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WEEKLY VIEW OF THE MARKET

Indian markets started the week gone by on a weaker note as Nifty indices slid below 10750 mark in early sessions, however sharp recovery was seen in heavyweights such as Reliance industries, Maruti Suzuki and Bajaj twins from lower levels and this led Nifty once again to reclaim 10950 mark in the later part of the week. From the derivative front, hefty open interest addition was observed in 10900 strike while marginal call writing was seen at 11000 strike. In coming week, it is expected that any sharp up move above 11000 levels can trigger further short covering, which can move Nifty towards 11100-11150 levels. The Implied Volatility (IV) of calls was up and closed at 16.37% while that for put options closed at 16.85%. The Nifty VIX for the week closed at 17.27% and is expected to remain volatile. PCR OI for the week closed at 1.13, which indicates OTM put writing. On the technical front, Nifty is moving up with formation of higher high and higher bottom from last three trading sessions and it is expected that as far Nifty is holding above 10850-10900 levels, the current trend is likely to move towards 11100 levels with some volatility on the cards.

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 (Oct) may witness sell on rise facing resistance near 6850 levels, while can see 6400-6300 levels on the downside. The sentiments are bearish on expectations of better production in the 2019-20 (Jul-Jun) crop year. Turmeric acreage in Telangana, the largest producer of the yellow spice, was at 48,177 ha as on Aug 28, up from 47,122 ha a year ago, according to the state farm department. In Nizamabad, the benchmark market in Telangana, remained steady today with the finger variety of the yellow spice trading in the range of 6,500-6,600 rupees per 100 kg. The bulb variety turmeric traded at 6,400-6,500 rupees per 100 kg. Jeera futures (Oct) is expected to break 16820 & correct further to test 16500, facing resistance 17100 levels. The overall outlook for the spice remains bearish due to ample supply. Good rains in key growing areas of Gujarat, along with high moisture content in the soil, will motivate farmers to increase acreage under the spice and may further dampen sentiment. Dhaniya futures (Oct) will probably take support near 6000 levels & witness upside 6355 levels. The market participants expect a pick-up in domestic demand and likely fall in daily supply. However, one needs to stay cautious as good rains in the key growing regions could encourage farmers to increase sowing area under the spice which will keep coriander prices in check. Cardamom futures (Oct) may see a recovery till 2800-2900 taking support near 2530 levels. The arrivals of the new crops are expected to remain lowers due to sharp fall in 2019-20 (Jul-Jun) production.

BULLIONS

Bullion counter may remain on a volatile path as increased uncertainty regarding U.S.-China trade dispute is keeping the investors jittery. Recently, sharp profit booking was witnessed after the metal rallied to a six-year peak as U.S. and China) have agreed to restart talks. But dovish stance by Fed, Brexit concerns and falling US treasury yields can cap the downside. Gold(Oct) can witness some profit booking as it test 38000 levels in MCX while taking resistance near 39800 levels while silver(Dec) can test 47000 levels while taking resistance near 51000 levels. Silver outperformed gold as gold silver ratio plunged lower from above 90 to 81 recently. This month outcome of Fed meeting on 17-18 September will be keenly watched as Federal fund futures imply that traders see a 89% chance of a 25 basis point rate cut by the U.S. Federal Reserve. Lower interest rates and Treasury yields reduce the opportunity cost of holding non-yielding bullion. Investor’s inclination was seen towards more risker assets encouraged by a stronger US economic data and hopes of easing in the US-China trade conflict. Uncertainties have been hovering in the market for quite some time as updates from either side of the countries have been impacting the market sentiments. Last week British parliament voted to prevent Prime Minister Boris Johnson taking Britain out of the European Union without a deal on October 31. On domestic market record high gold prices have put pressure on demand as India's gold imports slumped over 70% in August.

