MARICO LIMITED (MARICO)

MUTHOOT FINANCE LIMITED (MUTHOOTFIN)

WEEKLY VIEW OF THE MARKET

Overall derivative data indicates short rollover and most of the Nifty August futures positions has been rolled over in the range of 11350 to 11400. Derivative data indicates bearish scenario to continue. Nifty has multiple resistances at higher levels. Various resistance are 11100, 11200 spot levels. We may see short buildup and long liquidation on every rise. In the August option contracts we are seeing maximum options open interest building up in 10800 puts and 11s100/11200 calls. In option data we have been seeing shifting of range towards lower band. Market Undertone is likely to remain bearish. The Implied Volatility (IV) of calls was up and closed at 13.58% while that for put options closed at 13.80%. The Nifty VIX for the week closed at 14.56% and is expected to remain volatile. PCR OI for the week closed at 1.13, which indicates OTM put writing. On the technical front, 10750-10800 spot levels is support zone and current downtrend trend is likely to continue towards 10750-10800 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 LONG BUILD UP

TOP 10 SHORT BUILD UP

SPICES

The correction of turmeric futures (Sept) might get steeper towards 6600- 6500 levels. The export demand to Iran, the largest buyers have come to a standstill since May with the expiry of the US sanctions waiver to India for six months. This has happened after a record turmeric export of over 1,20,000 tonnes in 2018-19, as per the trade figures. Secondly, the spot prices are falling due to expectations of higher acreage on the back of good progress in the monsoon. Jeera futures (Sept) will probably break the major support level near 17100 & plunge further to test 16800-16500 levels. The sentiments are dampened because of high moisture content in the spice, due to rainfall in the key producing areas of Gujarat. Even though the rain gods have made a late entry into the parched lands of Gujarat, in recent weeks the state has witnessed decent rainfall. It is being anticipated that this winter crop will be good this year as rains are just as farmers wanted. Soil moisture will improve and dams will again have water after the revival of monsoon. The overall trend of dhaniya futures (Sept) is still bearish & may descend to 6300-6100 after witnessing a minor pull back. The sentiments are negative as Russian, Ukrainian and Bulgarian harvests are in full swing. Moreover, the Russian crop is expected to be high in the southern areas of Krasnodar and Stavropol thanks to favourable weather. There is high probability that cardamom futures (Aug) may continue its stellar rally towards 4500-4900 levels. The factors acting as catalysts involves failed crops, delayed monsoon, poor stock, in addition to the growing use of the spice in contemporary cooking.

BULLIONS

Bullion counter may trade with some bullish bias as the fear of US and China trade war has once again emerged with a very strong tweet last week in which he mentioned about the failure of talk but still positive about the future talk. The tweet stimulated massive buying in gold and now it is expected to trade with some upside which was few days back trading weak on profit booking from higher levels amid technical weakness. U.S. Federal Reserve delivered a 25-basis-point rate cut as expected but ruled out a lengthy easing cycle. Gold(Oct) can dip lower and can test 35600 in MCX while taking resistance of 36100 while silver can test 39500 while taking resistance near 42500. However, Fed Chair Jerome Powell, speaking in a news conference after the release of the central bank's statement, characterized last week rate cut as "a mid-cycle adjustment to policy", a sign to markets that further sharp cuts were not imminent. U.S. Treasuries reacted to Powell's remarks by flattening the yield curve as the front-end of the market scaled back on prior expectations for at least a 100 basis points of easing in the near-term. U.S. and Chinese negotiators ended a brief round of trade talks on recently with little sign of progress and agreed to meet again in September, prolonging an uneasy truce in a year-long trade war between the world's two largest economiesU.S. Mint sold 5,500 ounces of American Eagle gold coins in July, up 10% from the previous month.

