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WEEKLY VIEW OF THE MARKET

Snapping the three day losing streak, Indian markets started the January series on a positive note with Nifty once again reclaiming 12200 levels and bank nifty 32400 levels supported by gains in financial counters. From derivative front, 12200 put strike added hefty open interest while marginal call writing was observed at 12300 strike. The technical setup at current juncture suggests that whatever fall Nifty has witnessed from its record peaks was profit booking at higher levels and the bounce from key support levels once again can add further momentum into the prices towards record peak. On the higher side, 12300-12350 zone would act as immediate resistance for the Nifty while banknifty has hurdle at 32500 levels. Though the broader trend is bullish for the markets, thus any dip into the prices towards support levels should be used to create fresh long positions. The immediate support for the Nifty is placed at 12200 & 12150 levels. The Implied Volatility (IV) of calls closed at 11.13% while that for put options closed at 12.10%. The Nifty VIX for the week closed at 11.12% and is expected to remain volatile. PCR OI for the week closed at 1.15. In coming week, we believe that still lot of outstanding short position is held with call writers and we might witness another round of short covering once Nifty surpasses 12300 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 (Mar) is expected to hold on to its three months support levels near 5500 levels, while the upside may remain capped near 6800 levels. According to traders, the quality of arrivals in the mandis is lower. On the contrary, the demand from North India is continuing to be sluggish. The market is now eyeing the arrival of new crops, which will start from the end of the next month. Additionally, the sufficient carryover stocks are weighing on prices. Jeera futures (Jan) will probably trade sideways and consolidate in the range of 16300-16800 levels. The exporters are cautious and waiting for the extension of partially restored merchandise export of India scheme incentive, which will expire on December 31. Secondly, the overseas inquiries are lower as the fresh arrivals have started in other major producing countries like Syria and Turkey & it is expected to pick-up gradually. On the supply side, rise in acreage in Gujarat is also weighing on prices. The acreage was at 4,16,639 hectares as on December 23, up 30% as compared with 3,21,363 hectares a year ago, state farm department data showed. Coriander futures (Jan) is likely to remain trapped in the range of 6300-6850 levels. The supplies are getting affected on the spot markets of Rajasthan due to intense cold wave. While on the other side, the adverse weather conditions in key growing areas have hit the sown crop. Cardamom futures (Jan) is likely to trade higher towards 3600 levels. The factors of lower production & strong demand across the consuming markets in North India have pushed up the average price realization to more than Rs.4000 per kg in the auctions market.

BULLIONS

Bullion counter may continue its upside momentum as investors preferred to put bets in the safe haven metal during the holiday season as uncertainties around the US China phase-1 deal still exists in absence of any concrete details of the same. Meanwhile, concerns about the implications of President Donald Trump’s recent impeachment by the House, and worries about stock market valuations being stretched at least in the U.S also boosted yellow metal. But investors are skeptical about the move because of the light volume, but recent data from the US government shows that hedge funds have been accumulating gold futures contracts for at least a month. Gold may continue its recovery as it can test 39400 levels by taking support near 38200 levels whereas silver may recover towards 47600 levels while taking support near 45800 levels. A report that North Korea’s leader Kim Jong Un held a meeting of top military officials to discuss boosting the country’s military capability also supported gold. North Korea may not have delivered a so-called “Christmas gift” to the United States, at least not on Christmas Day, but U.S.-North Korea tensions appear far from resolved as Pyongyang’s end-of-year deadline for nuclear talks approaches. North Korean leader Kim Jong Un’s annual New Year’s Day speech will also be closely watched. Meanwhile, gold silver ratio dipped from nearly 89 to below 85 as silver outperformed gold. This ratio can further dip towards 82 in near term. The gold-silver ratio had hit the level of 94 in July 2019, the weakest since 1991.

