GAIL (INDIA) LIMITED (GAIL)

THE KARNATAKA BANK LIMITED (KTKBANK)

WEEKLY VIEW OF THE MARKET

Nifty has again closed near weekly high, data reflects that at current levels still there is lot of outstanding short position in Nifty and Index calls and we can expect another round of short covering. As per current derivative data, Nifty can move towards 11500-11550 mark this week as the market undertone remains bullish with support of consistent short covering. Derivative data indicate bullish scenario to continue with Nifty having multiple strong supports at lower levels around 11300 & 11350 spot. Currently, Nifty is moving up, with decent addition in open interest which indicates strength in the current trend. Option writers were seen active in recent rally as put writings are seen in 11200 & 11300 strikes along with the unwinding in calls. Among Nifty Call options, the 11500 strike call has the highest open interest of more than 20 lakh shares, while in put options 11300 strike hold the maximum open interest of more than 25 lakh shares. The Implied Volatility (IV) of calls closed at 12.89% while that for put options closed at 12.20%. The Nifty VIX for the week closed at 15.15% and is expected to remain volatile. The PCR OI for the week closed at 1.51 which indicates put writing. On the technical front, 11300-11350 spot levels is strong support zone and current trend is likely to continue towards 11500-11550 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

The bearish trend is likely to prevail in turmeric futures (Apr) as the downside may get extended towards 6100-6000 levels. In the present scenario, almost all the traders are buying for their requirement alone and they do not want to stock turmeric, as they are expecting the new Erode Turmeric may arrive for sale by the middle of April and also they may get fresh upcountry demand for the new turmeric soon. The recovery seen last week in jeera futures (Apr) faced resistance near 15775 levels & then retraced on the back of profit booking. This phenomenon may drag down the counter to 14500, if breached the support near 15000 levels. Overall, the sentiments are bearish on better output prospects. The traders are optimistic of higher output because of adequate availability of water. India’s cumin seed (jeera) output is set to touch 4,16,000 tonnes for 2019, about 9% higher than the previous year, supported by a sharp jump in production in Rajasthan. Besides, lower export demand in the physical market also capping the upside. Coriander futures (Apr) may witness a consolidation in the range of 6300-6680 levels. Spot prices remained steady at major markets of Rajasthan amid matching demand and supply whereas in Guna, the major market of Madhya Pradesh, prices are declining with rise in new arrivals of low quality and higher moisture content. Cardamom futures (ApriL) may see a rise till 1530-1560 levels as demand is outweighing the supply. The growing areas have not received rains for some time coupled with protracted dry spell has changed the market sentiment to bullish. The period between now and the next crop remains wider compelling many to cover whatever material arriving at the auctions.

BULLIONS

Bullion counter has witnessed extreme volatility recently due to the Brexit dilemma, which has now resulted in a stalemate lacking any real progress to resolve their current dilemma. There is also the factor of recent volatility seen in the British pound and Euro dollar, a direct result of Brexit issues. British lawmakers voted last week to seek to delay Brexit - maybe for weeks, maybe for months - after Prime Minister Theresa May's plans for leaving the European Union have been repeatedly rejected by a UK Parliament trying to wrest control from her. Meanwhile stronger local currency rupee is also capping the upside which appreciated to nearly 69.20 on robust foreign inflows ahead of general elections. FIIs have flooded Indian markets with $1.8 billion till date in March, which has partially helped market rally. Gold can take support near 31400 levels while facing resistance near 32400 levels while silver can dip towards 37000 levels while facing resistance near 38500 levels. Federal Reserve chairman Jerome Powell said the U.S. central bank does “not feel any hurry” to change the level of interest rates again as it watches how a slowing global economy affects local conditions in the U.S. The number of Americans filing applications for unemployment benefits increased more than expected in penultimate week, suggesting the labour market was slowing, while new home sales fell more than expected in January. US sales of both gold and silver coins jumped to two-year highs in January, but then slumped again in February.

OIL AND OILSEEDS

Soybean futures (Apr) is trading near its two months low & this bearish trend is likely to persist as it can fall further towards 3550 levels, if breaks the near term support of 3625 levels. Demand in the physical market is continuing to remain subdued from millers and crushers with ongoing lean season for soybean and oil market. Soy oil futures (Apr) is likely to witness sell on rise & touch 725 levels owing to increasing supply pressure of imported edible oil in the domestic market. The overall import of vegetable oils during November 2018 to February 2019 is reported at 4,862,849 tons compared to 4,785,778 tons i.e. up by 1.61%. The bearish trend of CPO futures (Mar) is expected to continue till 510-505 levels, taking negative cues from the fundamental factors emerging in the international market. The European Commission concluded that palm oil should be phased out from transport fuel due to environmental concerns. Apart from this, there is ample supply of palm oil in India which is exerting pressure on domestic edible oil prices. During Nov.’18-Feb.’19, Palm Oil import has marginally increased to 3,070,466 tons from 3,034,514 tons during the same period of last year; however Soft Oils import decreased to 1,541,346 tonnes from 1,620,936 tonnes during the same period of last year. Total stock at ports and in pipelines on 1st March is reported at 2,195,000 tons, increased by 85,000 tons from 2,110,000 tons as on 1st February, 2019. The downtrend of mustard futures (Apr) is likely to go down further to test 3730 levels. The ongoing phase of lean demand, significant arrivals amid expectations of bumper crop output this season would drag down the prices.

