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 (Mar) is expected to consolidate in the range of 5825-6150 levels & trade with a downside bias. This bearishness is likely to prevail for the rest of this month as higher output along with increased standard moisture content in the arrived crop has proved to be a double whammy for price. Furthermore, the quality of old turmeric is weak and there is sporadic arrival of Mysore turmeric in Erode. At Erode, new turmeric was sold at Rs.5,455- 6,522 a quintal of finger turmeric and root variety was sold at Rs.4,275-5,800. Jeera futures (Mar) may witness some recovery & move higher to test 14200- 14400 levels, taking support near 13700. Despite projected bumper crop of cumin, farmers are set to get encouraging prices for their yield as export prospects of the spice look up due to the lower cultivation of cumin seeds in Turkey and Syria. Local exporters are already getting orders at $2,000-2,500 per tonne from Gulf countries. It is expected that cumin exports from India would easily cross 1.70 lakh tonnes in the current season compared to last year’s around 160 lakh tonnes. Cardamom futures (Mar) is likely to descend towards 3300 taking negative cues from the spot markets. The availability of inferior quality capsules from the current harvest in the plantations following the end of the season has also escalated the bearish sentiments at the auctions. The market according to traders has been witnessing a very slow demand as there was no sales happening across the trade centers in upcountry markets. The high-priced inventory both at the primary trade centres and consuming markets, forcing buyers to abstain from the market.

BULLIONS

Bullion counter can trade on weaker path as infusion of stimulus measure from China into its economy and bounce back in global equity markets globally is keeping the upside capped. Recently strong U.S. economic data was offset by fears over a rapidly spreading coronavirus outbreak and its impact on the global economy. Gold may dip lower towards 39400 while facing resistance 40600.Silver can test 45000 while facing resistance near 46800. China’s central bank huge liquidity injections through open market operations recently showed its determination to stabilize financial market expectations and restore market confidence. PBoC injected a total of 1.7 trillion Yuan ($242.74 billion) via reverse repos. With China’s efforts to support the economy jolted by the outbreak that is expected to have a devastating impact on first quarter growth, the economic data reported from US are also putting pressure on the metal prices. The China virus outbreak is adding to global economic uncertainty but its impact may be short term and temporary, limiting the need for policy action, top European Central Bank executives stated recently. Meanwhile U.S. factory activity rebounded in January after contracting for five straight months amid a surge in new orders .U.S. Mint gold coin sales saw a strong recovery in January after the weakest year on record in 2019. A total of 60,000 ounces of the gold American Eagle coins were sold in January, which is a staggering increase of 2,900% from the previous month that saw only 2,000 ounces sold, according to the U.S. Mint data.

OIL AND OILSEEDS

Soybean futures (Mar) is expected to trade higher towards 4250-4300 levels taking support near 4140-4100 levels on positive cues from the international markets. U.S soybean is on the recovery phase on expectation of fresh Chinese purchases. That agreement, signed on Jan. 15 and taking effect on Feb. 15, suspended a new round of U.S. tariffs in exchange for Chinese purchases of agricultural, energy and manufactured goods and services. The sentiments have got a boost aftermath of Beijing’s announcement that it will halve additional tariffs on some $75 billion of imports later this month. With the earlier retaliatory duty remaining place, it still means U.S. soybeans will be subject to a 27.5% tariff, down from 30% previously. The correction in mustard futures (Apr) may steepen further towards 4000-3930 levels. India's mustard output is seen at 8.0 mln tn in 2019-20 (Jul-Jun), 2.6% higher than last year's estimate of 7.8 mln tn, according to the market participants. A larger crop estimate is primarily due to likely higher yield and favourable weather conditions. Currently, the early-sown crop is in the pod filling stage and healthy. The overall output is likely to be higher due to rise in yield in Uttar Pradesh, Madhya Pradesh, and Haryana. CPO futures (Feb) has again resumed its uptrend & looking at the positive fundamentals of its counterparts on BMD & CBOT, it seems that in days to come it can test 780-790 levels. It is being estimated that Malaysian palm oil inventories likely tumbled to its lowest since June 2017, amid dry weather and lower fertiliser usage. Official palm oil data will be published by the Malaysian Palm Oil Board on Jan. 10. Similarly, soy oil may gain towards 865-875 levels.