OIL AND OILSEEDS

Soybean futures (Sept) is expected to show an upside momentum towards 3625-3650, taking support near 3565 levels. It is reported that the government has sounded caution about the spread of yellow mosaic disease in the soybean crop in isolated pockets of Madhya Pradesh, the top grower of the oilseed. Farmers are alerted and advised to remove the infected plants and take all the measures to prevent the spread. Reportedly, the disease is mostly in western parts of the state comprising the Malwa region. Current weather conditions are also favourable for leaf spot and anthracnose diseases. Mustard futures (Sept) may continue to hover sideways & consolidate in the narrow range of 3920-3960 levels. The spot prices are showing a steady to firm trends due to improved demand from local crushers. In days to come, there is anticipation of a rise in demand from oil millers and mustard meal exporters. Soy oil futures (Sept) is likely to trade sideways in the range of 725-740 levels, while CPO futures (Aug) may remain trapped in the zone of 507-517 levels. The market participants are cautiously watching the movement of edible oils in the international market & gauging the demand of China after U.S imposed additional 10% tariff on $300 billion in Chinese imports that aren't yet subject to US duties after setbacks in negotiations with Beijing. Additionally, another limiting factor is the huge stocks in domestic markets and estimates given by the Malaysian Palm Oil Council that India is likely to import 2.5 million tons palm oil from Malaysia following its 5% preferential duty on the edible oil.

ENERGY COMPLEX

Crude oil prices may trade in range as global economic growth is likely to slow further amid the U.S.-China trade war but drop in crude production among OPEC members, along with Libya cutting exports will limit the downside. Trade war discussion turned bitter, though the talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into US. It will give negative impact on the health of the economy; ultimately put pressure on the commodities; closely associated with the health of economies and crude is one of them. Meanwhile, U.S. crude oil stockpiles fell for the seventh straight week, declining to their lowest levels since November even as production rebounded and net imports increased. Crude oil may take support near 3700 while taking resistance near 3980 levels. Supply risks are still a concern as tensions remained high around the Strait of Hormuz, through which about a fifth of the world’s oil passes. Tensions spiked between Iran and the West after Iranian commandos seized a British-flagged oil tanker in the Gulf this month in apparent retaliation for the capture of an Iranian tanker by British forces near Gibraltar. Natural gas may under selling pressure as it can test 140 levels while taking resistance near 158 levels. The current forecasts for much warmer-than-normal weather from mid-September through November proves to be correct, weatherdriven demand could be exceptionally low. NOAA also reported that the weather in the North East will be warmer than normal over the next 6-10 days .

OTHER COMMODITIES

Cotton futures (Aug) is expected to follow the downhill footsteps of international cotton prices trading near 3 year low of 61.45 cents a pound & plunge towards 19990 levels. The demand for U.S cotton by China is seen declining after Trump statement that U.S. will start, on September 1st, putting an additional Tariff of 10% on the remaining $300 Billion of goods and products coming from China. Back at home, planted area in Central India is 5% higher than last year due to high domestic seed cotton prices and delayed monsoon rains. While export prospects have diminished, imports are expected to remain stable as they remain price competitive against domestic supplies. Additionally, slow yarn exports, is too weighing on cotton prices. Guar seed futures (Sept) is likely to consolidate in the range of 4200-4400 levels. The revival of rains in the growing areas boosted sowing and raised the improved prospects of better output in the ongoing Kharif season. Rains in the next few days will encourage sowing in the rain-fed area where farmers are likely to increase area of guar that have been lagging due to fewer rains so far. As per the latest statistics from Department of Agriculture, Rajasthan this season till 31st July, guar has been sown on 1451.50 thousand hectares, as compared to 2612.3 thousand hectares during this time last year. Castor seed futures (Sept) is likely to take support for the sixth consecutive weeks near 5580 levels & trade with an upside bias due to reports of lower acreage this season. In Rajasthan, the area covered under sowing is 72% down at 13,900 hectares as compared to 50,100 thousand hectares during same time last year.

