HINDUSTAN UNILEVER LIMITED (HINDUNILVR)

KANSAI NEROLAC PAINTS LIMITED (KANSAINER)

WEEKLY VIEW OF THE MARKET

Nifty indices ended the week with minor losses after witnessing see saw moves in the range of 10900-11150 on the back of mixed domestic and global factors. From derivative front, however, put writers were seen active in 10900 & 11000 strikes, which should provide some support to markets in coming week. On higher side, any decisive above 11100 should trigger fresh round of short covering, which can move Nifty towards 11250 levels. From the technical front, 11250 levels should act strong hurdle as long term moving averages on daily charts are placed over there. The Implied Volatility (IV) of calls was up and closed at 14.42% while that for put options closed at 13.96%. The Nifty VIX for the week closed at 16.36% and is expected to remain volatile. PCR OI for the week closed at 1.15, which indicates OTM put writing. We expect that as far we are holding above 10900 levels in Nifty (SPOT) the current trend should move towards 11150-11200 along some volatility on cards.

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 LONG BUILD UP

TOP 10 SHORT BUILD UP

SPICES

Turmeric futures (Sept) is expected to trade with an upside bias in the range of 6960- 7260 levels. The market participants are now focusing on the possible crop damage in Sangli (Maharashtra). The torrential rains of the last eight days in western Maharashtra have destroyed many Kharif crops. The actual damage will be known when the surveys by the Revenue Department commence to know the real extent of crop damage. Jeera futures (Sept) will possibly trade with a downside bias & descend towards 16500. The sentiments are bearish as the winter crop output is seen robust due to adequate rains. Saurashtra and Kutch subdivision, a major producer of the spice, received 456.20 mm of rainfall since the commencement of monsoon till 14th August, 23% more than the normal of 370 mm, as per the data of India Meteorological Department. Dhaniya futures (Sept) is likely to crash further towards 5700-5500 for the fourth consecutive week. The report imports from Ukraine, Russia and Bulgaria have convinced the market participants to create short positions. It is reported that in recent weeks, imports have risen a lot and are coming into India at $650 per ton. Moreover, weather is very favorable right now for next season's sowing, which is a negative factor for prices. Cardamom futures (Sept) is likely to witness profit booking towards 3300-3150 levels. The heavy rainfall in Kerala is likely to help plantations with better fruit formation and growth. Heavy-tovery heavy rainfall is likely over Kerala till 18th August due to a cyclonic circulation over northwest Arabian Sea, India Meteorological Department said. It also issued a 'red alert' for the state.

BULLIONS

Bullion counter may continue to extend its swift rally upside amid safe haven buying as monetary easing by central banks and concerns of slowing global growth increased coupled with fresh concerns about the U.S.-China trade dispute. Gold(Oct) can trade higher and may tough 39200 in MCX while taking support near 37300 while silver can touch 45000 while taking support near 42500. China recently vowed to counter the latest $300 billion U.S. tariffs, but also called on the U.S. to meet it halfway on a potential trade deal. U.S. President Donald Trump said he believed China wanted to make a trade deal, and that the trade conflict would be fairly short. Investors are focused on the Federal Reserve's annual symposium next week. Traders see an about one-inthree chance of a 50 basis-point rate cut by the Fed this September. The European Central Bank's (ECB) Olli Rehn last week flagged the need for a significant easing package in September. The ECB is widely expected to cut interest rates by at least 10 basis points when it meets next month. Germany also reported anemic economic data for Q2 as its exports slowed, hinting at a possible recession, along with the inverted yield curve news, which tanked stocks, all occurrences pressurizing prices. US President Donald Trump has expressed his concern about the risk of a Chinese crackdown in Hong Kong, as he suggested that President Xi Jinping should take the extraordinary step of sitting down with protesters as a way to help de-escalate the situation.

