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 (Apr) may see more downside of 6200-6100 levels owing to lack of sufficient cues from the demand side which are failing to pull up the prices. On the spot markets, poor quality of new turmeric is arriving for sale due to which the stockists are getting discouraged from fresh buying. The market participants are expecting upcountry demand but are getting very negligible numbers at present, hence getting the producers are not bringing their best quality produce. The production of Mysore turmeric at Karnataka area is in encouraging level, the farmers are bringing little quantity of the turmeric for sale every day. Jeera futures (Mar) has gone down to an extremely oversold zone & this week we may see some short covering with the counter expected to take support near 15300 levels. However, any sharp upside may not be seen as the fundamentals indicate that the current weather conditions over the major growing regions are conducive for the crop. This season, Gujarat has witnessed lower sowing, but due to cool weather persisting for a longer time, the yields are expected to get better. In Rajasthan, the climatic conditions are also proving to be beneficial for the standing crop & hence the production is likely to be higher. On the demand side, the exporters are almost inactive and waiting for the fresh crop to hit the markets. The increasing open interest week-on-week & decreasing trend of coriander futures (Apr) depict that we may witness more correction in the counter towards 6000 levels. Spot coriander prices are trading with a bearish bias at major markets in Gujarat, Madhya Pradesh and Rajasthan due to heavy arrivals from the ample old stocks.

BULLIONS

Bullion counter may witness range bound movement as stronger greenback is keeping the upside in check but dovish stance by fed chairman along with US and China trade war concerns to keep downside capped. Market sentiments are also affected by the uncertainty Brexit concerns and possibility of another US government shutdown. U.S. President Donald Trump stated that he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to achieve a trade deal. The two countries had taken a 90-day hiatus in their trade war to work out a deal. Gold can face support near the level of 32500 while its upside will be capped near 33500 while silver can witness further profit booking towards 39200 while facing resistance near 40400. Dollar index can further improve towards 97.5 levels. The US dollar index has edged up against European currencies amid disappointing European economic data, concerns about Brexit and downbeat central bank outlook. U.S. President Donald Trump repeated his promise to build a border wall in his State of the Union address, raising the prospect of another U.S. government shutdown. The European Commission sharply cut its forecasts for euro zone economic growth this year and next on expectations the bloc's largest countries will be held back by global trade tensions and domestic challenges. Meanwhile Shanghai gold premium firmed in January, the volume traded on the Shanghai Gold Exchange was up 14% [year-on-year] and local prices have edged higher.

OIL AND OILSEEDS

The correction in soybean futures (Mar) may witness a halt & take support in the range of 3750-3700 levels. The sentiments are turning optimistic after the export data highlighted a sharp jump in soybean meal exports to Iran during the period April 2018-January 2019 to 2.8 lakh tonnes from 23,000 tonnes last year. In the wake of economic sanctions by the US, Iran turned to India to meet its soybean meal requirements. To support this, Iran started accepting payments in Indian currency, used it to pay India for imports. The hopes of more exports are rising as Iran could use the opportunity to meet its soybean demand from India, because it does not produce enough of the protein-rich soymeal domestically. Mustard futures (Apr) is expected to trade with a downside bias & may even test 3825 levels. The prospects of rape meal exports to China amid US-China trade tensions are less likely to yield any fruit for Indian oilmeal exports & may not resume during current financial year as procedure for registration with MoA, China is too cumbersome, lengthy and time consuming to complete all formalities. CPO futures (Feb) is in the overbought region & correction may emerge due to profit booking & also facing resistance near 576 levels. Moreover, the India's January imports of palm oil, including crude and refined variants, are seen at around 900,000 tn, up 12.5% from December. Globally, the market participants are worried amid pessimism over trade and global growth after the breaking news that President Donald Trump won’t meet Chinese President Xi Jinping before a March 1 deadline to avert new U.S. tariffs on Chinese goods.