BASE METALS

Base metal counter can trade on mixed path amid uncertainty regarding US and China trade dispute and slowing Chinese economy. Pressure on China's factories eased a little in July due to growth-boosting steps from the government, but overall manufacturing activity remained in contraction. China’s factory activity shrank for the third straight month in July, underlining the need for more stimulus to support an economy hit hard by the bruising trade war with the United States. Copper may find support near 430 levels while facing resistance near 460 levels. Meanwhile, Lead may recover towards 162 levels while taking support near 148 levels. About 18,000 tonnes of lead are expected to be off the market as Korea Zinc is carrying out maintenance at a lead refinery until late August, but the company had secured inventories ahead of the maintenance. Zinc may recover towards 197 levels while taking support near 186 levels. Steel futures in China slumped to their lowest in five weeks ahead of the lifting of intensified production restrictions in the nation's top steelmaking city of Tangshan. Nickel prices can move with sideways to upside bias as it can move in range of 980-1025. Aluminium can trade with sideways bias as it can take support near 138 levels while facing resistance near 146 levels. United Company Rusal reported a 21% rise in second quarter aluminium sales compared to the previous quarter, as the Russian aluminium giant’s recovery from 10 months under U.S. sanctions accelerated.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CRUDEOIL MCX (AUG) contract closed at Rs. 3966.00 on 1st Aug’19. The contract made its high of Rs. 4188.00 on 15th Jul’19 and a low of Rs. 3604.00 on 13th Jun’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 3966.20. On the daily chart, the commodity has Relative Strength Index (14-day) value of 43.120.

One can sell between Rs. 3930-3960 for a target of Rs. 3670 with the stop loss of Rs. 4055.

NICKEL MCX (AUG) contract closed at Rs. 1019.30 on 1st Aug’19. The contract made its high of Rs. 1049.40 on 18th Jul’19 and a low of Rs. 869.00 on 18th Jun’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 932.68. On the daily chart, the commodity has Relative Strength Index (14-day) value of 65.754.

One can buy near Rs. 980 for a target of Rs. 1060 with the stop loss of Rs. 940.

CPO MCX (AUG) contract was closed at Rs. 514.50 on 01st Aug’19. The contract made its high of Rs. 524.50 on 19th Jun’19 and a low of Rs. 492.20 on 10th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 516.30. On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.618.

One can buy near Rs. 512 for a target of Rs. 536 with the stop loss of Rs 500.

11

NEWS DIGEST

• In a circular issued, Sebi said, “All compulsory delivery commodity futures contracts shall have a staggered delivery period. The minimum staggered delivery period should be five working days”.

• NCDEX has revised the positional limits for agricultural commodities with effect to Sep 2. The exchange has lowered the positional limits for barley, castor, chana, guar gum and guar seed whereas raised limits for cottonseed oilcake, coriander, kapas, maize, mustard, sugar, soybean and turmeric.

• NCDEX launched Options on Guar Seed 10 MT Futures, Options on Guar Gum 5MT Futures, Options on Chana Futures and Options on Soybean Futures with effect from August 02, 2019.

• Malaysian crude palm oil (CPO) production for the first half of calendar year (CY) 2019 was up roughly 10% compared to the same time the previous year to 9.8 million metric tons (MT). – USDA Foreign Agricultural Service

• Glencore has started a new copper concentrates blending facility in Taiwan to mix clean material with ores containing high levels of arsenic.

• OPEC oil output hit an eight-year low in July as a further voluntary cut by top exporter Saudi Arabia deepened losses caused by U.S. sanctions on Iran and outages elsewhere in the group.

• Philippines' copper and gold producer Philex Mining Corp said on Thursday it's seeking possible strategic partners for a long-delayed $1.1 billion mine project in the south of the country.

• BHP Group posted its largest annual profit in five years and record full-year dividends.

• United Company Rusal reported a 21% rise in second quarter aluminium sales compared to the previous quarter.

