ICICI Prudential Life Insurance Company Limited (ICICIPRU)

Petronet LNG Limited (PETRONET)

WEEKLY VIEW OF THE MARKET

Nifty is trading between support and resistance. In recent sideways movement call writers and puts writes were seen active in both calls and puts. Derivative data indicates bearish scenario to continue. Nifty has multiple resistances at higher levels. Various resistances are 11700 & 11800 spot levels. We will see short buildup and long liquidation on every rise. In the July option contracts, we are seeing maximum options open interest building up in 11500 puts and 11800 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 closed at 12.79% while that for put options closed at 12.05%. The Nifty VIX for the week closed at 12.47% and is expected to remain sideways. PCR OI for the week closed at 0.90, which indicates OTM call writing. On the technical front, 11500-11550 spot levels is support zone and current trend is likely to continue towards 11400- 11450 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 (Aug) may continue to face resistance near 6790 levels & the upside may remain capped. The latest statistics show that in Telangana, till now, 85% of sowing has been completed. Demand is seen poor during the monsoon season. Prices are also under pressure ahead of sowing in Erode, another key producer in Tamil Nadu, where sowing will commence from Jul 15. We may again see an upside momentum in Jeera futures (Aug) rising towards 17800-17900 levels. The sentiments are on a strong foot due to steady demand from domestic stockists amid fall in supplies. The arrivals are lower as farmers are hoarding their produce on expectations of better prices. Cardamom futures (Aug) may head towards 3100-3200 on the back of failed crops, deficit monsoon & poor inventories. The crop is 30-40 % less than normal as this year the behavior of monsoon in Kerala is just the opposite of last year wherein the aromatic crop were floated away in massive floods. This year, the South-West monsoon in Kerala has been deficient by an estimated 35%. It is being anticipated that the prices are unlikely to drop even as new produce is expected to hit the market by July. Due to disequilibrium in demand-supply scenario whatever supplies would come, will be procured by the stockiest. Small-scale cardamom farmers are yet to reap the benefits as harvesting of presently cultivated cardamom could be done only by August. Dhaniya futures (Aug) may see lower level buying near 7040-7000 and later gain towards 7300- 7400. The overall sentiment for coriander is bullish because of higher export demand and a smaller crop in the key growing areas of Rajasthan and Gujarat.

BULLIONS

Bullion counter may continue to remain on upside path but profit booking at higher levels cannot be denied. Investors are edgy regarding the US China trade war; Middle East tensions and expectation of interest rate cut by Fed in this month meeting. Dovish stance by the Fed is assisting the bullion counter but bounce back in greenback is capping the upside. Gold is facing stiff hurdle near 35300 in MCX and $1440 in COMEX while it has strong support near $1380 and 34000 on domestic bourses. Meanwhile silver can test 38800 while taking support near 37500. Worries over renewed U.S.-China trade tensions and expectations of a rate cut by the Federal Reserve boosted demand for the safe-haven metal. Fed Chair Jerome Powell indicated that a rate cut is likely at the Fed’s next meeting as businesses slow investment due to trade disputes and a global growth slowdown. Furthermore signs of a pick-up in underlying inflation, along with separate data on weekly jobless claims showing the labour market remained solid, curbed financial market expectations of a more aggressive 50 basis point cut at the Fed’s July 30-31 meeting. According to World Gold Council’s estimates a 2.5% increase to gold’s import duty may result in a reduction of gold demand by approximately 2.4% in 2019. According to WGC weaker economic growth and the possible impact of higher gold price volatility may result in softer consumer demand this year, especially in emerging markets that make up the major share of annual demand.

