about 2.96 million barrels. Natural gas prices saw further decline on weaker demand. Natural gas is still down nearly 20% YTD as record supply will keep prices depressed. Some safe haven buying noticed in gold though the upside was limited owning to appreciation in dollar index. Silver was weak as global growth to weigh on silver’s industrial uses, which accounts for roughly 50% of the metals demand. Almost all base metals nosedived on growth concern; aluminum and zinc traded weak for nonstop seven week. While global consumption growth of aluminium and copper during the first quarter of 2019 was muted at 1.4 per cent and 0.8 per cent, respectively, as against 4 per cent and 2.3 per cent, respectively, in 2018, consumption of zinc registered a de-growth of 1.3 per cent as against 0.3 per cent de-growth in the last year. Despite muted consumption levels, markets of the three key non-ferrous metals continued to remain in deficit in this period, with shortages in fact expanding on a Y-o-Y basis, as production growth was even lower than the growth in demand. MSP declaration by the Government couldn’t give much positive impact on the prices. Oil seeds and edible oil counter was in a bearish grip. As of now, no sowing has been reported in Madhya Pradesh and Maharashtra while sowing in Rajasthan jumped over six folds to 186,000 ha. There is lack of buying for the oilseed on the spot markets, due to negative crush margin. Castor seed witnessed gains in key spot markets of Gujarat and futures owing to decline in acreage.

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 $)

Higher MSP........to caring Farmers

To ease the suffering of farmers due to deficient start of monsoon and its less coverage & to fulfill the promise of doubling the farmers’ income till 2022, the Union Cabinet on July 3, 2019 has hiked the Minimum Support Prices (MSPs) for major Kharif crops for 2019-20. The Central government has taken farmer friendly initiative on the line of policy of increasing MSP of notified crops to at least 50 per cent return over cost of production which is a major step towards increasing the income of farmers.

The MSPs for all kharif crops of 2019-20 season have been increased from 1 per cent to 9 per cent as follows :

• The MSP of soyabean has been increased by Rs 311 per quintal to Rs.3,710 per quintal from last year’s Rs.3,399 while MSPs of sunflower has been increased by Rs 262 to Rs.5,650 per quintal and sesamum by Rs 236 to Rs.6,485 per quintal.

• Government has increased the MSPs of tur dal by Rs 125 per quintal and urad dal by Rs 100 per quintal. This will help address the issues related to requirement of pulses in view of the need to meet the nutritional security and protein requirements of a large section of population.

• The MSP of cotton too has gone up marginally. The highest percentage return to farmers over their cost of production is for Bajra (85%) followed by urad (64%) and tur (60%)

The Minimum Support Prices for all kharif crops of 2019-20 season is as follows:

MSP has an important role

The move will lead to increased investment and production through assured remunerative prices to the farmers. The revised MSPs will provide much relief to farmers as it will bear the burden of increased input cost such as increasing fuel prices, rental cost of agricultural equipment and spike in fertliser prices. Promoting cultivation of pulses & oilseeds can help India overcome nutrition insecurity, improve soil fertility by nitrogen fixation, reduce the dependency on import by boosting production and provide income support to farmers. Thus, increased MSPs for pulses & oilseeds will give a price signal to farmers to increase acreage. Increase in MSPs of nutri-cereals will improve nutritional security and allow farmers to get higher prices.

However, the MSP hikes are expected to widen the fiscal deficit. The move may stoke inflation; prompt the Reserve Bank of India (RBI) to hike interest rate. It may also hit exports of Rice, Kapas and soymeal badly as the domestic prices of these crops may go beyond international prices.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week