OIL AND OILSEEDS

Soybean futures (Sept) is expected to trade with an upside bias & has the potential to move higher to test 3750-3780. Recent floods in and around Sangli district, which harvests around 100,000 ton soybean in Sep-Oct, is expected to have completely damaged most of the crop resulting in lower new-crop supply until mid-October. This should lead to more buying of soybean by stockists and mills in the coming weeks. Taking cues from this oilseed & a weaker rupee against dollar soy oil futures (Sept) is likely to witness further rise towards 770-780. CPO futures (Aug) may also witness a rise till 565-575 on the back of firm cues from overseas markets. Among global cues, fall in palm oil stock in Malaysia for the fifth straight month in July is also supporting prices on Bursa Malaysia Derivatives. The import cost has also risen after the hike in the base import tariff on crude palm oil to $527 per ton from $502, on refined palmolein to $570 per tn from $540. Among other factors, India’s August beginning edible oil stocks fell for the 4th consecutive month after shedding 7.21% from July to low of 1.995 million tons, the lowest in 12 months or 24% below the same time last year. On CBOT, soy oil is expected to hold on to the support of 27.50 and anticipated to rise towards 31-32 cents per pound. Mustard futures (Sept) is expected to show an upside momentum towards 4000-4020, if trades & sustains above 3980, taking support near 3930 levels. Steady demand for mustard meal and seasonal rise in demand for mustard oil during monsoon will support prices in the short term.

ENERGY COMPLEX

Crude oil prices may sideways movement amid mixed fundamentals. Crude oil may take support near 3750 levels while taking resistance near 4100 levels. The efforts of OPEC+ have been outweighed by worries about the global economy amid the U.S.-China trade dispute and as well as rising U.S. stockpiles of crude and higher output of U.S. shale oil. China's July crude oil throughput rose 4% from a year earlier buoyed by improved refinery profit-margins and as new plants started production. Saudi Arabia, the de-facto leader of the Organization of the Petroleum Exporting Countries (OPEC), said late last week it plans to keep its crude oil exports below 7 million barrels per day in August and September to help drain global oil inventories. Currently, the markets seem imbalanced with supply lagging demand, but demand itself isn't that strong in the crude markets. The primary reason why supply is unable to meet demand is that imports are very weak right now due to ongoing OPEC cuts which are causing the balance to see massive draws as crude is being pulled from inventories to satisfy ongoing demand. Meanwhile, EIA stated that U.S oil output from seven major shale formations is expected to rise by 85,000 bpd in Sep, to a record 8.77 Mbpd. Natural gas may witness further recovery as it can test 168 while taking support near 145. U.S. Natural gas futures can get support on forecasts for greater heat and cooling demand than previously expected despite an increase in output to a record high.

OTHER COMMODITIES

Cotton futures (Aug) is expected to trade with an upside bias in the range of 20975-21200 taking positive cues from the international market. Cotton prices have been low for quite some time, but now it has started rising boosted by strong export sales data from the U.S. Department of Agriculture, which highlighted high demand from Bangladesh. It has been able to hold the 59 level since the last week and if manages to close near 60, we might see prices going up to 61.50-62 cents per lb. Guar seed futures (Sept) is looking bullish & may rise to test 4550-4600. This Kharif season, with the monsoon coming to an end & sowing window about to close, the farmers in the western region Rajasthan, particularly Barmer, Jaisalmer and Bikaner are still waiting for rains to pour sufficiently. As the latest statistics from the India Meteorological Department the west Rajasthan is still having a deficit monsoon by about 6% with 172.5 mm of rain as compared to normal of 183.5 mm. While guar gum futures (Sept) is likely to trade sideways to up in the range of 8500-8800 levels. The slow down in exports demand from the American oil & gas industry amid a slowdown in drilling of shale oil may have impacted the exports. Castor seed futures (Sept) will probably witness another round of consolidation for the fourth consecutive week in the range of 5615-5700. The factors due to which the counter is getting support is the rising demand from domestic stockiest and a fall in the acreage. However, on the contrary the deterrent factor capping the gains is the lower export demand.