OIL AND OILSEEDS

Soybean futures (Aug) may witness a consolidation in the range of 3540-3690 levels until there is a clarity on monsoon over the growing areas during next week. This Kharif season, soybean may be an exception among the other crops that are under threat due to poor monsoon so far. So far sown areas is on just a third of a year-ago area & is hopefully the final acreage would be close to the average area of 11 mln ha. The acreage is likely to rise in coming days due to the prospects of better rains from July onwards. U.S soybean futures (Aug) is expected to continue to take support near $8.70 a bushel. A softer dollar and USDA making a downward revision by 305 million in output figures to 3.845 billion bushels, may keep the counter steady. Mustard futures (Aug) will probably remain stuck in the consolidation zone of 3880-3960. The upside is being capped by the sluggish demand as the crush margin is negative of Rs.103 per quintal. Day’s ahead, crushing is expected to fall more now because of end of peak arrival season. CPO futures (July) is trading near the crucial support of 492 & if it attempts to break, the downside may get extended towards 490-485 levels. The CPO price war between Indonesia and Malaysia might deepen due to the increased supplies of cheaper Indonesian palm oil flooding the market, causing further downward pressure on the Malaysian CPO price. Soy oil futures (Aug) is likely to trade with a positive bias in the range of 723-736. An expectation of a weaker rupee taking support near 68.25 against Dollar may make import costlier & we may see a rebound in this edible oil counter.

ENERGY COMPLEX

Crude oil prices may continue to witness further upside as U.S. oil producers in the Gulf of Mexico cut more than half their output in the face of a tropical storm and as tensions continued in the Middle East. Oil companies in the Gulf of Mexico had cut more than 1 million barrels per day (bpd) of output, or 53% of the region’s production, due to Tropical Storm Barry. Meanwhile, Iran’s alleged attempt to block a British-owned tanker heightened tensions in the Middle East in the wake of attacks on tankers and the downing of U.S. drone by Iran in June. But a lower 2020 oil demand outlook from the Organization of the Petroleum Exporting Countries can keep price gains in check. OPEC stated that the world would need 29.27 million bpd of crude from its 14 members in 2020, down 1.34 million bpd this year. OPEC stated that oil output in June fell by 68,000 bpd to 29.83 million bpd, above 2020 demand forecast. Crude oil may excel further towards 4350 levels while taking support near 3900 levels in near term. Natural gas may witness lower level buying as it can test 175 while taking support near 157. According to Natgasweather , “A strong cold front will push across the Great Lakes and Northeast the next several days with lows behind the cold front reaching the 0s to 20s for strong demand. Investors are waiting for the short-term or mid-term weather forecasts to confirm or deny the return of cooler temperatures later in the month.

OTHER COMMODITIES

We might see a further slump in cotton futures (July) towards 20800-20600 levels. This weakness is mainly due to the bearish trend in the international cotton market which is near to three-year low amid the outlook for big supplies at a time when consumption growth is slowing and American exports are hurting. US President Donald Trump accused China of backsliding on promises to increase purchases of American farm exports. It is reported that the hedge funds are holding their biggest-ever bet that the declines will continue. Back at home, despite lower yields due to scanty rain last year, Gujarat’s farmers seem to be banking on cotton this Kharif season. Sowing of cotton in Gujarat is much better than in states such as Maharashtra, Karnataka, Andhra Pradesh and Telangana. Maize futures (Aug) is trading near its lifetime high of Rs.2254 per quintal due to supply tightness. This bullish momentum is likely to prevail and in days to come 2350 levels can be seen on the national bourse. The government allowed another 400,000 tn of maize imports in 2019-20 (Apr-Mar), but this might not help to arrest the uptrend as currently, free-on board prices of Ukrainian nongenetically modified maize are at $195-$200 per tn, unviable for Indian importers. Castor seed futures (Aug) may take an attempt to break above 5700 & move higher to test 5800 levels. Prices of castor seed are rising in the key markets of Gujarat due to a fall in its acreage amid rising demand from domestic stockists & exporters. The latest statistic show that the during April-June, India has exported castor meal exports to the tune of 153,596 tons as compared to 41,017 tons during same period last year.

