BEML LIMITED (BEML)

THE KARNATAKA BANK LIMITED (KTKBANK)

WEEKLY VIEW OF THE MARKET

Long rollover was seen to April series. Average rollover price is in the range of 11500 to 11600. Smart recovery was seen led by short covering from lower levels. Calls writers covered their short positions and put writers were actively selling puts. Maximum put open interest buildup of more than 21 lakh shares is at 11500 puts, which should act as strong support zone. Next week is most likely to trade in the range of 11500 to 11700 with positive bias. Nifty has multiple strong supports at lower levels. Various supports are 11500 & 11450 spot levels. Option put writers were active in recent rally. Put writing is seen in 11500 & 11400 puts. The Implied Volatility (IV) of calls closed at 14.20% while that for put options closed at 14.00%. The Nifty VIX for the week closed at 16.65% and is expected to remain sideways. Among Nifty Call options, the 12000-strike call has the highest open interest of more than 20 lakh shares, and in put side 11500-strike put has the highest open interest of over 20 lakh shares in open interest respectively. The PCR OI for the week closed up at 1.17 which indicates OTM put writing. On the technical front, 11500-11450 spot levels is strong support zone and current trend is likely to continue towards 11700-11750 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 (Apr) is expected to remain stuck in the range of 6000-6250 levels. In days to come, we may see fewer business activities on the spot markets as on account of Mariamman festival, all the turmeric markets will be closed for nine days from 30th March to April 7th. Beforehand last week, the buyer traders have purchased all the good quality turmeric for their demand and some traders have decided to store few bags of best quality turmeric. Also, the stockists are very cautious in buying the turmeric as they feel at present the price may not be improved. On the supply side, the arrival for Erode markets is very low when compared to very heavy arrival of turmeric at Nizamabad. At present Mysore and Dharmapuri turmeric is arriving for sale. Jeera futures (Apr) will possibly witness a rise for the fourth consecutive week to test 15900-16100 levels. This rally is getting fueled by prospects that India's jeera exports in 2018-19 (Apr-Mar) are estimated to rise 4.4% to about 150,000 tn. The fall in output in Syria and Turkey on account of loss of quality due to weather adversities will possibly make India the sole supplier in the international market. So far this quarter, most export deals for Indian jeera have been struck in a range of $2,000-$2,100 per tn. Coriander futures (Apr) is in overbought zone, but regardless it will possibly maintain its upside bias taking support near 6300 levels due to strong demand for the new crop which is of superior quality. Arrivals of coriander with ideal moisture content of 8- 10% have begun, and this had led to a rise in demand.

BULLIONS

Bullion counter can continue its selling pressure as stronger greenback coupled with lack of safe haven demand can keep prices downbeat. The U.S. dollar rose versus other currencies following more dovish soundings from central banks and renewed expectations that the European Central Bank will keep rates low for longer. Worries over global economic slowdown boosted the demand for U.S. Dollar as a safe haven rather than yellow metal. The Reserve Bank of New Zealand this week joined a growing list of central banks that have turned dovish amid signs of a slowing global economy, saying its next move in interest rates was likely to be a cut. Gold(June) can further dip lower towards 31100 while facing resistance near 32000 while silver (May) can dip lower towards 36500 while facing resistance near 37800. Recent economic number released from the US showed homebuilding fell more than expected in February, while consumer confidence ebbed in March, offering more evidence of a sharp slowdown in economic activity early in the year. The U.S. third and final reading on fourth-quarter gross domestic product GDP came in at up 2.2%, which was right in line with the consensus forecast and compares to the last 4Q estimate of up 2.6%.On the Brexit front, the U.K. Parliament late Wednesday rejected all eight options offered by Prime Minister Theresa May to break the Brexit deadlock. May’s options moving forward on the matter are increasingly limited, with speculation of a general election being held in the near future.