ENERGY COMPLEX

Crude oil prices may witness some profit booking at high levels as Russian Energy Minister Alexander Novak poured cold water over Saudi Arabia's hopes. Novak stated in December that it was highly unlikely that OPEC and other oil producers would set up a joint structure due to the additional red tape it would create, as well as the risk of U.S. sanctions against monopolies. On the flip side, Saudi Arabia cut its crude output in January by about 400,000 bpd, bring the total to 10.24 million bpd from 10.643 in December, representing a cut that was 70,000 bpd deeper than targeted under the OPEC-led pact to balance the market and support prices. Crude oil can test 3500 while facing resistance near 4000. The spare capacity in other oil producers and strategic reserves are likely to compensate for a loss of Venezuela's crude exports. U.S. refiners are eager to buy Canadian heavy crude to replace supplies they had been importing from Venezuela that are now blocked by Trump administration sanctions. But there’s not enough space on pipelines and trains to get it across the border due to pipeline constraints. Natural gas counter may continue to plunge further as it can dip lower towards 175. U.S. natural gas plunged to their lowest in almost 2.5 years after forecasts for warmer weather in February and a smaller-than-expected storage decline. EIA showed that inventories fell by 237 bcf compared to expectations for a 245 bcf drawdown.

OTHER COMMODITIES

Cotton futures (Feb) is likely to witness a bounce back amid lower level buying taking support near 20350. Moreover, the statistics of lower output this season may lend cushion to the prices. In its latest estimates, the Cotton Association of India has further trimmed the crop size by 5 lakh bales to 330 lakh bales of 170 kg each for season 2018-19. This estimated crop size is the lowest in a decade. Guar seed futures (Mar) may show more sign of weakness & may even break the strong support near 4185 to test 4030 levels, while guar gum futures (Mar) is expected to plunge further towards 7900 levels. The week-on-week declining ratio of guar seed to guar gum is depicting the fact that demand for these commodities are decreasing. Chana futures (Mar) is expected to show an upside momentum towards 4390. The counter is trading higher at major markets in the country following firm cues from fresh physical trade activity at lower rates. Flour millers are actively purchasing chana due to cheaper prices and easy availability compared to White Pea. Moreover, the cold waves and untimely rains may further damage the standing crop. Mentha oil (Feb) is likely to trade with a positive bias & may even rally up to test 1630-1660, if sustains above 1610 levels. Overall, sentiments are bullish as delayed sowing in the state is likely to affect the crop yield. As per reports, farmers are now worried as untimely rains and inclement weather conditions have delayed the sowing in key producing belts. The production is likely to be badly affected, if weather conditions don't improve in the next few days.

BASE METALS

In base metal counter, prices can witness some profit booking at higher levels as concerns over global economic growth and U.S.-China trade tensions weighing on the market. Weak data in recent weeks in key global economies, including in top metals consumer China, has stoked fears of a recession. A private survey showed that China’s factory activity shrank by the most in almost three years in January as new orders slumped further and output fell. Copper may witness some profit booking at higher level, and may dip towards 435 while facing resistance near 453. Chilean state copper miner Codelco saw a 1.9 percent drop in its output in 2018, at 1.8 million tonnes, while production at the world’s largest copper mine, Escondida, shot up 34 percent in the same year. Meanwhile, Lead may also dip towards 144 while facing resistance near 152.Aluminium can trade with mixed bias in range of 131 -139. Rusal sees demand for aluminium growing in 2019 with potential for prices to rise. Alumina, an oxide key to aluminium smelting process, may be expected to be more balanced. Zinc may also dip towards 190 while facing resistance near 200. Concern about nearby zinc supplies has been fuelled by one company holding between 50 percent and 79 percent of LME zinc warrants and cash contracts. Nickel can also witness profit booking towards 880 while facing resistance near 945 levels. Nickel surged recently after a Brazilian state court ordered Vale to stop using eight tailings dams following a disaster last month that probably killed more than 300 people.

TREND SHEET

TECHNICAL RECOMMENDATIONS

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NEWS DIGEST

• Bank of England stated that Britain faced its weakest economic growth in 10 years in 2019, blaming mounting Brexit uncertainty.

• The Brazilian state of Minas Gerais canceled Vale SA's license to operate a dam at one of its largest mines.