BASE METALS

Base metal counter can witness lower level buying as US and Chinese negotiators opened a new round of trade talks and expectations of a US interest rate cut later this month. Copper may move further towards 455 levels while taking support near 436 levels. Southern Copper was granted the construction permit for its Tia Maria copper mine in Peru but the company has agreed to delay the start of its construction. Meanwhile, lead may continue its recovery as it can test 165 while taking support near 150 levels. Lead has been supportive on expectation of a shortage, dwindling inventories and difference between LME cash -3M flipped to a premium of $10.50 a tonne, indicating a nearby supply shortage. Zinc may trade with weak bias as it can test 188 levels while taking resistance near 198 levels. Metals and mining company Nyrstar stated that that it was extending force majeure at its Port Pirie lead and zinc smelter in Australia until the last week of July. Nickel can excel further as it can test 950 levels while taking support near 890 levels. Nickel Inventories in LME warehouses at 153,612 tonnes are the lowest since 2013, stocks in ShFE more than doubled in recent weeks to 21,811 tonnes. There was a global deficit of 27,200 tonnes over January-April in the 2.4 million tonne a year nickel market. Aluminium can trade sideways as it can take support near 136 levels while taking resistance near 146 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

CPO OIL MCX (JUL) contract closed at Rs. 497.40 on 11th Jul’19. The contract made its high of Rs. 535 on 01st May’19 and a low of Rs. 491.30 on 10th Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 516.00. On the daily chart, the commodity has Relative Strength Index (14-day) value of 39.315.

One can buy above Rs. 495 for a target of Rs. 515 with the stop loss of Rs. 485.

CRUDE OIL MCX (JUL) contract closed at Rs. 4132.00 on 11th Jul’19. The contract made its high of Rs. 4694.00 on 24th Apr’19 and a low of Rs. 3540.00 on 06th May’19. The 18- day Exponential Moving Average of the commodity is currently at Rs. 4157.00. On the daily chart, the commodity has Relative Strength Index (14-day) value of 61.101.

One can buy above Rs. 4170 for a target of Rs. 4300 with the stop loss of Rs. 4105.

JEERA NCDEX (AUG) contract was closed at Rs. 17515.00 on 11th Jul’19. The contract made its high of Rs. 18,100.00 on 4th Jun’19 and a low of Rs. 17,070.00 on 2nd Jul’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 17401.4. On the daily chart, the commodity has Relative Strength Index (14-day) value of 59.818.

One can buy near Rs. 17500 for a target of Rs. 18000 with the stop loss of Rs 17250.

11

NEWS DIGEST

• ICEX launched Basmati Paddy 1121 futures contract on 11th July. The trading and delivery unit is 10 metric tonnes and the delivery centre is Karnal, Haryana. From Thursday, September, October and November contract expiry will be available for trading.

• NCDEX launched futures trading in 'Paddy (Basmati) - Pusa 1121 on 10th July. The trading and delivery unit is 10 metric tonnes with a compulsory delivery option.

• During Jun 1-Jul 9, the country received 202.7 mm rainfall, 17% below the normal weighted average of 243.6 mm for the period.

• Malaysia's crude palm oil output declined 9% on month to 1.52 mln tn in June, according to data released by the Malaysia Palm Oil Board.

• LME is planning an investment worth "tens of millions of U.S. dollars" in a new trading platform that will enable market participants to trade faster and that offers more graphical interface.

• Bosnia's sole aluminium smelter was disconnected from the power grid over a huge debt it had incurred because of high electricity and alumina prices.

• The South African arm of steelmaker ArcelorMittal expects to plunge to a first-half loss and cut more than 2,000 jobs as it struggles with cheap imports.

• The U.S. Commerce Department would impose duties of up to 456% on certain steel produced in South Korea or Taiwan.

