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ISSUE: 051

24TH AUGUST, 2019

RULE THE MARKET

From The Desk Of Research Head

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PSBs may need profitability KPIs than accounting them for social outcome KPIs

Over a period of last 5 years, the government has infused Rs. 3 lakh crore to recapitalize the Public Sector Banks (PSBs). However, the prime point discussion of our writing is about the government making the Public Sector Banks accountable for their Key Performance Indicators (KPIs). If we look back into history, there are many factors to which the PSBs lost to the private banks at a faster pace. In terms of total outstanding credit, the PSBs have to settle down to 46.5% in FY19 which was 60% in FY14. Similarly, in terms of new lending, private banks excelled with 75% sidelining the PSBs. Of worst, PSBs lost traction in deposit collection with the private banks collecting double the value in deposits if we see the last two years. We all know that the banking sector needs low-cost deposits to improve their credit off take to run their concerns into profitability and the same applies to PSBs after witnessing a series of loss years. However, the process of the Finance Ministry evaluating the PSBs is a debatable point rather than setting them right on the track of profitability.

The Key Performance Indicators proposed recently to the PSBs can be categorized into three types. The first one includes gauging the total credit given to infrastructure, agriculture, housing, MSMEs, Start-Up India Stand Up India and another stimulus like welfare or charitable causes. However, it’s a proven fact that directing the credit based on quantitative targets may result in lending to the sub-prime borrowers keeping aside the due diligence in risk assessment. Even the recent example includes the MUDRA loans that had accumulated up to Rs. 16000 crore NPA by March 2019 on which the PSBs have strong bets. However, it would be unwise to commit to a second loan binge while the banks are still in the process of writing off the legacy NPAs. The second set of KPIs include the PSBs taking responsibility for social outcomes of providing direct benefit transfers, women’s empowerment, financial inclusion of the weaker sections and CSR. This may hurt the financial health of the PSBs as these are the lending decisions taken by the government on social objectives on behalf of the PSBs. On the third set, the government is keen on direct lending to MSMEs by PSBs than NBFCs even though the latter was proved more efficient on loan recovery.

Contemplating the above, assigning region-wise targets to the PSBs may dampen the very idea of PSB reform by dictating the way of business doing to the banks instead of giving the progressive requirements of the evaluation. The government should have kept the KPI terms for NPA reduction, loan recoveries, return on capital and on loan growth instead of terms for whom to lend, which might have resulted in an efficient economy rather than a stimulus needed economy.

CONTENTSEquity 1-6

Derivatives 7-8

Commodity 9-12

Currency 13-15

Team

Dr. Ravi Singh

Syed Hasan Jafar

Aditya Kistampally

Viplav Dhandhukia

Srinivas Krishnan Bobba

Vaishali Paruthi

Chetan K Waghray

Arvind Vinjamoori

Bhaskara Reddy

Konpal Pali

Sourabh Gilda

Vivek Lohumi

Vivek Ranjan Misra

Karvy Head Office

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Analyst CertificationThe following Karvy Research Desk, who is (are) primarily responsible for this report and whose name(s) is/ are mentioned therein, certify (ies) that the views expressed herein accurately reflect his (their) personal view(s) about the subject security (ies) and issuer(s) and that no part of his (their) compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report.

- DR. RAVI SINGHHead-Technical & Derivatives Research

EQUITY

Economy:

• Consumer confidence in India has declined by 3.1 percentage points in August compared to last month, according to the latest India Primary Consumer Sentiment Index (PCSI).

• India’s economic growth is set to slow further in the April-June quarter of this year to 5.7% amid contraction in consumption, weak investments and an underperforming service sector, says a Nomura report.

• According to Grant Thornton’s monthly M&A Dealtracker, as many as 39 deals worth USD 4.3 Bn were reported in July against 49 transactions worth USD 9.1 Bn in the year-ago period.

