Adani Ports and Special Economic Zone Limited (ADANIPORTS)

Divi's Laboratories Limited (DIVISLAB)

WEEKLY VIEW OF THE MARKET

Indian markets witnessed a sharp rally last week with Nifty scaling nearly 3% along with bank nifty once again reclaiming 29100 levels on local bourses. Gains were majorly added by sharp surge in heavyweights like Reliance, LT, Maruti & Bajaj twins. From derivative front, call writers were seen covering their short positions while put writers added heavy open interest build up in 11600 & 11500 strike. We believe that the rally in Nifty is likely to continue towards 11750 levels in coming sessions majorly supported by positive domestic and global factors. From technical front, Nifty has taken almost a V shape recovery from its recent lows of 11100 levels to once again reclaim above its long term moving averages on daily interval. The Implied Volatility (IV) of calls was up and closed at 14.76% while that for put options closed at 15.55%. The Nifty VIX for the week closed at 15.88% and is expected to remain volatile. PCR OI for the week closed at 1.21, which points towards put writing and is positive for markets. From technical front, now 11550-11500 levels should act as strong support for nifty and any dip into the prices shall be used to create fresh longs.

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 (Nov) is hovering near its two-year low of 5,710 rupees per 100 kg due to forecast of higher output in the 2019-20 (Jul-Jun). In days to come, more weakness is likely to be in this counter towards 5500 levels. The sale of turmeric has increased in past few days, but is not encouraging. At present, only medium and poor quality turmeric is arriving for sale, hence the traders are purchasing 60-70 per cent of the arrivals on average. At the Erode Cooperative Marketing Society, finger turmeric was sold at Rs.5,959-7,009 , the root variety at Rs.5,699-6,459. At the Erode Turmeric Merchants Association Sales yard, the finger turmeric was sold at Rs.5,605-7,074 a quintal, root variety at Rs.5,099-6,269 a quintal. Jeera futures (Nov) is expected to make a fresh new quarterly low as it can test 16000 levels. At present, the export demand is almost nil & on the supply side the production is also expected to increase in the forthcoming season. Due to prolonged monsoon, the market participants are expecting the winter to be good, which will help in increasing production. The spot markets are moving only on the basis of scattered local buying. Dhaniya futures (Nov) is likely to trade higher towards 6280-6350, if surpasses the resistance near 6180. Spot coriander prices are quoting higher at the Ramganj and Baran markets in Rajasthan due to increase in demand at existing lower levels. While prices are also steady at other major markets in, Rajasthan, Gujarat and Madhya Pradesh. According to traders, demand is emerging for Diwali and arrivals are on the weaker side

BULLIONS

Bullion counter may witness range bound movement as uncertainty regarding Brexit and US China trade deal to keep investors jittery. European Union leaders unanimously backed a new Brexit deal with Britain last week leaving Prime Minister Boris Johnson facing a battle to secure the UK parliament’s backing for the agreement, if he is to take Britain out of Europe on Oct. 31. Britain managed to eke out a deal for its exit from the European Union, lifting risk appetite recently. But downside was limited amid Middle East tensions and economic slowdown concerns in US as indicated by weak retail sales data and industrial output report which fanned fears about the health of the world’s biggest economy. Meanwhile, China hoped to reach a phased agreement with the United States over trade as early as possible, and make progress on cancelling tariffs on each others’ goods. SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, holdings stood at 918.19 tonnes. Investors continued to add to exchange-traded funds backed by the metal, with holdings closing in on record levels previously seen in 2012. Gold can take support 37700 levels while facing resistance near 38500 levels while silver can take support near 44500 levels while facing resistance near 46500 levels. In the next policy meeting on 30th Oct, U.S. central bankers appear unconvinced a partial U.S.-China trade deal is enough to dispel the policy uncertainty that has weighed on economic growth for months. Gold imports by India plunged in September to the lowest monthly inflow in at least three years