ENERGY COMPLEX

Crude oil prices may remain on weaker path as energy demand globally would take long-term hit from growing coronavirus outbreak outweighing the efforts by OPEC to stabilize prices. Reports suggest OPEC+ considering cutting crude output by further 500,000 bpd. Uncertainty remains as producer group could face taxing battle to put more cuts in place so soon after existing pact was agreed to and uncertainty over how long the virus crisis will last. Crude oil may dip lower towards 3500 while facing resistance near 4100. According to an estimates China’s oil demand could grow at just 100,000 bpd this year due to the coronavirus. That would make it the slowest expansion in consumption in nearly 20 years. OPEC wants to extend current oil output cuts until at least June from March, with the possibility of deeper reductions on the table if oil demand in China is significantly impacted by the spread of a new coronavirus. Russia’s Energy Minister Alexander Novak said the OPEC+ ministers could discuss moving its meeting forward but said it needs several more days to monitor the situation. Natural gas can remain on weaker side as weather is expected to remain warmer than normal as it can further slip lower towards 120 by taking resistance near 150. U.S. natural gas futures slipped to near four-year low recently on forecasts for warmer-than-normal weather and low heating demand over the next two weeks, and a small decline in exports. The fact that winter has been relatively mild in the United States and 17 % excess gas production last year have resulted in huge glut of natural gas.

OTHER COMMODITIES

ICE cotton futures is likely to hold the support near 67 cents per pound & trade with a positive bias amid expectations of further stimulus measures to stem the impact of the new coronavirus and reports of a possible treatment for the epidemic.Cotton futures (Feb) may witness a rally till 19600 taking support near 19100. In the domestic market, despite a larger crop, the demand side is strong and this may outweigh the supply side. The month on month shipments significantly increased as new crop arrivals are being shipped primarily to Bangladesh, and small volumes to China and Indonesia, followed by Egypt. This is the second straight month of increasing cotton exports indicating signs of revival. Chana futures (Mar) may continue to slide further towards 3850- 3800 levels. Good crop and availability of new domestic Chana has dragged down price in the spot market below Rs 4,000 per quintal. The demand for chana dal and besan from consumption centres is also reported to be slow. It is also reported that NAFED has started liquidation of old procured stock at lower rates in Madhya Pradesh. Mentha oil futures (Feb) is likely to remain under selling pressure, hence may break the support near 1175 & move lower towards 1150-1130 levels. In the present scenario, the demand is tepid from the consuming industries and exporters. In the days to come, the sentiments are likely to become more bearish with waning of seasonal demand at the fagend of the winter season. In the major growing regions, the sowing of this mint is going on & weather will play a major role in deciding the crop’s fate.

BASE METALS

Base metal counter may remain on a positive path. Copper may recover towards 448 levels while taking support near 420 levels. Copper prices rebounded sharply higher recently as investors’ unwound bearish positions after the central bank in China, the world’s biggest metals consumer, pumped stimulus into its economy. China’s copper smelters will reduce output by more than 15% in February from last month due to the coronavirus outbreak. Meanwhile, lead may remain in green as it can test 150 levels while taking support near 135 levels. Imports of lead concentrates jumped by 37% last year and those of zinc were up by 7% after falling in the first half of the year. Zinc may witness some short covering towards 180 levels while taking support near 170. The premium of LME cash zinc over the three-month contract fell to $5.25 a tonne, the lowest since late December, from $23.75 two weeks ago, indicating there are more metal supplies in the LME system. Chinese zinc production, meanwhile, accelerated to a record high in December as smelters capitalized on high treatment charges and better concentrates availability. Nickel prices can recover towards 985 while taking support near 935. Manufacturing activities across nickel downstream sectors in China slowed from a month ago in January and stayed in contraction for the tenth consecutive month, but the decline was smaller than the previous estimates. China imports of nickel ore and concentrates leapt higher over the fourth quarter as shippers tried to beat the deadline. Aluminium prices can move in the range of 134-142 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

COTTON MCX (FEB) contract closed at Rs. 19300.00 on 05th Feb’2020. The contract made its high of Rs. 20440.00 on 10th Jan’2020 and a low of Rs. 18840.00 on 03rd Feb’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 19562.59. On the daily chart,the commodity has Relative Strength Index (14-day) value of 38.606.