ENERGY COMPLEX

Crude oil prices may remain on positive path as production cuts led by OPEC and U.S. sanctions against Venezuela and Iran likely created a slight deficit in global supply in the first quarter of 2019. However, oil prices have been capped by concerns that an economic slowdown will soon start denting growth in fuel demand. Crude oil can test 4200 while taking support near 3900. The Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies such as Russia - known as the OPEC+ alliance pledged to withhold 1.2 million barrels per day (bpd) in crude supply from the start of the year to tighten markets and prop up prices. U.S. crude oil production is expected to grow slower than previously expected in 2019 and average about 12.30 million barrels per day (bpd) the U.S. Energy Information Administration (EIA) stated recently. Meanwhile, U.S. sanctions against Venezuela as well as Iran have further tightened oil markets. With OPEC voluntarily withholding supply and U.S. sanctions preventing Iranian and Venezuelan oil from entering markets, global crude flow data in showed a slight supply deficit likely appeared in the first quarter. Natural gas counter may witness short covering at lower levels as it may take support near 190 and can recover towards 215 levels. U.S. natural gas futures got support after the release of a federal report showing the biggest weekly storage draw ever during the month of March. The rapid drop in demand reflected in the latest weather outlooks has occurred as production has shown signs of rebounding from earlier lows.

OTHER COMMODITIES

The upside move of cotton futures (Mar) may remain restricted near 21320 levels. After the recent spurt in cotton prices, many ginning factories in Telangana and Gujarat have stopped their operation as the cotton production has gone down. So, arrival of the cotton bales to Tamil Nadu markets has decreased, and resulted in sudden increase of the cotton price. However, the prices are expected to cool down as the Cotton Corporation of India (CCI) is likely to start selling its existing stocks, procured in the ongoing 2018-19 season (Oct-Sept) from April.. On the international market, ICE cotton futures (May) is facing resistance near 76 cents per pound. In days to come may trade with a downside bias reacting negative to the news that a meeting between President Donald Trump and President Xi Jinping to sign an agreement to end their trade war won’t occur this month and is more likely to happen in April at the earliest. Chana futures (Apr) may show a break out of its resistance near 4270 & move higher to test 4350 levels. The near term support is 4250 levels. The positive factor which may lift the sentiments is that the festival demand for chana ahead of Holi. The Besan or Gram flour is used in making a variety of savoury and sweet dishes. Mentha oil (Mar) is likely to gain further to test 1730-1760 levels. The overall sentiments are still bullish as demand from both domestic and export fronts are emerging at existing price levels. While, the major producing belts of Chandausi in Uttar Pradesh are witnessing lower arrivals as farmers are holding back their produce anticipating rise in prices ahead.

BASE METALS

In base metal counter, prices can trade with sideways bias amid uncertainty regarding the trade dispute between US and China. According to the Treasury Secretary Steven Mnuchin “A summit to seal a trade deal between U.S. President Donald Trump and Chinese President Xi Jinping will not happen at the end of March as previously discussed because more work is needed in U.S.-China negotiations”. Copper may take the support of 435 levels and resistance near 455 levels. On warrant stocks of copper, those not earmarked for delivery, in LME-approved warehouses jumped 34,900 tonnes to 66,325 tonnes. The premium of cash copper over the three-month LME contract eased to $20 a tonne from a discount of $70 recently, indicating worries over tight supply were easing. Meanwhile Lead may dip towards 144 levels while facing resistance near 150 levels. Aluminium can remain sideways as it can take support near 142 levels while facing resistance near 149 levels. The United States is working on a plan to lift tariffs from Mexican and Canadian steel and aluminum but preserve the gains that domestic producers have received from the duties so far. Zinc may dip lower towards 190 levels while facing resistance near 205 levels. LME zinc stocks have fallen to 58,950 tonnes, the lowest since October 2007. Meanwhile investors have been holding metal outside LME warehouses where storage is cheaper. Nickel can also witness some profit booking at higher levels as it can test 860 levels while facing resistance near 925 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CRUDE MCX (APR) contract closed at Rs. 4098 on 14th Mar’19. The contract made its high of Rs. 4170 on 22nd Feb’19 and a low of Rs. 3302 on 31st Dec’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 4022.80.On the daily chart, the commodity has Relative Strength Index (14-day) value of 56.66.

One can sell below Rs. 4025 for a target of Rs. 3880 with the stop loss of Rs. 4090.

NATURAL GAS MCX (MAR) contract closed at Rs. 197.70 on 14th Mar’19. The contract made its high of Rs. 211.40 on 15th Jan’19 and a low of Rs. 185.10 on 7th Feb’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 197.39. On the daily chart, the commodity has Relative Strength Index (14-day) value of 49.39.

