SENTIMENT INDICATOR (NIFTY)

SENTIMENT INDICATOR (BANKNIFTY)

FII’S ACTIVITY IN INDEX FUTURE

FII’s ACTIVITY IN DERIVATIVE SEGMENT

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SPICES

Turmeric futures (Mar) is expected to consolidate in the range of 6200-6500 & trade with a downside bias. The reason is that the new turmeric has started arriving in the markets of Nizamabad in Telangana. The quality is inferior due to cold weather just before the harvest. Also, the demand is thin in ready markets and traders are also focusing on the higher moisture levels. The supply is coming from the six-month crop and has a moisture level of 20-30 percent, against the normal of 7 percent. Arrivals are likely to gather pace in the coming weeks, which will further weigh on the prices. Jeera futures (Mar) may take an attempt to break the support near 15000 & plunge further to test 14500-14300 levels. In the present scenario, the demand is sluggish amid prospects of a bigger crop this year.An increase in jeera's acreage in Gujarat and Rajasthan, and favourable weather conditions across the growing regions may lead to a rise in yield. Meanwhile, total area sown under jeera in Gujarat, was at 4.87 lakh hectares as on January 13 in the current 2019-20 Rabi season, up 40 percent from 3.48 lakh hectares over the year-ago period, as per the state agriculture department's data. Dhaniya futures (Apr) is expected to trade sideways in the range of 6705-7200 levels. Extremely cold weather conditions in Rajasthan have led to reduction in area under the spice, as coriander is a weather-sensitive crop. Despite, the disturbance in yield, Pradesh, production of coriander during 2019-20 (Oct-Sep) in Rajasthan and Madhya is projected to be higher.

BULLIONS

Bullion counter can trade with mixed bias as receding Middle East tensions and optimism over an interim U.S.-China trade deal reduced safe haven demand but still the interim deal fails to address structural economic issues that led to the trade conflict, as it does not fully eliminate the tariffs that have slowed the global economy, and sets hard-to-achieve purchase targets. Gold may take support near 39300 and resistance near 40500 whereas silver may take support near 45700 and resistance near 47000. Meanwhile, from Huawei to the South China Sea, deep political rifts between Beijing and Washington are set to persist, despite a trade relations breakthrough, as the U.S. pushes back against an increasingly powerful and assertive China. United States showed retail sales rose for a third straight month in December and the number of Americans filing claims for unemployment benefits dropped for a fifth straight week last week. Adding to concerns, China's pledge to buy U.S. farm goods based on "market conditions" during the deal signing ceremony spurred doubts among farmers and commodity traders over Beijing's lingering tariffs on U.S. exports. U.S. Federal Reserve expressed confidence that borrowing costs are at the right level to sustain growth and lift inflation to healthier levels, despite what businesses say is a lingering drag from uncertainty over U.S. trade policy. Meanwhile the total business volume of gems and jewellery industry has posted a 30 per cent decline in terms of demand over the last six months.

OIL AND OILSEEDS

Soybean futures (Feb) may continue to witness correction on every pull back & if breaks 4155 then probabilities are higher that it may plunge to test 4080- 4050 levels. Bearish sentiments are persisting over the whole oilseeds complex in domestic as well as in the international markets amid cautiousness around the uncertainty of soybean imports by China from U.S & back at home, the improving prospects of oilseeds production this Rabi season. Mustard futures (Feb) is expected to fall for the third consecutive week & test 4235- 4200 levels. The current weather conditions in many states including Punjab, Haryana, Uttar Pradesh and Rajasthan have been very favourable for the oilseed crops. CPO futures (Feb) is expected to trade with a downside bias & test 770-755 levels, while soy oil futures (Feb) will probably go down further to test 875-855 levels. Multiple factors of profit booking, sliding trend of U.S soy oil on CBOT & palm oil on Bursa Malaysia Derivatives may lend negative cues to the edible oil counters. Moreover, despite the fact that In the last 4 months, pipelines stock dried up to the lowest level andreported at 515,000 tons as on 1st Jan.,2020 compared to 630,000 tons as on 1st Dec.2019, the edible oil counters failed to show a positive reaction. This is because, there being no restrictions on the issuance of new licences for import of refined palm oil, the trade fears that importers may rush to get licences for palm oil imports &refined palm oil will be dumped in India.The Solvent Extractors' Association of India (SEA) has sought quantitative restrictions on new import licences.

