MARUTI SUZUKI INDIA LIMITED (MARUTI)

TECH MAHINDRA LIMITED (TECHM)

WEEKLY VIEW OF THE MARKET

Indian markets beaten down in the week gone by with nifty falling well below 10750 marks on the back of sharp selloff in banking, financial and reality counters. From derivative front, call writers were seen active in 10900 & 11000 call strikes while marginal put writing was observed at 10700 strikes. Call writers are seen shifting to lower bands from recent past which clearly indicate that bears are likely to keep control over markets moving forward as well. From the technical front, Nifty and Bank Nifty both the indices have given a sharp breakdown below the triangle pattern, which is also a bearish signal for the markets and we may witness more downside into the prices. The Implied Volatility (IV) of calls was up and closed at 15.68% while that for put options closed at 16.08%. The Nifty VIX for the week closed at 17.02% and is expected to remain up trending . PCR OI for the week closed at 1.03, which indicates OTM call writing. It is expected that as far we are holding below 11000 levels in Nifty (SPOT), the current trend is likely to remain bearish and markets should move towards 10600-10560. However, any technical bounce towards 10850-10900 levels which would be a key supply zone, and one should use for creating fresh short positions.

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) may witness correction till 6700 levels on cues from the spot market where prices are trading weak due to fragile domestic and overseas demand. The overall sentiments related to jeera are bearish due to weak export demand and good rainfall in key areas of Gujarat that may lift production in the coming season. Gujarat received good rainfall recently, and the water level in dams rose significantly. This will motivate farmers to grow jeera on higher area and increase production, which are likely to drag jeera prices down. In Unjha, the benchmark spot market for jeera, prices remained in the negative zone & traded around 17,500. On the national bourse, taking negative cues from the spot markets, the September contract is expected to drop further towards 16500-16300 levels, if breaks 16720 levels. Dhaniya futures (Sept) is expected to trade with a downside bias to 5700-5600 levels. The spot prices are under pressure due to subdued demand as rainfall in the key producing areas of Rajasthan led to high moisture content. Cardamom futures (Sept) is expected to hold on to the support near 3050 & witness a pullback rally till 3350-3400 levels. Damage to the standing cardamom crop in Kerala has induced bullish sentiments into the market. Karnataka imports more than 80% of its cardamom from Kerala, mainly from Idukki and Kottayam districts, both of which have been severely hit by the floods this year, leading to depleting stocks. The demand is expected to rise with start of festive season as it is needed in many sweets and desserts.

BULLIONS

Bullion counter may continue to extend its swift rally upside amid Minutes of US Federal Reserve's July meeting showed policymakers deeply divided over whether to cut interest rates. Some Fed members favored a deeper cut of half a point, while some favored no change at all. Gold investors will closely watch Fed chair Jerome Powell’s comments at the Jackson Hole symposium, scheduled for Friday. They would also be watching this weekend's G7 summit on what additional steps policymakers may take to boost economic growth. Traders mostly expect that US Federal Reserve could go for another 25 basis-point cut in US interest rates in September. Lower interest rates boost the appeal of noninterest yielding assets like gold. Global equity markets have recovered this week after on expectations that major economies like China and Germany would announce stimulus to boost growth. Gold (Oct) can trade in a range and can test 38500 upside in MCX while taking support near 37300 while silver can test 45000 while taking support near 42500. Mixed factors have kept gold in a range. Supporting price is ETF inflows show robust investor interest. Gold holdings with SPDR ETF rose by 6.74 tonnes to 851.91 tonnes, highest since May 2018. In India, spot gold prices surged to a new high of Rs.38,820 per 10 gram in Delhi bullion market. But many jewelers say that the recent surge in domestic gold prices have hurt demand. Also, recent floods in states like Kerala and Karnataka may also weigh on gold sales. Silver along with gold may remain in range in the near term as halt in rally may pave way for profit taking.