OIL AND OILSEEDS

Aconsolidation can be seen in soybean futures (Apr) in the bandwidth of 3600- 3740 levels. The spread between mustard seed and soybean has dropped significantly in last couple of weeks, making mustard seed more preferential to purchase. During the start of the second week of this month, mustard seed prices were on premium of Rs.225 per quintal compared to soybean price & now it is reduced to Rs.90 per quintal due to surplus mustard stock arrivals, thus making it more attractive oilseed commodity for the buyers. We may see more correction in soy oil futures (Apr) and it may run down to 720 levels. Being a price taker from the international market, it is following the bearish trend of soy oil on CBOT, trading near its two month low of 28.82 cents per pound. In days to come, more selling more may be seen in CPO futures (Apr) & if it breaks the support at 520, then 510-505 will be achieved. This edible oil counter is facing a double whammy of rising inventories in the international market & promotion of ‘palm oil free’ certification in the world food market, hurting its demand. Mustard futures (Apr) is expected to trade with an upside bias towards 3800 levels, taking support in the range of 3735-3710 levels. The demand from crushers at current price levels is likely to improve, as the crush margin pace has gone up. In news, The Haryana State Co-operative Supply and Marketing Federation Limited (HAFED) have decided to procure mustard crop directly from farmers from March 28 to May 10 limiting the role of commission agents (arthiyas) in grain markets.

ENERGY COMPLEX

Crude oil prices may extend its upside momentum as ongoing supply cuts led by producer club OPEC and U.S. sanctions against Iran and Venezuela, which have given crude markets the biggest first quarter price push since 2009. Meanwhile the price surge triggered a call by U.S. President Donald Trump on Thursday for OPEC to boost production to lower prices. Oil prices have been supported for much of 2019 by efforts by the Organization of the Petroleum Exporting Countries (OPEC) and non-affiliated allies like Russia, known as OPEC+, who have pledged to withhold around 1.2 million barrels per day (bpd) of supply this year to prop up markets. Disruptions to Venezuelan exports helped to limit oil price losses in crude oil prices as U.S. sanctions in January which banned U.S. refiners from buying Venezuelan oil, the OPEC member’s main oil export port of Jose and its four crude upgraders were unable to resume operations following a widespread three-day power blackout. Crude oil can further move towards 4300 while taking support near 4000. Natural gas may remain on sideways path as it can take support near 180 levels and resistance near 205 levels. Natural gas inventories remain below the 5-year average the recent warmer than normal weather has eased heating demand. The weather over the next 2-weeks is expected to be warmer than normal. This week, the weather conditions have finally warmed up substantially across Lower-48 states in US. A drop in heating demand was especially pronounced in the Southeast and Southwest parts of the country.

OTHER COMMODITIES

The trend of cotton futures (Apr) has reversed to bearish after last week’s steep correction & day’s ahead we may see more downside of 20800 levels. This drift is happening due to two major influencing factors of declining prices of cotton in the international market & increasing supply pressure in the domestic markets. The Cotton Corporation of India (CCI) has reportedly started offloading cotton procured so far in the current marketing season. Steep rise in prices in open market prompted CCI to start sale. The agency has procured around 1.1 million bales (1 bale = 170 kg) of cotton in the ongoing marketing season that started on Oct 1. The gains in chana futures (Apr) may get restricted from hereon as it may face resistance near 4360 levels. The arrivals of new domestic chana are expected to gain pace in the new financial year. Guar seed as well as Guar gum futures (Apr) are looking bullish as they can reach 4500-4600 and 9200-9300 levels respectively. Coming to the fundamentals of guar, it is being anticipated that exports of the guar gum are likely to be higher in 2018-19. The demand for guar gum has started to rise as a hydraulic fracturing agent after crude oil prices are trading near its 3-month high levels. The market participants are optimistic about more orders to come from the food processing sector. In latest news, a newer guar gum product has been developed & approved for large scale production of potash fertilizers to increase its stability providing better conditioning. It is reported that orders have been received for this new product & these orders are expected to execute during financial year 2019-20.