One can buy above Rs. 19450 for a target of Rs. 19850 with the stop loss of Rs. 19250

COPPER MCX (FEB) contract closed at Rs. 434.50 on 05th Feb’2020. The contract made its high of Rs. 457.50 on 16th Jan’2020 and a low of Rs. 420.60 on 03rd Feb’2020. The 18- day Exponential Moving Average of the commodity is currently at Rs. 437.22. On the daily chart, the commodity has Relative Strength Index (14-day) value of 48.221.

One can buy near Rs. 432 for a target of Rs. 448 with the stop loss of Rs. 424.

JEERA NCDEX (MAR) contract was closed at Rs. 13855.00 on 05th Feb’2020. The contract made its high of Rs. 16235.00 on 11th Nov’19 and a low of Rs. 13710.00 on 04th Feb’2020. The 18-day Exponential Moving Average of the commodity is currently at Rs. 14445.27. On the daily chart,the commodity has Relative Strength Index (14-day) value of 25.070.

One can buy above Rs. 14200 for a target of Rs. 15500 with the stop loss of Rs 13550

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NEWS DIGEST

• The U.S. trade deficit fell for the first time in six years in 2019 as the White House's trade war with China curbed the import bill.

Glencore posted a 6% fall in fourth-quarter copper production and a 13% decline in cobalt as the miner and trader shut its Mutanda mine ahead of schedule.

• IHS Markit's final euro zone composite PMI rose to a fivemonth high of 51.3 in January from December's 50.9.

• India's gold imports in January plunged 48% from a year earlier to their lowest in 4 months.

• Total area sown under Rabi crops was at 662.13 lakh hectares as on January 31 in the current 2019-20 season, up 9.53 percent or 57.61 lakh hectares from 604.52 lakh hectares over the year-ago period.

• Acommodity transactiontax (CTT)willbeimposedontrading on commodity indices as well as options in goods with effect fromApril1,2020,accordingtoBudgetdocuments.

• In the Union Budget, agriculture credit target for the year 2020-21 has been set at Rs.15 lakh crore.

• Integration of electronic negotiable warehousing receipts (e-NWR) with the Electronic National Agriculture Market or eNAM, has been announced in the Union Budget.

• The Cotton Association of India (CAI) has retained its cotton crop estimate for 2019-20 season beginning October 1 at 354.50 lakh bales of 170 kg each as in the previous estimate.

Moscow Exchange will begin trading in a cash-settled futures contract on natural gas. The contract lot will be 100 MMBtu (or 100 million British Thermal Units). The contract will be quoted in US Dollars per MMBtu.