OIL AND OILSEEDS

Soybean futures (Nov) trend may continue to trade on a bullish note & hence buying on dip is suggested eyeing a level of 3800-3850 on the upside. The crop estimates given on the preliminary based on survey carried out by the Soybean Processors Association of India has highlighted that the estimated total production of soybean for the year 2019 as compared to 2018 in Madhya Pradesh is 40.107 Lakh tonnes, lower by -31.1%, while on contrary in Maharashtra output is pegged at 36.295 Lakh tonnes, higher by 5.70% & in Rajasthan at 6.560 Lakh tonnes a decrease of -26.7%. On the CBOT, U.S soybean futures (Nov) is expected to face resistance near $9.50 a bushel. Gains are being checked as traders waiting for more clarity on trade negotiations between Washington and Beijing. A question is still hovering around the trade deal after Trump said he likely would not sign any trade deal with China until he meets with Chinese President Xi Jinping at the upcoming APEC Forum in Chile on November 16–17, 2019. The upside move of mustard futures (Nov) may remain limited from her as it may face resistance near 4200 levels. The demand may slow down from the millers as the crush margin has turned negative to Rs.-109 per quintal. CPO futures (Nov) is likely to move higher & test 568, taking support near 552 levels. In news, the food ministry is firming up a proposal to increase integrated GST (IGST) on imported refined palm oil to 12 per cent to offset the impending cut in import duty on the commodity from January next year

ENERGY COMPLEX

Crude oil prices witness bounce back at lower levels as it may recover towards 4000 while taking support near 3700 levels. U.S. crude inventories increased by 9.3 million barrels in the week ended Oct.11, compared with expectations for an increase of 2.9 million barrels. Elsewhere, the joint technical committee monitoring a global deal to cut output between the Organization of the Petroleum Exporting Countries (OPEC) and partners, including Russia, found compliance with cuts for September stood at 236%, according to four OPEC sources. OPEC and its allies have agreed to limit their oil production by 1.2 million barrels per day (bpd) until March 2020. OPEC Secretary-General Mohammad Barkindo stated that the Organization of the Petroleum Exporting Countries and allied producers “will do whatever (is) in its power” to sustain oil market stability beyond 2020. Crude production stayed at record high of 12.6 Mbpd for a second consecutive week. Natural gas may also bounce back at lower levels on forecasts for cold weather and higher heating demand in late October and November Overall it can test 170 while taking support near 158. The weather is expected to be cooler than normal over the next 8-14 days according to the National Oceanic Atmospheric Administration. A storm named Tropical depression 16, is now swirling in the Gulf and is expected to turn eastward making landfall in Louisiana and then Florida. The more west the storm goes the more likely it is to disrupt some natural gas installations.

OTHER COMMODITIES

In days to come, we may see more upside momentum in kapas futures (Apr) as it has the potential to test 1110 levels. The Cotton Corporation of India (CCI) has entered Punjab, Rajasthan and Haryana, to purchase the raw cotton directly from the farmers. The intention is to prevent this soft commodity to fall below the MSP as more arrivals are waiting to hit the spot markets. The first picking takes place in September-October months when 30% of the total kapas arrives in the market. Second arrival starts in November during which 45% of the total crop arrives and last picking takes place in December when remaining 25% cotton reaches in mandis. In the international market, ICE cotton futures (Dec) is expected to reach for the resistance near 68 level. Market participants are closely watching the latest development on the U.S.- China trade front. Moreover, the concern that weather could deteriorate quality on the way through the harvest, which is currently 32% complete which is 5% ahead of the average as condition ratings. Chana futures (Nov) may consolidate in the range of 4400-4500 levels. The gains may remain checked as the festive buying is about to end and there are talks in the market that the government may extend the pulses import deadline under quota till November 30. The notification in this regard is expected later this month. The downfall of mentha oil futures (Oct) and trade sideways in the range of 1185-1120 levels. Mentha oil stocks at MCX-accredited warehouses were at 3,78,192.30 Kgs at end of last week, lesser by -43234.32 Kgs as compared to its previous week, according to data from the bourse