BASE METALS

In base metal counter, copper, zinc and aluminium may remain on buoyant note while nickel and lead can remain in range. Copper may test 455 while taking support near 440. London copper heading for its first quarterly gain since the end of 2017, as hopes of progress in U.S.-China trade talks lent support. State-owned Chilean miner Codelco, the world’s largest copper producer, expects output at its El Teniente mine to rise to more than 500,000 tonnes per year by 2025. China’s top copper smelters last week lowered their floor treatment and refining charges (TC/RC) for the second quarter of 2019 by more than 20 percent, indicating a tighter copper concentrate market. Polish miner KGHM and union representing workers at its Sierra Gorda copper mine in Chile have agreed to extend contract talks, temporarily warding off the threat of a strike, the union president stated last week. Meanwhile Lead may face resistance near 143 levels while taking support near 138 levels. Aluminium may extend upside momentum as it can test 155 levels while taking support near 143 levels. Aluminium surged higher as inventories fell and prices shrugged off another step towards a full restart of Norsk Hydro’s Brazil alumina operations. Zinc may extend its upside as it can test 210 levels while taking support near 197 levels. Zinc has been trading firm on back of tightness in the physical market where cash LME zinc over the 3M was at premium if $56 a tonne from $47 as LME stocks hit a record low of 55,225 tonnes last week. Nickel can trade in range as it can take support near 860 while facing resistance near 920 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

GOLD MCX (JUN) contract closed at Rs. 31823.00 on 28th Mar’19. The contract made its high of Rs. 34228 on 20th Feb’19 and a low of Rs. 30684 on 20th Dec’18. The 18-day Exponential Moving Average of the commodity is currently at Rs. 31747.00.On the daily chart, the commodity has Relative Strength Index (14-day) value of 37.407.

One can sell at Rs. 31950 for a target of Rs. 31310 with the stop loss of Rs. 32270.

LEAD MCX (APR) contract closed at Rs. 140.20 on 28th Mar’19. The contract made its high of Rs. 155.05 on 28th Feb’19 and a low of Rs. 137.90 on 27th Mar’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 142.73. On the daily chart, the commodity has Relative Strength Index (14-day) value of 39.838.

One can buy at Rs. 139 for a target of Rs. 145 with the stop loss of Rs. 136.

COTTON MCX (APR) contract was closed at Rs. 21310 on 28th Mar’19. The contract made its high of Rs. 21880 on 31st Dec’18 and a low of Rs. 20550 on 13th Feb’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 21394.50.On the daily chart, the commodity has Relative Strength Index (14-day) value of 46.10.

One can sell at Rs. 21510 for a target of Rs. 21000 with the stop loss of Rs 21765.

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NEWS DIGEST

• China's top copper smelters lowered their floor treatment and refining charges (TC/RC) for the second quarter of 2019 by more than 20 percent.

• China's industrial firms posted their worst slump in profits since late 2011 in the first two months of this year.

• U.S. homebuilding fell more than expected in February as construction of single-family homes dropped to near a two-year low.

• Bank of Japan (BOJ) policymakers debated the feasibility of ramping up monetary stimulus at their rate review this month as heightening overseas risks weighed on the country's fragile economy.

• India's castor oil exports fell 29.3% on year to 39,251 tn in February. - The Solvent Extractors' Association of India

• The Cotton Corporation of India has commenced sale of the commodity procured so far in the current marketing season. The agency has procured around 1.1 mln bales (1 bale = 170 kg) of cotton in the ongoing marketing season that started on Oct 1.