WEEKLY COMMENTARY

Commodities traded under pressure from past few weeks and the downside deepened more after the negative tweet of Mr. Trump on Thursday. CRB faced resistance near 195 and now trading near 180 levels. The fear of US and China trade war has once again emerged with a very strong tweet last week in which he mentioned about the failure of talk but still positive about the future talk. The tweet stimulated massive buying in gold. Correction occurred everywhere and capital inflows were seen in bullion as well in dollar index. Dollar index hit two years high of 98.94, which also exerted pressure on commodities. Safe haven demand returned in bullion counter and it made a weekly high of 1457.50 levels. Gold miner stocks and sector-related ETFs surged late Thursday as investors turned to the precious metal in the wake of President Donald Trump’s sudden threats of additional tariffs on Chinese goods. Gold was under pressure in the first half of the week after the Fed went for interest rate cut and Fed attributed the cut to a “mid-cycle adjustment” and not necessarily the start of a “lengthy” rate-cutting process. Silver; too saw the upside but it was limited. Trade war discussion turned bitter, though the talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. It will give negative impact on the health of the economy; ultimately put pressure on the commodities; closely associated with the health of economies and crude is one of them. Most of the base metals closed in red except nickel and aluminum. Oil prices fell almost 7% on Thursday, the most this year, as President Donald Trump’s threat to put additional 10% tariff on China, hammered a market already tanking on disappointment over an inadequate U.S. interest rate cut. Natural gas prices saw pause in the fall. In agri commodities, oil seeds and edible oil futures saw some bearish pressure. Cotton traded bearish in both domestic as well as in international market whereas cotton oil seed cake continued its firm trend. Cotton is the primary raw material for cottonseed oilcake & there is drought-like situation in the key growing states of Gujarat and Maharashtra. Castor saw good rebound on strong technical amid slow sowing report. Kharif acreage of castor seed was down 34% on year in the week ended Thursday due to slower pace of sowing in Rajasthan, the second-largest grower, according to data from the farm ministry.

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 $)

US benchmark rate and its impact

The US FOMC announced a 25 bps cut in the benchmark rate. It was first rate cut by the Fed in over 10 years. The US Federal Reserve uses changes in its fed funds rate to manipulate US economic growth, but its impact is even more far-reaching, influencing as it does the relative strength of the US dollar versus other currencies, and the interest rate decisions of the world’s other major central banks. There were widespread expectations that the Fed would be launching a rate cut cycle from August, with at least 75 bps cut in the Fed funds rate up to the end of the year, in order to help avoid recession in the US. But, the Fed Chairman made it clear that the rate cut was “mid-cycle adjustment to policy”, thus ruling out a series of rate cuts. The Fed appears to have lowered rates this time due to the uncertainties to economic growth due to the ongoing trade tensions and lower than expected inflation. But as the FOMC statement said, US labour market remains strong and economic activity in the US has been rising at a moderate rate.

Impact on Stock market

There was a violent reaction in the US market to the Fed Chairman’s statement ruling out a rate-cutting cycle. The Dow Jones Industrial Average and the S&P 500 lost over 1% after the statement. But, this is not surprising since both the indices are trading close to their life-time highs and are up 15 and 18 per cent so far this year. The Sensex and the Nifty have begun the session on a weak note, down over 1 %, in line with other global indices. The rate-cut by the Federal Reserve is important for all global markets because the impact it has on the foreign portfolio flows in to the country.

Impact on Rupee

The dollar can strengthen further in the days ahead as the rates in US are far more lucrative compared to negative yields on bonds of other advanced economies. Further, with dollar being a safe haven asset, money tends to move in dollardenominated assets in times of stress, away from riskier assets. Rupee has not reacted too much to dollar strength, and is trading slightly down, around 69. But this event is likely to limit rupee’s strength to the 68-68.5 zone. A stronger dollar will apply downward pressure on the Indian currency and drag it towards the 70-70.5 zone. But the relatively attractive real yields on Indian bonds is likely to sustain FPI flows in to Indian debt, thus providing support to the Indian rupee, keeping it in the 68-71 range for a while. Going along with that bullish backdrop in the US Dollar has been a support breach in Gold, taking out the 1415 level that had helped to hold the lows over the past couple of weeks. The 1400 level may remain of interest for those that want to approach Gold with an aggressively bullish approach; although longerterm support potential may remain as more attractive in areas such as 1375 or 1357.50. Each of those prices was significant areas of prior resistance that as yet, haven’t been tested for support since the June breakout took-hold. While it can face resistance near 1480 & 1520

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week