BASE METALS

Base metal counter may witness some bounce back at lower levels on hopes of partial US China trade deal and tentative divorce deal between the United Kingdom and the European Union. Copper may witness bounce back towards 448 levels while taking support near 435 levels. Las Bambas, which account for 16% of Peru’s entire copper output, had targeted between 385,000 tonnes and 405,000 tonnes of copper production this year, versus 385,000 tonnes in 2018. Chile's Antofagasta Minerals one of the world's top copper producers, averted a labour strike at a copper mine after reaching an agreement with its employees. The copper producer reached a labour agreement with a union of supervisors at its flagship Los Pelambres mine in Chile. Meanwhile, Lead may also remain sideways as it can move in the range of 152-160 levels. Henan Yuguang Gold and Lead, China’s largest lead producer plans to set up a leadacid battery production line as part of a downstream expansion. Zinc may witness lower level buying and may test 189 levels while taking support near 180 levels. Zinc treatment and refining charges are expected to stay at high levels due to rising mine supply from Australia and South Africa, Chinese smelters, overseas miners and traders said this week at an industry gathering in China. Nickel prices can move with weak bias amid weak demand from both the stainless steel and electric-vehicle sectors as it can test 1140 while taking resistance near 1220. Aluminium can trade with sideways to weak bias as it can test 130 while facing resistance near 138 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

NATURAL GAS MCX (NOV) contract closed at Rs. 179.60 on 17th Oct’19. The contract made its high of Rs. 209.80 on 17th Sep’19 and a low of Rs. 171.30 on 11th Oct’19. . The 18-day Exponential Moving Average of the commodity is currently at Rs. 181.84. On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.633.

One can buy between Rs. 175-177 for a target of Rs. 200 with the stop loss of Rs. 168.

CRUDE OIL MCX (NOV) contract closed at Rs. 3827.00 on 17th Oct’19. The contract made its high of Rs. 4504.00 on 16th Sep’19 and a low of Rs. 3640 on 3rd Oct’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 3875.54. On the daily chart, the commodity has Relative Strength Index (14-day) value of 46.54.

One can buy above Rs. 3920 for a target of Rs. 4150 with the stop loss of Rs. 3820.

DHANIYA NCDEX (NOV) contract was closed at Rs. 6141.00 on 17th Oct’19. The contract made its high of Rs. 6355.00 on 03rd Sep’19 and a low of Rs. 5389.00 on 03rd Oct’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 6041.42. On the daily chart, the commodity has Relative Strength Index (14-day) value of 53.465.

One can buy near Rs. 6050 for a target of Rs. 6400 with the stop loss of Rs 5900.

11

NEWS DIGEST

• On the occasion of Diwali, there will be Muhurat Trading (MCX & NCDEX) on October 27, 2019. The market timings for Muhurat Trading session will be from 6:15 pm – 7:15 pm.

• The food ministry is firming up a proposal to increase integrated GST (IGST) on imported refined palm oil to 12% to offset the impending cut in import duty on the commodity from January next year.

• The LME will raise its trading and clearing fees by 8% from January 2020, its first increase in five years to fund new projects and keep up with inflation.

• Trump said he likely would not sign any trade deal with China until he meets with Chinese President Xi Jinping at the upcoming APEC Forum in Chile on November 16–17, 2019.

• Southwest monsoon has withdrawn from the entire country and simultaneously Northeast monsoon rains have commenced over Tamilnadu and adjoining areas of Andhra Pradesh, Karnataka and Kerala.

• India's soymeal exports were at 0.34 lakh tonnes in September this year, down 61 percent from 0.87 lakh tonnes during the same month a year ago. - Soybean Processors’ Association of India (SOPA).

• The International Monetary Fund warned that the U.S.- China trade war will cut 2019 global growth to its slowest pace since the 2008-2009 financial crises.

• China's top copper smelters raised their floor treatment and refining charges (TC/RCs) for the fourth quarter of 2019 by 20% from the previous quarter.

Saudi Aramco has delayed the planned launch of its initial public offering in hopes that pending thirdquarter results will bolster investor confidence.