• Production of Malaysian palm oil products for March 1-25 inched up by 0.77 percent compared to the same period a month ago. - Southern Peninsular Palm Oil Millers Association (SPPOMA)

WEEKLY COMMENTARY

CRB couldn’t sustain at higher levels and saw correction from the higher side of 194. Rise in dollar index was the major reason for the decline in commodities. The U.S. dollar rose versus other currencies following more dovish soundings from central banks and renewed expectations that the European Central Bank will keep rates low for longer. Despite lower than expected US GDP, base metals moved up on lower levels buying amid tight supply issue. However, the upside was capped on metals were also reflecting worries about an accelerated slowdown in the U.S. economy and global growth in general. Copper prices recovered from 3 week low. Nickel prices climbed as expectations of a fourth consecutive year of supply deficit were reinforced by signs of robust demand from stainless steel mills in China. The price of stainless steel continues to rise and supply of ferronickel is very tight. Aluminum prices also rose as , downstream spot aluminium consumers in east and south China showed greater interest in purchasing, compared to earlier in the week, as prices fell. It was not a good week for bullion counter. Gold prices reached a three-week low and silver touched down to a three-month low as the dollar rose to a multi-month high. Gold futures on Thursday suffered from their largest one-day percentage loss since August, settling below $1,300 for the first time in two weeks. In energy counter, crude prices moved up and natural gas prices saw further pressure. Irony is that they reacted negative on their inventories positions. Crude rose despite the buildup in inventory while natural gas prices saw continuous fourth week despite dropdown in inventories. EIA reported Thursday morning that U.S. natural gas stockpiles decreased by 36 billion cubic feet for the week ending March 22.as regards the update on US and China trade talk; U.S. and China are holding high-level trade talks that are taking place in Beijing. The key figures were meeting for dinner Thursday evening. There is no clear consensus on the eventual outcome of the U.S.-China trade talks.

In agri trade, oil seeds and edible oil were bearish in both international and domestic market. Only mustard futures hold gain on the back of procurement by NAFED. Cotton counter saw a healthy profitbooking from higher side after a steep upside. Procurement by NAFED gave timely support to the chana prices; and it saw four week continuous upside. Guar counter was doing well in both spot as well as in futures market on lower production amid improved demand. Though; news of normal monsoon snatched away the gains as guar is very “Monsoon Sensitive” commodity which has negative correlation with monsoon.

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 $)

Purchasing Managers' Index....A strong indicator of Brent demand

The Purchasing Managers' Index (PMI) is an indicator of economic health for manufacturing and service sectors. This is based on five major survey areas: new orders, inventory levels, production, supplier deliveries and employment. The surveys include questions about business conditions and any changes, whether it be improving, no changes or deteriorating. The headline PMI is a numberfrom 0 to 100.A PMI above 50 represents an expansion when compared with the previous month.APMI reading under 50 represents a contraction, and a reading at 50 indicates no change.

How PMI is important

The PMI is an extremely important indicator for investors looking for clues about economic growth. Many investors use the PMI as a leading indicator for Gross Domestic Product (GDP) growth or decline. The Fed and other central banks also use the results of PMI surveys when formulating monetary policy

Purchasing Managers Index provides strong clues for commodities markets as it is highly co-related with the performance of commodities. When PMI number is lower, it suggests the slower manufacturing activity that increases the concern about the demand of such commodities which are the indicator of economic growth i.e. crude oil & base metals. A good reading of PMI enhances the attractiveness of an economy which in turn ignites the demand of fuel.

Correlation between US PMI & Chinese PMI with brent crude

The US PMI & Chinese PMI is major influencing indicator for global growth as well as brent crude prices. Brent Crude are primary benchmarks in oil pricing.

The above chart shows almost 80-90% correlation between US PMI & Chinese PMI with brent crude prices. Above chart show that when PMI reading of both US & China come under 50 during November 2015 to February 2016, the Brent prices nosedived to below $ 35/b. We know that China, the Asian giant is responsible for consuming massive amounts of raw materials-almost 45% copper, 55% of aluminum and second highest consumer of crude oil. China imports majorly Brent crude. Most interesting, the PMI reading of US & China both has impacted the Brent prices significantly. So when the PMI falls in both China and the U.S., the two largest economies in the world, it is not a good sign of economy and for Brent crude also.

Recently on March 22, 2019, Brent oil fell about 2 percent, slipping from 2019 highs as due to grim manufacturing data from Germany and the U.S. reignited fears of a slowdown in the global economy and oil demand.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week