Agriculture:

• The Commission for Agricultural Costs and Prices (CACP), the body which recommends minimum support prices (MSP) for crops has advised the government to launch a scheme for commercial crops in which farmers are directly paid if the market price falls below a particular level.

• The Chief Ministers’ Panel on Agriculture is deliberating with other state governments on whether to permit genetically modified (GM) crops in the country ‘in restricted spaces’. The contentious move may take time as some state governments have opposed the introduction of GM crops. The panel has, however, decided to make substantial changes to the Essential Commodities Act to remove stock limits.

Banking & Finance:

• The Finance Ministry has amended the Prevention of Money Laundering Act, 2002 to clarify the various modes of capturing customer details electronically, in what could potentially change the way regulated entities such as banks and telecom companies capture these details completely.

• The liquidity crisis in the NBFC sector was so grave that net loan disbursal by non-banking financial companies (NBFC) and housing financing companies (HFC) to realty developers declined by nearly 50% in 2018-19 on a year-on-year (YoY) basis to an estimated amount of Rs. 27,000 crore, a joint report by CII and JLL Saud on Wednesday.

• The Reserve Bank of India will allow customers to make recurring payments of less than Rs. 2000 without the two factor authentication process by giving an e-mandate from September.

Auto:

• Japan’s Igarashi Electric will buy out its Indian partner chief executive, Mukund Padmanabhan and will take over the debt from Igarashi Motors India as the Kawasaki-based electric motor maker looks to expand its business in the country.

• The Transport Ministry has written to the Finance Ministry asking for the goods and services tax on hybrid vehicles to be reduced from 28%.

• Korean auto major Kia Motors on Thursday made its debut in India with the launch of an SUV, Seltos, at an introductory price of Rs. 9.69 lakh.

Power & Oil

• Lanco Thermal Power, the holding company for investments in thermal power plants by Lanco Group, has received financial claims of Rs. 24,000 crore.

• Air India owes three state-owned oil firms close to Rs. 4,500 crore in unpaid fuel bills with payments being delayed by almost seven months, forcing retailers to snap supplies, senior officials said on Friday.

Steel• Thyssenkrupp of Germany has said it has filed a complaint with the General Court of the

European Union (EGC) against the European Commission’s decision to prohibit its joint venture in Europe with Tata Steel.

• An appellate tribunal on Monday dismissed appeals by some creditors of steelmaker Monnet Ispat & Energy against a Rs. 2,875-crore resolution plan offered by AION Investments and JSW Steel.

NEWS

INTERNATIONAL NEWS

• Canadian Prime Minister Justin Trudeau said on Wednesday he would not escalate a deepening trade and diplomatic dispute with China but added that his government had no intention of backing down as it defended its interests.

• US President Donald Trump said on Wednesday that his administration was seriously looking at ending the right of citizenship for US born children of noncitizens and people who immigrated to the US illegally.

• The Pentagon announced Wednesday that it is terminating a troubled billion-dollar program to develop a ballistic missile interceptor, citing design problems.