BASE METALS

Base metal counter can trade on mixed path amid uncertainty regarding US China trade dispute. President Trump was ready to impose tariffs on China by next month but then he postponed the same, in the last week once again he showed a soft spot for China saying that they want to strike a deal. China also commented saying US has to meet in the middle for the deal to happen. Copper may find support near 440 levels while facing resistance near 460 levels. China's refined copper output rose 4.8% year-on-year to 801,000 tonnes in July, data released by the National Bureau of Statistics showed .Meanwhile, Lead may recover towards 160 while taking support near 150 levels. Zinc may witness recovery towards as it can test 190 levels while taking support near 180 levels. Nickel prices can move with upside bias as it can touch 1200 levels while taking support near 1100 levels. Indonesia the second largest Nickel exporter aims to hasten the application of the ban on mineral ore exports which was supposed to come in to effect in 2020.For Nickel, LME cash nickel flipped to a premium of $13 a tonne over three-month contract. That was the strongest premium since mid-May and up from a discount of $11 a day earlier. Aluminium can trade with sideways bias as it can take support near 137 while facing resistance near 144 levels. Aluminium prices found some support as fresh supply disruptions arising from China after a typhoon affected the facilities belonging to China Hongqiao Group

TREND SHEET

TECHNICAL RECOMMENDATIONS

Nickel MCX (AUG) contract closed at Rs.1131.90 on 14thAug’19. The contract made its high of Rs.1161.90 on 16thAug 19 and a low of Rs.849 on 10thJun 19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 988.62.On the daily chart, the commodity has Relative Strength Index (14-day) value of 79.92.

One can buy between Rs.1130-1140 for a target of Rs.1200 with the stop loss of Rs. 1090.

Natural gas MCX (AUG) contract closed at Rs.152.60 on 14th Aug’19. The contract made its high of Rs.188 on 29th May 19 and a low of Rs.144.60 on 5th Aug19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 158.74.On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.32.

One can buy between Rs.155-158 for a target of Rs.170 with the stop loss of Rs.150.

Chana NCDEX (SEP) contract closed at Rs. 4320.00 on 14th Aug’19. The contract made its high of Rs. 4531.00 on 13th Jul’19 and a low of Rs.4205.00 on 7th Aug’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 4366.80. On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.479.

One can buy near Rs. 4300 for a target of Rs. 4400 with the stop loss of Rs. 4250.

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NEWS DIGEST

• China has cut gold shipments by some 300-500 tonnes compared with last year - worth $15-25 billion at current prices.

• US Core retail sales jumped 1.0% last month after advancing by 0.7% in June.

• Russian state oil company Rosneft has for the first time asked buyers to use the euro as the default currency in a spot tender to sell naphtha, an official Rosneft document shows.

• Venezuela's opposition-controlled congress is considering reforms to the country's oil law that would open up the sector to private investment.

• MCX is discontinuing the trading in the Cotton (29 mm) January 2020 contract (NIL open interest) with immediate effect (i.e. beginning of the day August 16, 2019).

• The Exchange shall be re-commencing the trading with the modified contract specifications in the January 2020 contract with effect from August 26, 2019.

• India's castor oil exports declined 13.5% on year to 52,384 tons in June. - Directorate General of Commercial Intelligence and Statistics.

• India's Apr-Jun guar gum exports fell 5.5% on year to 127,700 tons. - Agricultural and Processed Food Products Export Development Authority data.

• The overall import of vegetable oils during November 2018 to July 2019 is reported at 11,280,972 tons compared to 10,766,076 tons during the same period of last year i.e. up by 5%. - Solvent Extractors’ Association of India.