OIL AND OILSEEDS

The bull-run of soybean futures (Jan) is likely to get extended towards 4600 levels. The sentiments are firm due to strong demand from crushing plants amid lower supply in spot markets. Quality damage and yield loss has been reported for the new season crop due to the unseasonal and extended rainfall. Apart from quality, output is also expected to remain lower than its preliminary estimates. The next upsurge in mustard futures (Jan) can be seen to reach 4700-4720 levels, only if it surpasses the previous high of 4668. However, the support in near term is at 4550 levels. The market participants are cautious & closely watch the flowering stage of this oilseeds & the impact of the ongoing severe winters on the yield of this oilseed crop. Soy oil futures (Jan) has already seen a run-up of more than 29% last year and the gain doesn’t seem to take a pause in near future. In days to come, it can move more upside to test 940-960 levels. Similarly, CPO has almost doubled last year, giving a return of more than46% year-on-year. The bullish news coming from the international market that Indonesia is pushing for biodiesel mandatory to mix 30% palm-based fuel in a bid to slash its fuel import bill and boost domestic palm oil consumption, will definitely act as a catalyst for rocketing palm oil prices. In Malaysia also there is forecast a steeper-than expected drop in production. The ripple impact of these will surely be bullish on the domestic edible oil price. Saying this, the January contract is expected to rally further towards a new lifetime high of 800-820 levels.

ENERGY COMPLEX

Crude oil prices may remain on firm path as it hits 3 months high amid lower U.S. crude inventories, optimism around the China U.S. trade war and OPECled efforts to curb the oversupply. Crude oil may move further higher as it can test 4550 while taking support near 4300. Meanwhile the API reported that U.S. Stockpiles dropped 7.9 million barrels in the penultimate week. Prices got further boost after President Trump reported that U.S and China would have signing ceremony for so-called Phase 1 agreement to end their trade dispute. Oil prices have also been buoyed by robust hopes that the New Year will usher in an end to the long-running U.S.-China trade tariff war, a dispute that has overshadowed global economic growth prospects and left question marks over future demand for crude. Lower demand also rendered supply cuts by the Organization of Petroleum Exporting Countries (OPEC) and allies including Russia less effective in supporting the market. The so-called OPEC+ grouping agreed in November to extend and deepen production cuts that would take as much as 2.1 million barrels per day (bpd) of supply off the market, or roughly 2% of global demand. Weather related developments to keep natural gas on sideways path as prices can move higher towards 170-175 in near term. According to NatGasWeather “Strong high pressure will dominate much of the US with much warmer than normal conditions where highs will reach the 40s to 70s, warmest over the southern US”.

OTHER COMMODITIES

Cotton on the national bourse is trapped in sideways movement following its bearish fundamentals of rising supplies on the spot markets. There are possibilities that we may see another round of consolidation in the range of 19200-19700 levels. According to traders, the mills are not ready to purchase cotton at the current price. On the supply side, the crop is seen higher and we may see better yields in third and fourth rounds of picking due to better soil moisture. The Cotton Association of India estimated total cotton supply till end of the cotton season i.e. upto 30th September 2020 at 403 lakh bales of 170 kgs. The price scenario of cotton is just the opposite in the international market, wherein it is trading near its four month high of 69.34 cents per pound on CBOT. There is optimism among the market participants amid the news of that the U.S. and China will be having a signing ceremony of the first phase of the trade deal agreed to this month. In days to come, we may see a good buying in chana Import of peas has come to a grinding halt after the government changed its status from the ‘free’ to the ‘restricted’ category and levied a minimum import price (MIP) last week. While chana is a cheaper substitute, demand from the stockiest may push the January contract to 4700, if it breaks the previous high near 4611. Cocud futures (Jan) is looking bullish and the potential to test 2300-2350 on the higher side, taking support near 2155. In the present scenario, the supply of cotton seed has come down in recent days due to the majority of purchases from the Cotton Corporation of India.