TRENDSHEETSymbol CMP S2 S1 R1 R2 TREND

SENSEX 36701.16 35224 35963 37579 38457 Down

NIFTY 10829.35 10361 10595 11105 11381 Down

NIFTYBANK 26958.65 25421 26190 28098 29238 Down

YESBANK 59.45 37 48 76 92 Down

IBULHSGFIN 466.50 355 411 547 628 Down

RELIANCE 1276.40 1196 1236 1307 1337 Up

MARUTI 6251.00 5767 6009 6396 6541 Up

SBIN 271.35 246 259 288 305 Down

ICICIBANK 395.90 361 379 421 445 Down

HDFCBANK 2164.90 2080 2122 2225 2285 Down

BAJFINANCE 3170.05 2801 2986 3367 3563 Down

INDUSINDBK 1311.70 1172 1242 1420 1528 Down

HDFC 2058.05 1893 1976 2138 2217 Down

FORTHCOMING EVENTSCOMPANY NAME EVENT

EX-DATE/RESULT DATE

Accelya Solutions India Ltd. Result Update 28 Aug 2019

Varun Beverages Ltd. Interim Dividend - Rs. - 2.5 26 Aug 2019

Yuken India Ltd. Final Dividend - Rs. - 2.0 27 Aug 2019

Polyplex Corporation Ltd. Final Dividend - Rs. - 10.0 27 Aug 2019

KRBL Ltd. Final Dividend - Rs. - 2.5 28 Aug 2019

Lux Industries Final Dividend - Rs. - 3.5 28 Aug 2019

Bharat Bijlee Ltd. Dividend - Rs. - 12.5 29 Aug 2019

Mahanagar Gas Ltd. Final Dividend - Rs. - 10.5 29 Aug 2019

Panasonic Energy India Ltd. Dividend - Rs. - 4.0 30 Aug 2019

KDDL Ltd. Dividend - Rs. - 2.5 30 Aug 2019

KSTREET - 24TH AUGUST 2019 1

INDIAN INDICES (% CHANGE)

GLOBAL INDICES (% CHANGE)

NIFTY MIDCAP100TOP GAINERS & LOSERS (1W)

SECTORAL INDICES (% CHANGE)

FII/FPI & DII TRADING (IN RS. CRORES)

NSE NIFTY TOP GAINERS & LOSERS (1W)

EQUITY

Source: Bloomberg

-0.040

-0.035

-0.030

-0.025

-0.020

-0.015

-0.010

-0.005

0.000 Nifty

Sensex

BSE Midcap

BSE Smallcap

Nifty N

ext 50

Nifty M

idcap 100

-0.10

-0.08

-0.06

-0.04

-0.02

0.00

0.02

Auto

Bank

Services

FMC

G

Pharma

IT Metal

Energy

Consum

ption

Realty

0.00

0.01

0.01

0.02

0.02

0.03

0.03

0.04

Nasdaq

Dow

Jones

S&P 50

0

Nikkei

Hang Sang

Sanghai Com

p

FTSE 100

CA

C 40

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

RAJESH

EXPO

RTS LTD

MA

X FIN

AN

CIA

L SERVIC

ES LTD

CO

ROM

AN

DEL

INTERN

ATIO

NA

L LTD

MA

HA

NA

GA

R GA

S LTD

BHA

RAT ELEC

TRON

ICS

LTD

RELIAN

CE PO

WER LTD

STERLITE TECH

NO

LOG

IES LTD

RELIAN

CE

INFRA

STRUC

TURE LTD

EDELW

EISS FINA

NC

IAL

SERVIC

ES

RELIAN

CE C

APITA

L LTD

-30.00

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

MA

RUTI SU

ZUK

I IND

IA LTD

TATA

CO

NSU

LTAN

CY

SVC

S LTD

TECH

MA

HIN

DRA

LTD

INFO

SYS LTD

SUN

PHA

RMA

CEU

TICA

L IN

DU

S

ULTRA

TECH

CEM

ENT LTD

TATA

MO

TORS LTD

IND

USIN

D BA

NK

LTD

IND

IABU

LLS HO

USIN

G

FINA

NC

E L

YES BAN

K LTD

-1500.00

-1000.00

-500.00

0.00

500.00

1000.00

1500.00

2000.00

16-08-19 19-08-19 20-08-19 21-08-19 22-08-19

FII/FPI DII


BEAT THE STREET - FUNDAMENTAL ANALYSIS

KNR Constructions Ltd CMP Rs.229Target Price Rs.290Upside 27%

Investment Rationale

• Keeping in view of FY19’s high earnings base, we expect the earnings to normalize during FY19-21E with a revenue growth of 19.6% CAGR coupled with EBITDA margin of around 16.5%.

• Current OB of Rs. 43 Bn combined with anticipated order inflow of around Rs. 65 Bn in next 2 years provides revenue visibility.