OIL AND OILSEEDS

Soybean futures (Sept) may consolidate & trade with a downside bias in the range of 3575-3750 levels. In the present scenario, lean arrival season may further support prices but increased sowing under soybean so far would limit any significant rise. On the CBOT, US soybean futures is expected to trade sideways to down in the range of $8.45-8.75 a bushel. The agriculture and biofuel industries and their U.S. congressional allies ramped up pressure on the Trump administration on over the relief he has given oil refiners from rules requiring use of biofuels. The Iowa Soybean Association’s letter to the White House said the refining exemptions were forcing biodiesel producers to shut plants and lay off workers. The uptrend will possibly continue to persist in soy oil futures (Sept) till 765-770 & 570-580 in CPO futures (Sept), taking positive cues from the international market & firmness in rupee, making imports costlier. The rupee fell to its lowest level since Dec 14 tracking a fall in the Chinese yuan in the offshore market. On the Bursa Malaysia Derivatives Exchanges, palm oil is trading near two months high of 2265 MYR/ton & is expected to rise further towards 2359 MYR/ton. Data released by a state millers association showed slowing output growth for the first 20 days of August versus the corresponding period last month, according to traders. Mustard futures (Sept) is expected to consolidate in the range of 3850-4050 levels. The sentiments are weak due to weak demand from oil millers amid steady arrivals. Rising area under kharif oilseeds and favourable weather conditions is also weighing on the sentiment.

ENERGY COMPLEX

Crude oil prices may trade with sideways to downside amid mixed fundamentals. Crude oil may take support near 3820 while taking resistance near 4100 levels. OPEC delivered a downbeat oil market outlook for the rest of 2019, as economic growth slows and highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to curb supply. The bearish outlook due to slowing economies amid the U.S.-China trade dispute and Brexit could press the case for OPEC and allies including Russia to maintain a policy of cutting output to support prices. Traders were worried about the prospects for global oil demand especially amid trade tensions between the U.S and China, the world’s two biggest economies and oil users. U.S. President Donald Trump said he was “the chosen one” to address trade imbalances with China, even as congressional researchers warned that his tariffs would reduce U.S. economic output by 0.3% in 2020. Oil traders, are awaiting a speech from Federal Reserve Chairman Jerome Powell on Friday at an economic conference in Jackson Hole, Wyoming, that could indicate whether the central bank will continue to cut interest rates and ease monetary policy. Meanwhile, oil markets found some support from the simmering tensions between U.S. and Iran, after Iranian President Rouhani said if Iran’s oil exports are cut to zero, international waterways will not have the same security as before. Natural gas may witness further recovery as it can test 168 levels while taking support near 145 levels. 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

Soybean futures (Sept) may consolidate & trade with a downside bias in the range of 3575-3750 levels. In the present scenario, lean arrival season may further support prices but increased sowing under soybean so far would limit any significant rise. On the CBOT, US soybean futures is expected to trade sideways to down in the range of $8.45-8.75 a bushel. The agriculture and biofuel industries and their U.S. congressional allies ramped up pressure on the Trump administration on over the relief he has given oil refiners from rules requiring use of biofuels. The Iowa Soybean Association’s letter to the White House said the refining exemptions were forcing biodiesel producers to shut plants and lay off workers. The uptrend will possibly continue to persist in soy oil futures (Sept) till 765-770 & 570-580 in CPO futures (Sept), taking positive cues from the international market & firmness in rupee, making imports costlier. The rupee fell to its lowest level since Dec 14 tracking a fall in the Chinese yuan in the offshore market. On the Bursa Malaysia Derivatives Exchanges, palm oil is trading near two months high of 2265 MYR/ton & is expected to rise further towards 2359 MYR/ton. Data released by a state millers association showed slowing output growth for the first 20 days of August versus the corresponding period last month, according to traders. Mustard futures (Sept) is expected to consolidate in the range of 3850-4050 levels. The sentiments are weak due to weak demand from oil millers amid steady arrivals. Rising area under kharif oilseeds and favourable weather conditions is also weighing on the sentiment.