ENERGY COMPLEX

Crude oil prices may witness lower level buying as Washington and Beijing inked a long-awaited trade deal recently as the Phase 1 accord between the world's top two economies helped boosted the outlook for global trade. Crude oil may recover towards 4400 while taking support near 4000. Elsewhere, Saudi Arabia's energy minister Prince Abdulaziz bin Salman stated his country will work for oil market stability at a time of heightened U.S.-Iranian tension and wants to see sustainable prices and demand growth. Meanwhile International Energy Agency (IEA) stated that it expected oil production to outpace demand for crude from the Organization of the Petroleum Exporting Countries (OPEC), even if members comply fully with a pact with Russia and other non-OPEC allies to curb output. Moreover surging oil production from non-OPEC countries led by the United States along with abundant global stocks will help the market weather political shocks such as the U.S.-Iran stand-off. Meanwhile China’s crude oil throughput rose to a record high in 2019 following the start-up of two mega-refineries. Natural gas can remain on weaker bias as it can test 140 by taking resistance near 160 on feeble demand. Temperatures have not been cooperating with natural gas markets during the winter till now Meanwhile the fact that the Americans had drilled 17% more during 2019 than 2018 also adds more in the way of headwinds for market pricing. The weather over the next 6-10 and 8-14 days is expected to be milder, with warm weather on the west coast and colder weather on the east coast.

OTHER COMMODITIES

Cotton futures (Jan) will possibly remain stable in the range of 19650-20170 levels. Increased buying by the Cotton Corporation of India (CCI) could keep local raw cotton prices near government-set levels. The CCI is set to procure more than 5 million bales from farmers in 2019/20, the highest in five years, as local prices come under pressure due to surplus production. The latest statistics show that the CCI has procured about 40 lakh bales of cotton as part of its MSP procurement operations so far during the season, amounting to 25% of the crop arrivals in the market. Regarding international market, ICE cotton may continue to face resistance near 72 cents per pound. The traders are uncertain about cotton imports from China amidst lingering concerns of dampening demand of the fiber within China. The United States is also finding it difficult to ship large volumes of goods right now, and even on Wednesday Chinese mills were mainly buying Brazilian cotton. Chana futures (Mar) may trade below 4250 & fall further to test 4200-4170 levels. Sentiments are still under pressure due to improvement in Rabi Chana sowing and Government holding major stocks. Upcoming Chana crop is expected to be bumper and yields are likely to be higher due to favourable weather conditions. Mentha oil futures (Jan) may go down further to test 1250-1240 levels. At present, fresh arrivals are coming onto the spot markets from Madhya Pradesh. Moreover, the sowing for the new season is expected to commence from next month and the market participants are expecting that the acreage is likely to be higher this season.

BASE METALS

Base metal counter may remain on mixed path as copper may extend its recovery while nickel may remain under pressure. Copper may recover towards 460 levels while taking support near 440 levels. Declining stocks of copper in LME-approved warehouses have supported its prices which stood near their lowest level since March 2019 and they have declined over 60% since August 2019. The widening of the discount of LME copper cash over the threemonth contract pointed to a well-supplied market. Meanwhile, lead may remain sideways as it can move in the range of 150-157 levels. Zinc may take support near 177 levels and can recover towards 190. Nickel prices can move with sideways to weaker path as it may face resistance near 1060 while taking support near 1000 levels. London Metal Exchange Nickel inventory has more than doubled in the space of little more than a month, with almost 120,000 tonnes of metal flooding into registered warehouses. China's booming nickel raw material imports and falling refined metal imports are reinforcing the message that there is no imminent supply crunch. Aluminium prices can recover towards 146 levels by taking support near 137 levels. China's annual aluminium production fell for the first time in 10 years in 2019 hit by softer demand amid the Sino-U.S. trade row and large-scale smelter outages. According to the National Bureau of Statistics (NBS) “China Aluminium output dropped to 35.04 million tonnes last year, down 0.9% from record levels a year earlier”