• In view of the NHAI’s announcement of awarding 6000 km of projects for the FY20, we expect KNR to witness an order inflow of Rs. 25 Bn & Rs. 40 Bn for FY20 & FY21 respectively with revenue CAGR of 19.6% for FY-21E.

• KNR has a consistent margin profile with around 15% EBITDAM, RoE & RoCE at >15%. We expect the trend to continue in future. Historically, KNR has always maintained a strong balance sheet with D/E < 0.2x levels. Standalone liability stands at Rs. 3.4 Bn (promoter loan of Rs. 2.1 Bn).

• KNR has always maintained a lean WC cycle (42 days as of Q1FY20), especially a control on receivables. KNR also witnessed a consistent improvement in ATR (Asset Turnover Ratio) from FY14 to reach 5.8x (FY19) Vs 2.4x.

VALUE PARAMETERSFace Value (Rs.) 2.0

52 Week High/Low (Rs.) 303/163

M.Cap (Rs. Bn/US $Bn) 32455/452

EPS (Rs.) 19.2

P/E Ratio (times) (FY21E) 12.0

Dividend Yield (%) -

Stock Exchange NSE/BSE

P/E CHART

Valuation

At CMP of Rs. 229, KNR Construction is trading at 12.7x to FY21E standalone EPS. Considering the order book and execution rates, we value the EPC business at 12.5x to its FY21E EPS to arrive at the value of Rs. 240 per share. We also value the BOT assets at 1x BV & HAM opportunity at 1x BV of the equity investment and arriving at a value of Rs. 290. In view of the opportunity along with strong financials & KNR’s ability to maintain healthy profitability levels during lower execution times, we reiterate a “BUY” rating with a target price of Rs. 290 and an upside of 27%.

EQUITY

% OF SHARE HOLDING

in Rs.Mn ACTUAL ESTIMATE

YE Mar FY 19 FY 20E FY 21E

REVENUE 21373 25772 30588

EBITDA 4270 4217 5006

EBITDA(%) 20.0 16.4 16.4

PAT 2633 2139 2703

EPS (Rs.) 18.7 15.2 19.2

RoE (%) 18.6 13.1 14.2

PE (x) 13.9 15.1 12.0

63%

27%

6% 4%

Promoter

FIIs

DIIs

Others

0.00

20.00

40.00

60.00

80.00

100.00

120.00

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19

Phoenix Mills Sensex

55%

3%

30%

12%

Promoters

FIIs

DIIs

Others 70

90

110

130

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19

KNR Constructions Sensex

63%

27%

6% 4%

Promoter

FIIs

DIIs

Others

0.00

20.00

40.00

60.00

80.00

100.00

120.00

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19


55%

3%

30%

12%

Promoters

FIIs

DIIs

Others 70

90

110

130

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19



BEAT THE STREET - FUNDAMENTAL ANALYSIS

The Phoenix Mills Ltd. CMP Rs.637Target Price Rs.735Upside 15%

VALUE PARAMETERSFace Value (Rs.) 2.0

52 Week High/Low (Rs.) 700/489

M.Cap (Rs. Bn/US $mn) 95648/1333

EPS (Rs.) 27.0

P/E Ratio (times) (FY20E) 23.6

Dividend Yield (%) 0.4

Stock Exchange BSE/NSE

EQUITY

P/E CHART

% OF SHARE HOLDING

in Rs.Mn ACTUAL ESTIMATE

YE Mar FY19 FY20 FY21

REVENUE 19816 20588 21869

EBITDA 9931 9985 10607

EBITDA(%) 50.1 48.5 48.5

PAT 4970 3589 4141

EPS(Rs.) 32.5 23.4 27.0

RoE (%) 14.3 9.1 9.7

PE (x) 19.7 27.2 23.6

Investment Rationale

• PHNX’s revenue grew 49% YoY to Rs. 6150 Mn. The significant growth in revenue was on account of revenue recognition from tower 6 of its residential project “One Bangalore West” which has received OC in Q1FY20. Revenue from residential segment stood at Rs. 2017 Mn.