WEEKLY COMMENTARY

Lower level buying was witnessed in CRB which gave closing near 194 levels. Upside in bullions, crude and in few base metals strengthened whereas bearish pressure in agri commodities capped the upside. Crude saw rebound in the prices on various positive triggers, including dropdown in inventories in US. Oil prices also rose after U.S. oil producers cut more than half of Gulf of Mexico crude output due to Tropical Storm Barry, which is expected to make landfall over the weekend. Meanwhile, in its latest monthly report released Thursday, OPEC forecasted global oil demand will rise by 1.14 million barrels per day (bpd) next year, matching the projection for 2019. Natural prices cooled off after a two week upside on profitbooking from higher side. Gold continued to trade above $1400 in COMEX. Powell expressed worries that the U.S. economy and hence a rate cut is expected. He showed concern of weak inflation as he thought that it would be more persistent than previously expected. It gave jump to the gold prices across the board. Gold made a new high of 35145 on MCX. Investors have rushed into gold over the past two months, pushing the yellow metal from $1,200 levels to $1,400, as talk of a rate cut came into play. Silver too made base near 38000 levels. In base metals, copper, nickel and lead saw some upside whereas zinc saw massive decline in last eight week on weakness in LME and SHFE whereas aluminum prices caught in a range trading. The falling price has been rationalised as an indication of a better supplied market, signalled by rising Chinese production and a collapse in the premium for cash metal on the LME. Treatment and refining charges in China, have been held at an all-time high of $240 a tonne since May, suggesting China's smelting capacity has not matched the processing need for concentrate. The difference between LME cash and three-month lead contracts flipped to a premium of $US10.50 a tonne on Wednesday after holding in the discount zone for nearly a month, indicating a nearby supply shortage. In agri commodities, market welcomed the new listed commodities viz; paddy and moong. Moong saw decent gains in the first trading week. Oil seeds and edible oil counter traded in pressure on progress in monsoon amid low crushing in mustard. Overseas market traded firm as USDA lowered its U.S. 2019-20 soybean production estimate to 3.845 billion bushels, down from 4.150 billion in June. Guar counter rose in the news of slowing down monsoon. It is reported that the southwest monsoon is likely to take a pause after Jul 15, as the low-pressure area seen aiding the monsoon current over Uttar Pradesh may dissipate soon.

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 $)

Basmati Paddy Pusa 1121.....From farm to platform

NCDEX has launched futures trading in Basmati Paddy–Pusa 1121 from July 10, 2019. Introduction of this new contract will facilitate an effective risk management tool for market participants and provide a fair price discovery platform for the highly volatile basmati paddy. ICEX, another trading platform, has also launched trading in Basmati Paddy 1121 futures contract from July 11, 2019. The specification for the commodity is almost same on both exchanges. However, the quality specifications on some parameters are different. Basmati paddy exhibits quite large price volatility more than 60 per cent in a year. To mitigate the risk arising out of this price fluctuation, a reliable mechanism was inevitable.

Global & Domestic scenario of Rice

India produces about 5.5 million tonne Basmati, famous for its quality, with more than 70% share of global basmati production, while Pakistan contributes with rest of about 30% share. It is estimated that India produces about 5% basmati out of its total paddy production. Major Basmati rice variety produced in India is PUSA 1121. Haryana & Punjab contribute about 83% of Basmati rice production and about 89% of Pusa-1121 production of India. Other Basmati rice producing states includes Uttar Pradesh and Uttarakhand.

On global front, rice production is about 501.5 million tonne. India contributes about 23% of global output with approximate production of 116 million tonne. Basmati contributes 8-9 million tonne of total global rice production.

India is the leading exporter of the Basmati Rice to the global market. Export of Basmati rice is increasing at a CAGR of 6%. Nearly 80 percent of the total Basmati production is exported.

According to NCDEX, the Paddy will be 5% (Max) green grain while 10% max green grain on ICEX. Average brown rice grain length will be 8.7 mm on ICEX while 8.6 mm on NCDEX. Damage and discolored grains will be 2% (max) on ICEX while 4% (max) on NCDEX. Admixture of other varieties of Basmati Paddy will be max. 5% on NCDEX while max 4% on ICEX.

The Basmati varieties are identified more by the grain morphological identification. There are chances of adulteration of inferior varieties of paddy, with the higher priced varieties. Hence to avoid adulteration – DNA test to determine the purity.

The future trading in Basmati Paddy Pusa 1121 will provide a stronger economic value to agri businesses. In order to safeguard market price risks, this hedging instrument will help commodity participants to fetch better price realization for their grain produce, and thus will enhance their income. Basmati has least government intervention.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week