BASE METALS

Base metal counter may remain on a positive path. Copper may take support near 435 levels and recover towards 450 levels. China’s copper smelters raised their floor treatment and refining charges (TC/RCs) for the first quarter of 2020 to $67 a tonne and 6.7 cents a pound. China's imports of scrap metal in November rose by 6.3% MoM to 170,000 tonnes. China's refined copper output rose 19.6% YoY to a record monthly high of 909,000 tonnes in November 2019. Meanwhile, lead may remain sideways as it can move in the range of 150-158 levels. Moreover, China issued a pollution alert in the central province of Henan where a numerous lead smelters located which might lead to reduction in output. Lead prices found some support after rising significantly on the shanghai exchange over expectation of restocking of battery material might resume in January 2020. According to ILZSG “For the first 10 month of the year, lead demand exceeded supply by 81,000 tonnes”. Zinc may recover towards 188 levels while taking support near 174 levels. According to the ILZSG “the global zinc deficit reached 152,000 tons for the first 10 months of the year”. Nickel prices can move with sideways path as it may face resistance near 1055 while taking support near 1000 levels. Aluminium prices can recover towards 140 levels by taking support near 133 levels. China's Henan Shenhuo Group is set to commence production at the first 150,000 tonne per annum of its aluminium smelting project in Wenshan prefecture, Yunnan province.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CRUDE MCX (JAN) contract closed at Rs. 4403.00 on 26th Dec’19. The contract made its high of Rs. 4417.00 on 27th Dec’19 and a low of Rs. 3825.00 on 22st Oct’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 4280. On the daily chart, the commodity has Relative Strength Index (14-day) value of 67.188.

One can buy near Rs. 4350 for a target of Rs. 4550 with the stop loss of Rs. 4250.

COPPER MCX (JAN) contract closed at Rs. 444.90 on 26th Dec’19. The contract made its high of Rs. 454.05 on 07th Nov’19 and a low of Rs. 432.70 on 04th Dec’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 445.34. On the daily chart, the commodity has Relative Strength Index (14-day) value of 49.792.

One can buy above Rs. 448 for a target of Rs. 465 with the stop loss of Rs. 440.

COTTON MCX (JAN) contract was closed at Rs. 19430.00 on 26th Dec’19. The contract made its high of Rs. 19730.00 on 04th Nov’19 and a low of Rs. 18900.00 on 11th Nov’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 19347.14. On the daily chart, the commodity has Relative Strength Index (14-day) value of 57.193.

One can buy near Rs. 19320 for a target of Rs. 19760 with the stop loss of Rs 19100.

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NEWS DIGEST

Ÿ MCX has launched a new series of indices under the name MCX India Commodity Indices, or MCX iCOMDEX.

Ÿ MCX has decided to introduce uniform delivery lots across all its metal and energy contracts. From January, new contracts in Zinc, aluminium and lead will only be in lot sizes of one tonne.

Ÿ NCDEX launched future contracts in Bajra - Feed Grade (Symbol: BAJRA) expiring in the months of January 2020,February 2020, March 2020 and April 2020 are available for trading w.e.f. December 20,2019.

Ÿ Indonesia launched biodiesel containing 30% palmbased fuel, the highest mandatory mix in the world, in a bid to slash its fuel import bill and boost domestic palm oil consumption.

Ÿ China, launched its first gold options contract on the Shanghai Futures Exchange on 20th December, 2019.

Ÿ China's Shanghai Futures Exchange would relax trading position limits on its product contracts from 2020 in order to encourage trading activity and increase market participation.

Ÿ Chile's state copper miner Codelco would cancel a contract awarded in November to a consortium led by Japanese firm Marubeni to construct a desalination plant to feed its northern mines.

Ÿ Commodities trader Mercuria Energy Group expects to open a new U.S. Gulf Coast crude oil storage facility in 2020 that could compete to become a trading hub for shale oil.