WEEKLY COMMENTARY

In the week gone by, bullion counter continued its upside momentum but profit booking was seen as volatility continues to remain high. Gold prices gained as global worries about escalating uncertainties, slowing global growth, US bond yield continued fall increased worry about the inverted yield curve and various other issues is supporting prices on lower levels. Strong retail sales from the US last week did not exert much pressure on the prices as other uncertainties have a strong upper hand. The US-China trade deal is getting confusing as the mixed comments from both ends is creating chaos in the market. Base metals traded mixed but volatility remained high on account of conflicting messages about the ongoing trade discussions between the U.S. and China. U.S. President Trump said that U.S. and Chinese negotiators were holding productive trade talks and expected them to meet in September. Meanwhile, China vowed to counter latest U.S. tariffs but is ready to keep the discussion going on potential trade deal. Nickel jumped higher on Indonesian ore ban concerns. Crude oil also traded on sideways path as it got buoyed by rise in U.S. retail sales but on other hand, the massive buildup in U.S. inventories jolted markets that had just seen massive increases on earlier news that U.S. was pushing back tariffs for some of items anticipated to go into effect in the beginning of September. The dire economic data from China revealed a precipitous decline in industrial output growth to a 17-year low. China’s banks extended surprisingly fewer new Yuan loans in July, while money supply growth and total social financing also slowed. Natural gas jumped swiftly higher as U.S. natural gas futures jumped higher after the release of a storage report that showed a much smaller-than-expected build.

Last week, palm oil stood on the top tracking the benchmark October futures contract of crude palm oil which hit a four-month high on the BMD due to an estimated rise in exports of the commodity from Malaysia. Soy oil also gained on the back of host of factors such as low stock, hike in base import tariffs, and firm cues from CBOT. Cotton also witnessed a decent rise taking positive cues from the international market, wherein ICE cotton futures were seen hitting a two-week peak boosted by strong export sales data from the US Department of Agriculture, which highlighted high demand from Bangladesh. Coriander traded near three months low because of imports from Ukraine, Russia and Bulgaria, while the rally of cardamom got halted by the heavy rainfall in Kerala which might help plantations with better fruit formation and growth. Jeera also showed weakness due to sluggish export demand.

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 $)

Brent -WTI spread......highly fluctuating since January 2019

• Brent is the global benchmark for Oil prices. It is seaborne crude extracted from the North Sea located between the UK and Norway. Its price is the benchmark for African, European, and Middle Eastern crude.

• The pricing mechanism for Brent dictates the value for roughly two-thirds of the world's crude oil production.

• WTI, the other major traded crude oil, is the benchmark crude for North America. WTI is actually sweeter than Brent Crude and has a sulfur content of around 0.24 percent. Brent's sulfur content is 0.37 percent. WTI is a better grade of crude oil for the production of gasoline while Brent oil favors the production of diesel fuels.

• Brent and WTI crude have different properties. Therefore, the price differential is a quality spread. Also, the two crudes are located in different parts of the world, Brent in Europe and WTI in North America. Therefore, Brent versus WTI is also a location spread.

• The spread between Brent and WTI is a perfect example of how quality and location spreads affect the structure and ultimate pricing of crude oil around the globe.

• C u rre n tl y, th e sp re a d between Brent and West Texas Intermediate (WTI) crude is in the range of $4-$5 down from $8.37 in the start of this year. The spread peaked in last week of May at $10.99.

• Brent, the global benchmark, is down more than 18 percent from their peak reached in April this year, while WTI has loosed nearly 15 percent, with prices pressurized on signs of slower global demand due to U.S.-China trade row offsetting the rising tension in middle-east.

• EIA expects West Texas Intermediate crude oil prices will average $5.50/bbl less than Brent prices during the fourth quarter of 2019 and in 2020, narrowing from the $6.60/bbl spread during July. In the July EIA forecast the Brent-WTI spread to average $4.00/bbl in 2020.

• The narrowing spread reflects EIA’s assumption that crude oil pipeline transportation constraints from the Permian basin to refineries and export terminals on the U.S. Gulf Coast will ease in the coming months.

• By the end of 2019, we expect the price differential between WTI and Brent to narrow substantially as growing U.S. exports of light oil come to compete in Atlantic Basin and Asian markets.

• Expectations of declining U.S. crude supplies are also driving bullish sentiment & thus have impacted the lower spread.

• The narrowing gap between Brent and WTI crude oil prices could increase the transportation cost burden for US crude oil exporters. The higher spread could help mitigate transportation costs and increase profits.

• But there has been a positive relationship between US crude oil exports and the Brent-WTI spread. With the lower spread, US crude oil exports might fall in the coming weeks

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week