BASE METALS

Base metal counter can trade on mixed path amid uncertainty regarding US China trade dispute. Copper may find support near 435 levels while facing resistance near 455 levels. LME Copper stocks have more than doubled this year to 277,975 tonnes and those in ShFE warehouses have risen 40% to 155,971 tonnes. Imports of copper ores and concentrates surged 41% to 2.074 million tonnes in July, the highest on record. Meanwhile, Lead may recover towards 160 while taking support near 150 levels. Zinc may remain on weaker side as it can test 180 levels while taking resistance near 188 levels. The zinc market was in deficit by 123,000 tonnes over the first five months of the year, according to the ILZSG. January-May zinc mine production hit 5.27 million tons, up 1.4% from 5.20 million tonnes during the equivalent five-month period in 2018. Nickel prices can move with sideways to upside bias as it can move in rage of 1080-1180 levels. Indonesia relaxed a ban on ore exports in 2017, but said at the time the moratorium would last only five years and that export would be restricted again in 2022. Indonesia's nickel miners association (APNI) urged the government not to bring forward a ban on raw mineral exports from 2022. Aluminium can trade with weak bias as it can take test 138 levels while facing resistance near 145 levels. Russian aluminium giant Rusal stated that lifting the share of high value-added products in its sales might prove to be tough in coming months due to the weaker market for the metal.

TREND SHEET

TECHNICAL RECOMMENDATIONS

NICKEL MCX (SEP) contract closed at Rs. 1122.30 on 21st Aug’19. The contract made its high of Rs. 1160.00 on 16th Aug’19 and a low of Rs. 974.10 on 29th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 1012.20. On the daily chart, the commodity has Relative Strength Index (14-day) value of 70.536.

One can buy near Rs. 1090 for a target of Rs. 1200 with the stop loss of Rs. 1050.

TURMERIC NCDEX (SEP) contract closed at Rs. 6694.00 on 8th Aug’19. The contract made its high of Rs. 7288.00 on 16th Jul’19 and a low of Rs. 6546.00 on 5th Aug’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 6948.30. On the daily chart, the commodity has Relative Strength Index (14-day) value of 52.000.

One can buy near Rs. 6750 for a target of Rs. 7200 with the stop loss of Rs. 6525.

GUARSEED NCDEX (SEP) contract was closed at Rs. 4352.50 on 21st Aug’19. The contract made its high of Rs. 4526.00 on 11th Jul’19 and a low of Rs. 4206.00 on 29th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 4396.40. On the daily chart, the commodity has Relative Strength Index (14-day) value of 42.437.

One can sell near Rs. 4350 for a target of Rs. 4100 with the stop loss of Rs 4475.

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NEWS DIGEST

• As per Fourth Advance Estimates for 2018-19, total foodgrain production in the country is estimated at 284.95 million tonnes which is higher by 19.20 million tonnes than the previous five years’ average production of foodgrain.

• BSE Ltd has revised the staggered delivery tender period to last 5 trading days, including the expiry day, for most commodity futures contracts expiring in October and thereafter.

• During Jun 1-Aug 20, the country, so far received, 640.8 mm rainfall, 2% above the normal weighted average of 628.3 mm, IMD data showed.

• India's castor oil exports rose over 9% on year to 44,100 tn in July, according to data by the Solvent Extractors' Association of India.

• The global world refined copper market showed a 62,000 tonnes deficit in May, compared with a 124,000 tonnes deficit in April, the International Copper Study Group said in its latest monthly bulletin.

• China’s central bank unveiled a key interest rate reform to lower corporate borrowing costs and supports a slowing economy.

• China’s outstanding local-currency loans were at a staggering 147 trillion yuan ($20.87 trillion) at the end of July.

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

• India's crude oil production declined 4.4% to 2.77 million tonnes (mt) in July 2019 over July 2018. Crude oil output declined 6.2% to 10.98 mt in April-July period of the fiscal year ending March 2020 (April-July 2019), as compare to corresponding period of last year.