WEEKLY COMMENTARY

It was the week full of ambiguity – due to Brexit, Turkey or the twist and turn of US China trade deal. CRB was marginally higher. Benefit of doubt went to bullion counter, which closed the week on marginal gain though the upside was capped on some constructive move on both deal. In the energy counter, natural gas revived from lower level after a fall of four week and crude prices slashed on series of weak economic data. The U.S. EIA reported that domestic supplies of natural gas rose by 104 billion cubic feet for the week ended Oct. 11. That was a bit lower than the average build of 108 billion cubic feet expected by analysts polled by S&P Global Platts. The EIA reported that U.S. crude supplies climbed for a fifth week in a row, by 9.3 million barrels for the week ended Oct. 11. Gold prices were marginally higher on the Brexit headline and this is a clear sign that there are worries about the deal passing. Turkey agreed to a ceasefire in Syria; it gave some slowdown to the rally. Even weaker than expected economic data pressurized base metals prices. IMF’s caution that world will have the slowest growth this year since the financial crisis; raise the worries. Industrial production in the U.S. fell 0.4% in September, after an upwardly-revised gain of 0.8% in August, adding to evidence of an ongoing slowdown across the country. Earlier, the Philadelphia Fed’s manufacturing index fell to its lowest in five months, while data from the housing market also disappointed, as housing starts slowed more than expected, while initial jobless claims again edged higher. China's economic growth slowed to 6% year-on-year, its weakest pace in 27-1/2 years and below expectations, dogged by soft factory production amid ongoing trade tensions with United States and sluggish domestic demand. Nickel saw sharp fall in the prices among all. In agri commodities, soya and cotton complex caught up the rally in domestic market owing to firm international trend. Though the rally was late compared to CBOT as US market reacted in advance as China stand was soft on agri commodities during the talk of US and China trade war. In spices, all moved down except Dhaniya. Turmeric prices fell for nine weeks in a row as only medium and poor quality turmeric is arriving for sale. Chana futures were up for fifth straight week. Meanwhile, Dal millers in the country have asked the government to extend the deadline till year-end for the import of pulses. The Centre has urged the millers to import pulses by October 31.

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 $)

Trade deal.....Ray of hope is still dim

Recent trade talks between the United States and China have reached a partial trade agreement that includes purchases of about $40 billion to $50 billion worth of American agricultural products by China, as well as agreements on intellectual property and financial services. Although Trump tweeted that the deal is, by far, the greatest and biggest deal ever made for our Great Patriot Farmers in the history of our Council. But China merely suggested that “substantial progress" has been achieved but did not indicate the elements of the understanding reached with the US.

Partial victory for China

The U.S.-China trade war, which has continued since last 15 months, has rattled markets and sparked fears about global economic stagnation. The Wall Street Journal has already described the Trump’s tariffs as a “biggest policy blunders of his presidency” as this reckless exercise is setting a precedent for other countries to disregard WTO and its rules while Chinese economy is slowing continuously in last more than one year. Mr. Trump is currently facing serious electoral headwinds for his second term next year while China is facing serious democratic unrest in Hong Kong and human rights issues in Xinjiang. This situation has forced tremendously on both countries for mutual understanding.

With the first phase deal, however, China has scored a partial victory with the US in the bettering trade war, after the embattled Trump administration in principle agreed for freezing new tariffs against Chinese goods worth $250 billion. For China, reaching the $50 billion benchmark may take up to two years and require the U.S. to lift tariffs on Chinese imports as a goodwill gesture. So China has the least responsibility while China got tariff relief in exchange for buying commodities it genuinely needs. In other side, new sets of tariffs starting on October 15 on Chinese goods would be “more detrimental to the United States” than China has led the Trump administration to urgently pursue a partial deal.

Structural changes would be discussed in the second stage

According to Trump, more complex and difficult issues involving structural changes in the Chinese trading and economic system as demanded by the US would be discussed in the second stage. Here China again become gainer by deferring the most difficult negotiations on the US demands involving sweeping changes in the Chinese intellectual property provisions, including an end to the alleged forced transfer of technology, state-owned subsidies to the Chinese hi-tech companies, and other market access barriers.

However, meeting this target will be quite difficult due to:

• Chinese demand might be limited due to rising domestic output and falling demand on African Swine Fever

• China could face complaints from other countries, if it significantly ramps up its agriculture purchases from the U.S. in a non-market-based manner

• The production capacity of U.S. farmers may also be a constraint

The first phase deal still unclear about a new 15 per cent levy on about US$160 billion of Chinese goods – including popular products like smart phones, laptops and TVs – that would take effect on December 15. It is still not confirmed when a “phase one” agreement would be signed or whether the leaders of both countries planned to meet.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week