OIL AND OILSEEDS

Soybean futures (Oct) may trade with a downside bias & test 3460, facing resistance near 3625 levels. According to market participants, soybean crop estimates ranged between 9.0 mln tn and 14.0 mln tn for 2019-20, as against 9.5-13.8 mln tn for last year. Soybean yield this year is seen at 1,200-1,250 kg per ha against around 1,000 kg last year. Absence of any major outbreak of white grub, semi looper caterpillar, girdle beetle, and white fly insect attacks so far would boost the yield. In Maharashtra, no major threat from dry weather conditions is seen so far. In the key producing region of Malwa in Madhya Pradesh, too, the crop is seen in very good condition. The overall crop in the country is either at flowering or pod formation stage. On the CBOT, U.S soybean futures (Nov) may continue to consolidate for the fourth consecutive week in the range of $8.5-8.85 a bushel. Growing uncertainty around the US-China trade dispute has left American farmers grappling with high soybean stocks and limited options in selling their inventory. US soybean stocks are estimated at 29.13 million mt end-August, which is the end of the 2018-2019 marketing year, up 144% year on year, the US department of Agriculture said in its monthly report. Soy oil futures (Oct) is expected to see more downside level near 745-740, while CPO futures (Sept) may plunge towards 550-545 levels. The sentiments are bearish due to hopes of higher imports ahead of festivals starting next month and adding to it a stronger rupee against dollar, making imports cheaper.

ENERGY COMPLEX

Crude oil prices may witness profit booking at higher levels as the onset of September in US marks a seasonally weaker period for fuel demand as the peak summer driving period ends coupled with increased OPEC output. Prices were weighed down by rising OPEC and Russian oil output after OPEC output rose in August for first month this year as higher supply from Iraq and Nigeria outweighed restraint by Saudi Arabia and losses caused by US sanctions on Iran. Russian oil production in August rose to 11.29 Mbpd, topping rate cap pledged by Russia, hitting its highest since March. Crude oil may dip towards 3900 while taking resistance near 4180 levels. OPEC, Russia and other non-members, known as OPEC+, agreed in December to reduce supply by 1.2 million bpd from Jan. 1 this year. OPEC’s share of the cut is 800,000 bpd, to be delivered by 11 members and exempting Iran, Libya and Venezuela. Natural gas may witness further recovery as it can test 180 while taking support near 160. The emergence of multiple cyclones could keep natural gas volatility high during the balance of the season as prices are experiencing upward momentum as a supply issue. A supply event like a hurricane that shuts-in many of the Gulf of Mexico drilling rigs would be the catalyst that drives prices higher. There are forecasts for the weather to remain warmer than normal in Texas and the Southeast through mid September despite projections for slightly lower cooling demand than previously expected.

OTHER COMMODITIES

Cotton futures (Oct) is expected to consolidate in the broader range of 19200-19600 levels. The demand for this soft commodity is in trouble as the textile industries are facing a slowdown. Many of the competing countries are gaining access in various export markets like China, South Korea, and Turkey mainly on account of the preferential access given to them by the importing countries leading to further erosion of India’s market share. In view of the sharp decline in exports, the spinning and weaving sector is in a very critical situation as many production units are shutting down. Similarly, U.S Cotton is also likely to trade sideways in the range of 57-60 cents per pound. The demand side is also dull in the international market, but for the time being the concern is turning to cotton fields as the hurricane Dorian churns northward. The potential damage to cotton may lead the U.S. Department of Agriculture to trim its estimate for domestic production in the 2019-2020 seasons that started last month. Chana futures (May) will probably continue to descend towards 3970-3950 & witness selling pressure with every short covering. The government said that there is no shortage of pulses in the country. A total of 307 lakh tonnes of pulses will be available with the government in the current year, of which 290 lakh tonnes is estimated to be consumed. The outlook of castor seed futures (Oct) is bullish towards 5900 on the back of a smaller crop from last year and the fact that arrival of the new crop is at least six months away is increasingly leading to a vacuum in supply pipeline.