WEEKLY COMMENTARY

CRB index tried to gain some strength from the lower side, rebound in crude supported to stay near 180 mark. Geopolitical tension amid fall in inventory kept crude oil prices in higher zone. Tensions in the Middle East remained in the spotlight as U.S. Secretary of State Mike Pompeo said on Tuesday that the United States would take every action it can to prevent an Iranian tanker in the Mediterranean from delivering oil to Syria in contravention of U.S. sanctions. Oil prices were also supported by data showing lower exports in June from Saudi Arabia, the world’s top oil exporter. The EIA reported that U.S. crude inventories decreased by 2.7 million barrels during the week ended Aug 16, more than the drop of 1.89 million forecast by analysts. In Indian market, it traded near 4050 levels. Natural gas showed continuous but gradual upside. It remained firm in third week in continuation. All base metals took a downside on gloomy world outlook. Copper made two years low for the same reason. Nickel which gave terrific upside in recent past saw correction from upside. Sentiments in lead, zinc and aluminum were more or less same. Upside in dollar index also created bearish pressure on industrial metals sector. Xinfa Group, one of China's top aluminium producers, has shut down an aluminium production line after an explosion at a plant in the northwestern Chinese region of Xinjiang. Bullion counter saw some correction from higher side as traders were disappointed that the U.S. Federal Reserve did not reveal any plans for a series rate cuts. Back at home, gold traded in green territory on sharp weakness in Indian currency. Silver saw a continuous upside of eight week on MCX, though it saw minor profit booking in COMEX. Gold’s faring extremely well as a safe haven asset; with inflows into exchange-traded funds (ETF) hitting 1,000 tonnes since holdings bottomed in early 2016 after a prolonged unwind in the wake of the global financial crisis.

In agri, both oil seeds and edible oil futures traded weak. Though slower than expected growth in production in Malaysia gave some support to CPO in later part of the week. Cotton was up on pickup in demand and international inquiries amid firm international market. Lower export demand kept castor in negative territory. Spices remained traded weak on expectation of higher production. The sentiments are bearish as the winter crop output is seen robust due to adequate rains. Dhaniya turned weak as the report imports from Ukraine, Russia and Bulgaria have convinced the market participants to create short positions.

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 $)

4th Advance Estimates of production of major crops for 2018-19

The 4th Advance Estimates of production of major crops for 2018-19 have been released by the Department of Agriculture, Cooperation and Farmers Welfare on 19th August, 2019. As per Fourth Advance Estimates for 2018-19, total Food grain production in the country is estimated at 284.95 million tonnes which is higher by 19.20 million tonnes than the previous five years’ (2013-14 to 2017-18) average production of food grain.

• Total production of Rice during 2018-19 is estimated at record 116.42 million tonnes. Production of rice has increased by 3.66 million tonnes than the production of 112.76 million tonnes during 2017-18. It is also higher by 8.62 million tonnes than the five years’ average production of 107.80 million tonnes.

• Production of Wheat, estimated at record 102.19 million tonnes, is higher by 2.32 million tonnes as compared to wheat production of 99.87 million tonnes achieved during 2017-18. Moreover, the production of wheat during 2018-19 is also higher by 7.58 million tonnes than the average wheat production of 94.61 million tonnes.

• Total Pulses production during 2018-19 is estimated at 23.40 million tonnes which is higher by 3.14 million tonnes than the last Five years’ average production of 20.26 million tonnes.

• Total Oilseeds production in the country during 2018-19 is estimated at 32.26 million tonnes which is higher than the production of 31.46 million tonnes during 2017-18. Moreover, the production of oilseeds during 2018-19 is also higher by 2.61 million tonnes than the average oilseeds production.

With an increase by 20.25 million tonnes over 2017-18, total production of Sugarcane in the country during 2018-19 is estimated at 400.16 million tonnes. Moreover, the production of sugarcane during 2018-19 is also higher by 50.38 million tonnes than the average sugarcane production of 349.78 million tonnes.

• Production of Cotton estimated at 28.71 million bales (of 170 kg each) and production of Jute & Mesta estimated at 9.77 million bales (of 180 kg each).

The bumper production spells well for farmers, government and for better economic growth. Adequate supply of agriculture produce keep food inflation under check, but it also weigh on prices to slide below the production cost that increase the misery of farmers. The government has also to be faced a daunting task of ensuring farmers a fair and remunerative price for their produce. The lack of procurement processes and infrastructure are forcing farmers to distress sell their produce in the open market. Meanwhile, the Centre has started a new procurement mechanism so that most of the notified crops can be procured at MSP-a move, which will help farmers get remunerative prices of their farm produce.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week