WEEKLY COMMENTARY

2019 is about to end and it seems that commodities are giving a very strong farewell with its sharp upside move in the last leg of year. CRB saw gradual upside from past four weeks. Downside in dollar index apart from some improvement in economic sentiments stimulated buying in commodities. The dollar hovered near a six-month high versus the Japanese yen while the Australian dollar climbed to its strongest since July on Friday, buoyed by easing Sino-U.S. trade tensions. Bullion counter enjoyed the rally. Gold and silver rose on apprehensions over the U.S.-China trade deal and Trump and his impeachment proceedings. Physical gold demand is still lagging gold investment demand. Gold has shown surprising strength in the final stretch of the year, returning to the $1,500 level even after the Federal Reserve's indication earlier this month to end rate cuts. In the energy counter, crude prices ignited and natural gas recovered from the weekly losses. Long build up in Natural gas ETF’s showing the shift in climate patterns points to chilly weather in January, potentially lifting demand for heating ahead. Oil prices reached three-month highs on Friday after record online shopping by U.S. consumers drove optimism for the world's biggest economy. A report by Mastercard showed that online holiday spending by U.S. consumers reached a new high. Oil prices have also been buoyed by hopes that the U.S.-China trade war will soon end. Nonetheless, the Brent price has increased by more than a quarter in 2019, while the WTI is up around 35%. Base metals yet to react on positive developments in trade deal and economic performances and most of them trade with mix sentiments.

In agri commodities, oil seeds and edible oil lead the complex and gave the best return among all. In BMD, palm oil crossed the mark of 3000 ringgit riding momentum from supply shortage worries as industry groups forecast a steeper-than-expected decline for December production. On MCX, it has seen 12 week nonstop terrific rally. Mustard prices were 3 years high and it is attributed to firm demand from oil millers amid shrinking arrivals in spot markets, along with lag in sowing progress. Soyabean also see good upside owing to domestic demand from livestock businesses amid tight supply from producing belts. The market participants are expecting soybean output to be 8-8.5 million tons, much lower than the official estimate of 13.5 million tons because untimely rain damaged the crop. In news, additional margin of 2% will be applicable on both long and short side in all the running contracts of Soy Bean expiring from January 2020 onwards and in contracts to be launched. It was a good week for spices in which we have seen marginal buying everywhere.

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 $)

MCX ICOMDEX...... Best-In-Class Benchmarks to Commodity Investors

Multi Commodity Exchange of India (MCX) has launched a new series of indices under the name MCX India Commodity Indices, or MCX iCOMDEX. These indices are based on commodity futures contracts traded on MCX and conform to the SEBIprescribed guidelines for the design of commodity indices. Besides, MCX has ensured that the indices adhere to financial benchmarks set by the International Organization of Securities Commissions (IOSCO) in construction, administration and governance. The Index composition is rebalanced by MCX each year.

MCX iCOMDEX are excess return indices which consist of a composite index, sectoral indices and single commodity indices. A composite index (MCX iCOMDEX Composite Index, consisting of eleven liquid futures contracts across different segments traded on MCX), two sectoral indices (MCX iCOMDEXTM Bullion Index and MCX iCOMDEX Base Metals Index) and four single-commodity indices (MCX iCOMDEX Gold Index, MCX iCOMDEXTM Silver Index, MCX iCOMDEX Copper Index and MCX iCOMDEXCrude Oil Index) are being disseminated under the MCX iCOMDEX series of indices. The live index values are being disseminated on a continuous basis through various modes. These indices have a base value of 10,000 as on December 31, 2015 and the historical index values since then are available on the MCX website.

Eligible Index Constituents and Their 2020 Weights

The Eligibility Criteria for Composite Index, the individual index:

• The futures contracts should be on existence on MCX for at least previous twelve months.

• The futures contracts must have a traded history for at least 90% of the trading days during preceding twelve months.

• Average daily turnover of the futures contracts during the previous twelve months should be at least:

a) INR 75 Crore for agriculture commodities

b) INR 500 Crore for non-agriculture commodities

• Constituents having at least 80% combined weightages in the composite index shall meet this turnover criterion and no single constituent not meeting this criterion shall have a weightage of more than 15% in the Composite Index.

• Such a constituent shall have an average daily turnover of at least INR 75 Crore during previous twelve months.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week