BASE METALS

Base metal counter can witness some recovery at lower levels as China US agreed to hold high level trade talks reviving hopes for an end to a dispute. Key negotiators from both sides will strive to achieve substantial progress during the 13th Sino-U.S. high-level negotiations in early October. China will implement both broad and targeted cuts in the reserve requirement ratio for banks "in a timely manner," an indication that a cut in the key ratio aimed at boosting lending could be imminent. Copper may trade sideways to upside bias as it can test 460 levels while taking support near 438 levels. LME on-warrant copper inventories or those available for delivery, fell to a two-month low of 209,650 tonnes. Meanwhile, Lead may also remain sideways as it can move range of 151-158 levels. Zinc may witness recovery towards and it can test 188 levels while taking support near 180 levels. Zinc has been turning bullish once again as the cash - 3M spread flipped to a $12 premium, pointing to tighter nearby supply. Nickel prices can move with upside bias as it can test 1280 levels while taking support near 1200. The premium for cash nickel over three month metal fell to $15, continuing a rapid fall from 10-year highs. Indonesian officials declaring that the country will ban nickel ore exports as of January 1, 2020. The ban was previously stated for 2022. Aluminium can trade with sideways to weak bias as it can take support near 138 levels while facing resistance near 143 levels.

TREND SHEET

TECHNICAL RECOMMENDATIONS

NATURALGAS MCX (SEP) contract closed at Rs. 175.60 on 05th Sep’19. The contract made its high of Rs. 177.90 on 05th Sep’19 and a low of Rs. 146.70 on 05th Aug’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 161.07. On the daily chart, the commodity has Relative Strength Index (14-day) value of 66.376.

One can buy near Rs. 166-163 for a target of Rs. 190 with the stop loss of Rs. 152.

ALUMINIUM MCX (SEP) contract closed at Rs. 140.95 on 05th Sep’19. The contract made its high of Rs. 145.65 on 25th Jul’19 and a low of Rs. 137.80 on 29th Aug’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 143.17. On the daily chart, the commodity has Relative Strength Index (14-day) value of 38.186.

One can sell near Rs. 142 for a target of Rs. 135 with the stop loss of Rs. 145.

REF. SOYOIL NCDEX (OCT) contract was closed at Rs. 751.40 on 05th Sep’19. The contract made its high of Rs. 764.25 on 26th Aug’19 and a low of Rs. 706.00 on 13th Jun’19. The 18-day Exponential Moving Average of the commodity is currently at Rs. 742. On the daily chart, the commodity has Relative Strength Index (14-day) value of 51.988.

One can sell near Rs. 755 for a target of Rs. 730 with the stop loss of Rs 767.

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NEWS DIGEST

• India's commodity derivatives turnover from five exchanges rose 21% on year to 35.37 trln rupees in Apr-Aug, according to data compiled from bourse websites.

MCX has signed a MoU with China's Zhengzhou Commodity Exchange for knowledge sharing and to explore areas of mutual interests between the two exchanges.

• Futures and options of metal products on the CME Group hit a record high average daily volume of 885,000 contracts per day in August, 41% higher on year, the data by the world's largest derivatives bourse showed.

• Since Jun 1, the country has received 754.1 mm rainfall, 1% higher than the normal weighted average of 744.7 mm for the period, the IMD said.

• Mills in India crushed 575,000 tn mustard seed in August, up 15% on year, according to data compiled by the Mustard Oil Producers Association of India.

• Indian custom officials have seized 1,197.7 kg of smuggled gold in the April-June quarter, an increase of 23.2% compared with the same period a year ago.

Russian oil production in August rose to 11.294 million barrels per day (bpd), topping the rate Moscow has pledged to cap output.

• The Perth Mint's silver sales soared 18.7% in August from a month earlier and silver coin sales surged to 1,171,233 ounces, the highest monthly sales since June 2017.