• Eastern Libyan forces loyal to Libyan commander Khalifa Haftar captured the closed El Sharara oilfield last week.

• The U.S. trade deficit fell for the first time in six months in November last year amid declines in imports of cellphones and petroleum products.

• In the wake of the government announcing direct income support of Rs.6,000 per year for small and marginal farmers in the interim Budget on February 1, the Reserve Bank of India, on Thursday, raised the limit for collateralfree agriculture loans to Rs.1.6 lakh from Rs.1 lakh.

• India's cotton crop estimate is further reduced by 5 lakh bales to 330 lakh bales (each of 170 kg) for the season 2018-19. In its January 2019 estimate for India's cotton crop. - Cotton Association of India (CAI)

• BSE, in the commodity derivatives trading space, has launched futures trading in guarseed and guargum.

• The export of oilmeals during January 2019, provisionally reported at 283,850 tons compared to 269,668 tons in January 2018. The overall export during April 2018 to January 2019 is reported at 2,692,452 tons compared to 2,516,657 tons during the same period of last year i.e. up by 7%. - Solvent Extractors’ Association of India (SEA)

• The global food price index compiled by FAO started the year 2019 in a buoyant note and jumped by 1.8 per cent on sequential basis to 164.8 points in January.

WEEKLY COMMENTARY

Rally in commodities took a breather last week on profit booking from higher levels amid bounce back in the greenback. Currency played important role; first INR weakened to the 71.83 levels; reacted on Repo rate cut by 25bps to 6.25%; then it appreciated and traded below 71.3 and this made Indian commodities more volatile. There were corrections almost everywhere, from bullion to energy to base metals and in some agri commodities. Gold and silver moved down after two week strong upside on the stronger dollar index. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell for a fifth straight session on Thursday. Overall, holdings of gold in the relevant exchange traded funds increased in January, according to new data from the World Gold Council (WGC). ETF holdings increased for the fourth straight month, this time by 71.9 tonnes to 2,512.8 tonnes. Base metals counter performed mix as market was full of mix news. U.S. President Donald Trump said on Thursday he did not plan to meet with Chinese President Xi Jinping before a March 1 deadline set by the two countries to strike a trade deal. If there is no agreement between the world's two biggest economies, Trump has threatened to increase U.S. tariffs on Chinese imports. Another round of talks is scheduled for next week in Beijing. On Thursday, the European Commission sharply cut its forecasts for euro zone economic growth as it expects global trade tension and an array of domestic challenges. The Commission said growth this year would slow to 1.3 percent from 1.9 percent in 2018, before rebounding in 2020 to 1.6 percent. It capped the upside of base metals and some of the saw correction viz; lead and zinc. In energy counter both natural gas and crude prices edged down. Extreme volatility returned to the U.S. natural gas market with futures plunging to their lowest in almost two and a half years after forecasts for warmer weather in February and a smaller-than-expected storage decline revived speculative selling.

Cotton counter traded in ambiguity amid ongoing meeting between China and US. Chana gradually moved up on fresh demand from spot market. Guarseed and guargum prices declined in line with crude prices amid dull physical demand. Mentha recovered from the lower levels on improved demand. Turmeric prices moved down on fresh arrivals issues. Jeera saw no respite on weak export demand amid ample supply. In oilseeds; both soyabean and mustard took correction on fresh arrivals issue.

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 $)

Market-friendly policy by RBI

The RBI has announced a big cheer to common people in the first monetary policy review after presentation of Interim budget in Lok Sabha. Reserve Bank of India's last Monetary Policy Committee (MPC) meeting for this financial year led by governor Shaktikanta Das on Feb 07 surprised everyone with a cut in the repo rate. In his first announcement after taking charge as governor of RBI, Mr. Das has announced the repo rate cut by 25 basis points to 6.25 percent under the liquidity adjustment facility (LAF) with immediate effect. The MPC has also decided to change the monetary policy stance from calibrated tightening to neutral.

Highlights of Monetary Policy Review

Impact of the rate cut

Currency Table

News Flows of last week