TREND SHEET

TECHNICAL RECOMMENDATIONS

CPO MCX (FEB) contract closed at Rs. 792.50 on 16th Jan’2020. The contract made its high of Rs. 844.00 on 10th Jan’2020 and a low of Rs. 677.50 on 02nd Dec’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 798.86. On the daily chart, the commodity has Relative Strength Index (14-day) value of 50.633.

One can sell near Rs. 800 for a target of Rs. 760 with the stop loss of Rs. 820..

ZINC MCX (JAN) contract closed at Rs. 182.85 on 16th Jan’2020. The contract made its high of Rs. 195.00 on 30th Oct’19 and a low of Rs. 177.90 on 26th Dec’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 181.92. On the daily chart, the commodity has Relative Strength Index (14-day) value of 56.548

One can buy near Rs. 181 for a target of Rs. 189 with the stop loss of Rs. 177.

GUARSEED NCDEX (FEB) contract was closed at Rs. 4100.00 on 16th Jan’2020. The contract made its high of Rs. 4400.00 on 14th Nov’19 and a low of Rs. 3984.00 on 16th Dec’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 4161.12. On the daily chart, the commodity has Relative Strength Index (14-day) value of 41.604.

One can buy near Rs. 4020 for a target of Rs. 4280 with the stop loss of Rs 3890.

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NEWS DIGEST

• Stocks exchanges can launch ‘option in goods’ in their commodity derivatives segment, as per SEBI.

• The Bureau of Indian standard (BIS) notified standards for delivery of 32 items, including gold and silver. This implies that all commodities on the list, including bullion, will be treated on a par for delivery in India.

Ÿ US will immediately impose punishing economic sanctions against Iran. These sanctions will remain till Iran's Behavior Improves. – U.S President.

• The government has notified the mandatory hallmarking of gold jewellery and artefacts, come into force from January 15, 2021.

• As per the latest release from the Solvent Extractors Association of India (SEA), the import of Vegetable Oils during December 2019 is reported at 11.28 lakh tons compared to 12.11 lakh tons for December 2018, recording a drop of 7%.

• New home prices in China's 70 major cities rose 6.6% in December from a year earlier, the slowest since July 2018, and down from November's 7.1% on-year increase.

• China's crude oil imports in 2019 surged 9.5% from a year earlier, setting a record for a 17th straight year.

• China's unwrought copper imports rose 9.1% in December from the previous month to their highest since March 2016.

• US sanctioned 17 Iranian metals producers and mining companies but the impact to global supply would be minimal as the country is not a major producer.

WEEKLY COMMENTARY

Action was missed in commodities market despite the sign of First phase deal between US and China. Dollar index couldn’t face resistance near 97.5 and from there it saw fall. Bullion counter noticed lacklustre trade as safe haven buying diminished on First phase trade deal amid receding fear of war between Iran and US. After hitting highs the previous week in bullion, last week could see a rollercoaster-like drop as precious metals traders brace them for the wild ride. The bid for precious metals has weakened since the panic over possible hostilities between the U.S. and Iran passed. It was a weak week for energy counter in which both commodities viz; crude oil and natural gas saw downside. Oil prices dropped, despite a report from the U.S. Energy Information Administration (EIA) that confirmed a sharp decline in stockpiles that surpassed analysts expectations of a drop. The EIA said crude inventories fell by 2.5 million barrels, far more than the expected drop of 750,000 barrels. OPEC expects lower demand for its crude oil in 2020 even as global demand rises, as rival producers grab market share and the United States looks set for another output record. Chinese GDP last year grew by 6.1%, within the government’s target range between 6% and 6.5%. It kept industrial metals counter in a range. Copper, lead and zinc prices flared up whereas nickel and aluminium closed the week on weaker note. Copper gained, heading for a second straight weekly gain. It touched $6,343 yesterday – the most since the start of May last year. Hindustan Zinc expects Indian demand for zinc to increase from an overhaul of its railway network.