• During the quarter, total consumption growth was 5% YoY and rental income at its retail malls grew by 7% YoY. Consumption growth remained healthy at MarketCity Pune (9% YoY), Mumbai (14% YoY) and Bangalore (9% YoY). HSP Mumbai and MarketCity Chennai experienced muted consumption growth.

• At the end of the quarter, total debt stood at Rs. 44.9 Bn and cost of debt increased marginally to 9.36%.

• EBITDA margins expanded by 32 bps YoY to 48%.

• Management has indicated that the Lucknow mall will become operational by the end of Q2FY20. Higher renewal schedule at its 5 core malls will drive rental income over the next two years.

• Revenue from Room at St. Regis, Mumbai increased 8% driven by higher occupancy. The occupancy in Q1FY20 increased by 8 bps and reached 82% compared to 74% in Q1FY19. Occupancy at Courtyard Marriott, Agra touched 64% against 47% in Q1FY19.

Valuation

As India’s largest mall owners and operators, the Phoenix Mills Limited is evolving into a trusted proxy for the consumption trends of India’s urban middle class. PHNX remains India’s largest retail mall developer and operator and the expansion of retail & office space portfolio will help it achieve the next leg of growth. We retain “BUY” rating on the stock with a NAV based TP of Rs. 735/share with upside potential of 15%.

63%

27%

6% 4%

Promoter

FIIs

DIIs

Others

0.00

20.00

40.00

60.00

80.00

100.00

120.00

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19


55%

3%

30%

12%

Promoters

FIIs

DIIs

Others 70

90

110

130

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19


63%

27%

6% 4%

Promoter

FIIs

DIIs

Others

0.00

20.00

40.00

60.00

80.00

100.00

120.00

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

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19


55%

3%

30%

12%

Promoters

FIIs

DIIs

Others 70

90

110

130

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Jun-

19

Jul-

19



EQUITY

BEAT THE STREET - TECHNICAL ANALYSIS

Galaxy Surfactants

Galaxy Surfactants is a global leader supplying a wide range of innovative products to over 1000 customers in 103 countries. They have a wide range of specialty chemicals which includes Surfactants, Mild Surfactants, Rheology Modifiers, Pearlizing Agents, Conditioning Agents, blends based on innovative concepts, proteins, Quats for personal care. Galaxy is Certified Preferred Supplier to Colgate, Star Status Supplier for Unilever, Strategic Mind Partner with Henkel, Green Channel Holder of Reckitt Benckiser. Company has a good return on equity (ROE) track record with last 3 Years ROE at 25.44%. Technically, GALAXYSURF has rallied from 969 to 1282 on daily chart and has corrected to 38.2% Fibonacci retracement levels of the said rally i.e. around 1162 and bounced back from there to close above its previous swing high levels indicating end of the correction and a possible fresh leg of rally from these levels. Adding to it, Heiken candlesticks and parabolic SAR is signalling positive trend on the weekly charts reflecting the stock is well placed to move higher in the coming days. 14 periods RSI is trading above the 9 period averages on daily as well as weekly charts indicating positive momentum. The stock is trading well above all of its major moving averages on daily as well as weekly charts indicating strong positive momentum in the counter for all major time frames. The stock has given breakout from bullish head and shoulder chart pattern on daily chart. At the current levels, the stock has given an excellent opportunity for medium to long term investors to accumulate the stock around 1280-1290 levels for the potential upside targets of 1540-1590 levels over the next 6-9 months, keeping a stop loss below 1090 levels.