WEEKLY COMMENTARY

The week gone by was highly volatile; reacted broadly on Trump tweets, release of unexpected economic numbers amid volatile currency. Amid all CRB tried to make a base near 180 levels with some marginal gain. Silver was dearest among all commodities for investors. It gave 10 week massive upside for nonstop upside and made a high of 50672. Gold made fresh high of 89885, nevertheless it couldn’t sustain at higher levels on ease in tension between China and US. Silver clearly outperformed gold in past few weeks and the gold-silver ratio moved from the July’s disappointing level of 93 to below 80. In energy counter both crude oil and natural gas showed some upside move. Crude was more volatile. Oil prices tanked to multi-week lows on Tuesday as signs emerged that both OPEC and its key partner in the production cut deal, Russia, boosted oil production in August. U.S. manufacturing activity contracted for the first time in three years in August, with new orders and hiring declining sharply as trade tensions weighed on business confidence also weighed on the prices. Though, positive trade talk amid drop down in inventory sent prices higher significantly. Inventories had shed 4.8 million barrels in the week to August 30. Positive trade talk that is once again expected to start in October gave some sigh of relief to the base metals counter. ISM data capped the upside though. Index of national factory activity dropped to a reading of 49.1 last month from 51.2 in July. A reading below 50 indicates contraction in the manufacturing sector, which accounts for about 12% of the U.S. economy. Copper, lead, aluminum and zinc all closed up except nickel. Nickel jumped to multiyear high but couldn’t sustain at higher levels.

In oil seeds, CPO saw profit booking from higher side after a multi weeks upside on weak international market and it completely ignored the positive news of import duty hike. The Director General of Trade Remedies (DGTR) recommended the increase in customs duty by 5% from the existing 45% to 50% on imports of two varieties of palm oil originating in Malaysia for a period of 180 days to safeguard the interests of domestic industry. Rest oil seeds and edible oil too performed weak. Castor saw good upside on improvement in export demand. Chana was trading weak; even festive demand couldn’t lend hand to see some upside as milers are using kabuli chana in besan which is available on very cheaper price. In spices, dhaniya and jeera gained some buying momentum whereas turmeric and cardamom turned bearish.

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 $)

Glittering Gold

Yellow metal gold, which is witnessing upside momentum recently as safe haven buying due to escalating US China trade tensions, concerns over Italy, Brexit, decline in US treasury yields and monetary easing stance by many central banks globally is keeping the prices upbeat. Economic uncertainty globally and repercussions of US China trade war globally and central banks buying are some key factors assisting the recent rally.

Yellow metal has appreciated more than 25% in MCX and 21% in COMEX while silver appreciated by more than 28 % in MCX and above 25% in COMEX since the beginning of this year 2019. Gold managed to cross the key level of $1550 in COMEX and 39500 in MCX recently while silver breached above 50000 in MCX and $19.40 in COMEX.

Bullish factors impacting Gold

The monetary easing policy taken by some key central banks globally are also fueling the upside in yellow metal.

The Fed funds futures market now points to a 74% chance of at least a quarter-point rate cut at the Fed's September meeting, according to the CME Fed Watch tool. Traders are also pricing in two more cuts to the benchmark lending rate to a range of 150 to 175 basis points by the end of 2019. The central bank also left the door open to future cuts, saying it will “act as appropriate to sustain the expansion” as it continues to evaluate the incoming data.

U.S. Treasury yields tumbled to multi-year lows as the latest escalation in a U.S.-China trade war hit confidence in the global economy and boosted demand for safe-haven assets.

• The growing US China trade war which has started in first quarter of last year does not seems to end anytime soon now.

Central banks across the globe have been buying larger quantities of the precious metal, a phenomenon not been seen since 1971. Emerging markets (EMs) such as Russia, Turkey, Kazakhstan and Poland have been big buyers of gold last year. Central bankers are attracted to gold because no one knows how the ongoing trade disputes will be resolved.

Geopolitical tensions in middle-East since the U.S. withdrawal from the Iran nuclear deal last year and recent protest in Hong Kong are also supporting the safe haven buying in gold.

Growing concerns over the possibility of Britain leaving the European Union without a deal is supporting the gold prices.

However, in India high gold prices have hit demand. With domestic gold prices soaring, gold was being sold at a discount for the past three months. Dealers were offering a discount of up to $31-33 an ounce over official domestic prices. India’s gold imports plunged 73% in August from a year ago to the lowest level in three years as a rally in local prices to a record high and a hike in import duty discouraged retail buying.

Currency Table

News Flows of last week