WEEKLY COMMENTARY

CRB was six week down on increasing numbers of causalities in China due to Coronavirus amid sluggish trade activities. Oil futures rose last week after a steep fall in previous four week amid investor optimism over unconfirmed reports of possible advances in combating the coronavirus outbreak in China as a sign fuel demand may rebound in the world's biggest oil importer. Death toll from coronavirus jumped by 73 to 563 on Thursday in mainland China. Oil prices have slumped more than 20% since reaching their highest this year on Jan. 8 on demand concerns caused by the virus outbreak and oversupply indications. Prices also gained after a government report on Wednesday showed U.S. gasoline and diesel inventories fell. In the U.S., gasoline stockpiles dropped last week, counter to analysts’ expectations for a gain, and diesel inventories fell more than expected, the Energy Information Administration reported. In base metals, copper and nickel saw good rebound buoyed by unconfirmed reports of a possible advance in producing treatment drugs for the coronavirus that has shut down transport and limited industrial activity in China. Prices moved up also as investors unwound bearish positions. Lead, zinc and aluminum remained weak. China’s exports and imports are likely to fell in January after a brief rebound at the end of 2019. China’s copper smelters will reduce output by more than 15% in February from last month due to the coronavirus outbreak. Bullion counter moved down on the news of some breakthrough in Coronavirus antidote amid positive data from the United States such as the rise in January private payrolls and services sector activity, suggested the economy could continue to grow moderately this year. Gold traded near 40000 levels whereas silver traded near 46000. Recovery witnessed in oil seeds and edible oil counter, except mustard seed. This season, production of mustard can be at a record high of 9.7 million tonnes in 2019-20 (Jul-Jun), up from 9.3 million tonnes. The yield could rise over 1.4 tons per hectare due to ample moisture content in the soil. Palm oil prices jumped, lifted by expectations of a steep drop in January production and strength in rival soyoil. Enthusiastic crop report and rise in selling pressure dragged chana prices. Mentha prices saw marginal bounce back in the prices. In spices, turmeric prices saw limited upside as there is sporadic arrival of new crops in Maharashtra as well. Currently, the new Mysore-8 turmeric is arriving for sale & traders are waiting for upcountry demand to pick up as at present, there is only a little local demand. Dhaniya was bearish as demand was weak and market participants are waiting for fresh arrivals, which are expected in the middle of February.

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 $)

Commodity... “Brunt by Coronavirus”

The coronavirus epidemic, started from China has created tremors across worldwide & caused more than 600 deaths as of till date and infected more than 20,000 people in two dozen countries. It has forced the Chinese cities to shut down and factories and could damage the world’s second-largest economy. By considering its widespread epidemic and its significant impact on global markets, World Health Organization has declared an international emergency.

How serious could the impact on the commodity sector be?

China is the world’s largest importer and exporter of commodities and slowdown is expected in its economy because of business disruptions resulting from widespread outbreak. Nevertheless the China authorities have taken measures to curb the disease’s spread but prolonged disruption in China will have significant impact on global markets.

As per analysts, the coronavirus epidemic’s impact on commodity prices is greater than during the Severe Acute Respiratory Syndrome (SARS) outbreak in 2002-2003, which also originated in China and led to nearly 800 deaths.

Impact on Base Metals

Although no health emergency is identical, but SARS provides us a reference that Chinese Gross Domestic Product and Industrial Production growth could fall 1% this year. Economic activity can also dip this quarter, but the extent of that fall will depend on how long coronavirus epidemic will last. For most of the commodities, the virus has created transport problems. Due to nationwide travel and transportation disruption closure of markets and shopping malls, different sectors including construction, automotive, manufacturing steelmaking, aluminium smelting, coal mining and phosphate production are at risk which reduce the demand for steel, copper, aluminium and other commodities. As a result, commodity supply chains have been disrupted; shipments canceled or delayed and stocks piling up.

China consumes approximately half of the world’s metals and mining resources. Now the consumption by China is almost double when the country was hit by the Severe Acute Respiratory Syndrome (Sars) outbreak in 2002. China accounts for around half of global copper demand, and the industrial metal was still down more than 7% year to date.

Crude oil Melting

Short-term sales of crude oil and liquefied natural gas into China almost ground to a halt this week as a coronavirus outbreak slowed economic activity and hurt demand. China is the world’s largestimporter of crude oil, having imported a record 506 million tonnes in 2019, or about 10 million barrels per day, and recently became the world’s largest importer of liquefied natural gas. Just a few weeks after the outbreak of the virus, daily Chinese oil demand has been already down by 20 percent because of dwindling air travel, road transportation and manufacturing. The brent crude prices dropped almost 18% in lasttwo weeks on fear of coronavirus.

Gold glitters

Globally much desired commodity, gold is benefitting as safe-haven demand was boosted by worries over a fast-spreading coronavirus outbreak in China. Although, Chinese steps by injecting 1.2 trillion yuan ($173.8 billion) of liquidity into markets to mitigate the economic impact from the coronavirus epidemic drove some investors away from safe havens and back into riskier assets but uncertainty still remains about the extent of the impact on the Chinese and global economies.

INTERNATIONAL COMMODITY PRICES

Currency Table

News Flows of last week