One can buy at Rs. 192 for a target of Rs. 206 with the stop loss of Rs. 185.

GUARGUM NCDEX (APR) contract was closed at Rs. 8789 on 14th Mar’19. The contract made its high of Rs. 9006 on 21th Jan’19 and a low of Rs. 8295 on 27th Feb’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 8606.5.On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.06.

One can buy at Rs. 8600 for a target of Rs. 9000 with the stop loss of Rs. 8400.

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NEWS DIGEST

• U.S. consumer prices rose for the first time in four months in Februaryt, resulting in the smallest annual gain in nearly 2-1/2 years.

• Commodity trader Trafigura is shipping gasoline and gasoline blendstocks to South America from Asia in a crude tanker.

• U.S. crude oil production is expected to grow slower than previously expected in 2019 and average about 12.30 million barrels per day (bpd).

• China's daily steel output rose in January and February, as ramped up production.

• Pre Expiry Margins for Coriander futures contract shall now be levied at 1.5% per trading day in the last 11 trading days till the expiry day of the respective contracts. The revised pre-expiry margin will be applicable in all the running contracts expiring from April 2019 and in contracts to be launched.

• Additional Margin of 5% on buy (long) and sell (short) side of all running contracts and yet to be launched contracts of Cardamom withdrawn with effect from Tuesday, March 12, 2019.

• The European Commission restricted the types of biofuels from palm oil that may be counted toward the EU’s renewable-energy goals and introduced a certification system.

• DGCX will launch two new base metal products, aluminum futures and zinc futures. They will go live on March 22.

• LME launched seven new cash-settled futures contracts 11th March, including hot-rolled coil (HRC) steel, alumina and cobalt.

WEEKLY COMMENTARY

It was a volatile week for commodities; full of event risk and therefore market saw wild swings in both sides. The British Parliament rejected Prime Minister Theresa May's deal to quit the European Union for a second time, deepening the country's political crisis days before the planned departure date on March 29. Gold scaled a near two-week peak on Wednesday, after reclaiming the key $1,300 level in the previous session, as investors opted for the safe-haven metal after British lawmakers rejected an amended exit deal, while a weaker dollar lent further support. The disappointing U.S. data, which followed a spate of weak reports from other economies, cascaded concerns on slowdown in global growth. U.S. consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years, supporting the Federal Reserve's 'patient' stance on U.S. interest rate hikes. Though in the second half of the week, gold took correction and settled in sideways zone. Silver was down in both international and domestic market; tracking the weaker trend in base metals. Back at home, sharp appreciation in INR kept the precious metals on lower side. USD hit the low of 69.10 on improved flow of FII’s. Disappointing data from US and China, lingering trade war issue & BREXIT delay etc lowered the sentiments in base metals counter due to which copper, nickel and lead traded bearish while aluminium and zinc hold the gain. Crude gradually showed its strength, reacted on various statements given by OPEC for supply cut. The U.S. Energy Information Administration reported that crude oil inventories fell by 3.86 million barrels in the week to March 8 versus forecasts for a stockpile build of 2.66 million. It traded near four month high. Natural gas prices are consolidating and showing gradual upside move.

Oil seeds and edible counters were major victim of weak demand and most of them traded on weaker note. Malaysian palm oil futures slid for a sixth consecutive session on Wednesday to their lowest in three months on pressure from expectations of lower demand in top importer India and rising domestic production. World palm oil demand may suffer its first contraction in two decades during the 2019/20 crop year due to rising domestic oilseed supplies in India and slowing demand in Europe and China. Cotton saw strong rebound on lower production amid improved demand. Jeera and dhaniya showed some strength whereas turmeric and cardamom shed some previous gain.

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 $)

Aluminium Mini & Zinc Mini......Now compulsory deliverable.

After great success of compulsory delivery in Aluminium & Zinc contracts, MCX, after receiving permission from SEBI, has also modified the contract specifications in Aluminium Mini and Zinc Mini contracts i.e. from “Both Options” (cash and delivery) to “Compulsory delivery". The revised contract specifications for the above mentioned contracts have been implemented w.e.f. March 8, 2019. The June & July 2019 contracts of both Aluminium Mini & Zinc Mini are available for trading.

Sebi has been emphasizing on physical delivery settlement because as Sebi wants to reduce the distinction between cash market and derivative market to control speculation & volatility in the market. India has been producing these commodities. So, physical settlement can be done in India. If contracts have to be settled by delivery, domestic prices will be needed. But after successful settlement and compulsory delivery in Aluminium & Zinc contracts, Sebi has taken steps to allow compulsory delivery in Mini contracts of these both commodities.

Benefit of compulsory delivery

• The main benefit of having compulsory delivery is that it will curb excessive speculation.

• Another benefit of having compulsory delivery will be that as of now the cash settlement of commodity contracts is based on LME prices. But now in Zinc and Aluminium they will be based on local prices and also factor in taxes, freight and warehousing costs.

• Commodity derivatives are also hedging tool for those holding actual commodity, while speculators who traded without holding the underlying commodity impart liquidity to the counter by taking on the risk of the hedger.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week