In agri spices saw further weakness. Jeera prices crashed as favourable climatic conditions and improved water availability following good monsoon rains have brightened crop prospects. As Per the latest data in Gujarat, there is a 36% rise in area under cultivation of this spice over last year. Edible oil and oil seeds counter noticed dip in the prices. The stockiest & exporters are refraining from fresh purchase at such higher levels & waiting for a volatility to cool down. In the present scenario, there is lots of fundamental news impacting the price movement from both the sides. CPO saw a pause in rally after a fourteen week nonstop strong rally. Malaysian palm oil futures fell for a fourth straight session on Thursday on lower-than-expected exports and concerns over demand from India. Cotton prices moved lower in Central and South India amid sluggish demand from both exporters and mills at the existing higher prices. According to traders, buying from exporters has come down due to the decline in the global market. Chana futures declined on 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 $)

Vegetable oil imports

• As per the latest release from the Solvent Extractors Association of India (SEA), the import of Vegetable Oils during December 2019 is reported at 11.28 lakh tons compared to 12.11 lakh tons for December 2018, recording a drop of 7%.

• The import of vegetable oils during Oil Year 2019-20 (Nov.19 to Dec.19) i.e. edible oil and non-edible oil is reported at 22.5 lakh tons compared to 23.4 lakh tons for the same period of last year, down by 3.8%.

• The import of crude palm oil (CPO) declined to 6,31,824 tonne in December 2019, from 6,70,244 tonne in the year-ago period, as per the SEA data.

• The import of RBD palmolein dropped to 94,816 tonne, from 1,30,459 tonne, while that of crude palm kernel oil (CPKO) rose to 14,850 tonne from 10,997 tonne in the said period.

• The import of sunflower oil declined to 1,97,842 tonne in December 2019 from 2,35,824 tonne in the year-ago period.

• However, the shipment of soyabean oil rose sharply to 1,68,048 tonne from 85,404 tonne in the said period.

• The government on January 8, this year banned import of RBD palmolein to regulate excessive import of refined palm oils. The Indian Ministry of Commerce put refined palm oil products from 'Free' to “restricted” category. The import will now be subjected to license.

• The decision to restrict all imports of refined palm oil is also likely to boost business for Indian refiners of the vegetable oil. Indian refiners need the boost as refining activity in the country has been hit in the past year by imports of cheaper refined palm oil.

• Going forward, the government has issued an informal advisory to refiners not to buy the commodity from Malaysia after its criticism of India's actions in Kashmir and a new citizenship law.

• Now India can now only import crude palm oil. Malaysia’s share in India’s import of 741,490 tonnes of palm oil last month was 110,562 tonnes including 5,020 tonnes of refined oil and 3,000 tonnes of crude palm kernel oil (CPKO). Malaysian palm oil exports to India in November totalled 183,914 tonnes, including 41,600 tonnes of RBD palm olein.

• Palm oil accounts for nearly two-thirds of India's total edible oil imports. The country buys more than 9 million tonnes of palm oil annually, mainly from Indonesia and Malaysia. Indonesia is the world's biggest producer of palm oil, followed by Malaysia.

• The stock position of edible oils at various ports is estimated at 860000 tonnes. Pipeline stocks level fell to lowest level in four months at 515000 tonnes as on 1st January 2020.

• Against India''s monthly requirement of about 19 lakh tonnes, SEA said currently the country has a stock of 13.75 lakh tonnes of edible oils which can meet the requirement for 22 days.

INTERNATIONAL COMMODITY PRICES

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News Flows of last week