Godfrey Phillips India

Godfrey Phillips India is one of the largest FMCG companies in the country with many iconic cigarette brands like Four Square, Red & White, and Cavanders to its name. They also have an exclusive sourcing and supply agreement with Philip Morris International to manufacture and distribute the renowned Marlboro brand in India. Godfrey Phillips India has expanded its product portfolio beyond cigarettes and tobacco and entered India’s highly competitive chewing products, mouth freshener, confectionery segment and retail. Pan Vilas pan masala, Pan Vilas Silver Dewz – a silver-coated Elaichi (cardamom seed) and Funda Goli candies are all manufactured by the company at attractive price points. It is owned by Modi Enterprises which is a US $ 2.8 Bn group of companies with interests in a diverse range of businesses, which include agro-chemicals, tobacco, retail, education, cosmetic, network marketing, fashion, travel and gourmet restaurants. Technically, the stock has rallied from 673.3 to 1088.70 on daily chart and has corrected to 50% Fibonacci retracement levels of the said rally i.e. around 887 and bounced back from there to close near 23.60% Fibonacci retracement levels indicating end of the correction and a possible fresh leg of rally from these levels. The Heiken candlesticks and parabolic SAR is signalling positive trend on the daily charts reflecting the stock is well placed to move higher in the coming days. 14 periods RSI is trading above the 9 period averages on weekly chart indicating positive momentum. The stock is trading well above all of its major moving averages on daily as well as weekly charts indicating strong positive momentum in the counter for all major time frames. At the current levels, the stock has given an excellent opportunity for medium to long term investors to accumulate the stock around 950-960 levels for the potential upside targets of 1135-1170 levels over the next 6-9 months, keeping a stop loss below 820 levels.

STOCK GALAXYSURF

CMP 1302.65

ACTION BUY

ENTRY 1280-1290

AVERAGE 1120

STOP LOSS 1090

TARGET 1 1540

TARGET 2 1590

TIME FRAME 6-9 MONTHS

STOCK GODFRYPHLP

CMP 971.30

ACTION BUY

ENTRY 950-960

AVERAGE 850

STOP LOSS 820

TARGET 1 1135

TARGET 2 1170

TIME FRAME 6-9 MONTHS


EQUITY

Sentiment

Initiation 570

Stop Loss 600

Target 535

Lot Size 700

Margin 74000

21-DEMA 630

Open Interest Shares 2895200

Change in OI 154000

Cost of Carry (%) -8.97

SECTORAL SNIPPETS

NIFTY IT (15,816.60) closed on a positive note, settled with gains of nearly 2.93% on weekly closing basis. On the stock front, few stocks managed to outperform the index; TATAELXSI 4.42%, TECHM 4.10%, TCS 3.95%, INFY 3.45% while INFIBEAM -9.04% & OFSS -2.22% closed in negative territory on a weekly closing basis. NIFTY IT index after placing a swing low near 15238 levels, witnessed a bounce in the last two weekly sessions. Technically, index took the support of its 200-DEMA which is currently placed near 15380 levels, and currently, it is holding above its 13-DEMA placed near 15585 levels respectively. On the momentum oscillator front, 14-period RSI found support near the equilibrium level in the recent price correction, indicating the possibility of upside momentum to continue further in the sessions to come. On the downside, index has immediate support near 15478 levels followed by 15238 levels while on the higher side, 15945 will work as an immediate resistance followed by 16100 levels. Going forward, index on sustaining above 15238 levels is likely to trade with a positive bias.

NIFTY PHARMA (7,780.55) ended higher by around 1.2% last week outperforming the benchmark index Nifty which ended lower by around 1.80% on weekly basis. Technically, the index is currently trading well below the resistance levels of 7900-7950 levels on the weekly charts and any close above the said levels may trigger bullish reversal. In the past week, index has shown resilience to drift lower even in the weak market conditions indicating good buying interest is witnessed around the lower levels. Among the stock front, DIVISLAB & SUNPHARMA remained the star performers last week gaining more than 4% followed by DRREDDY, GLENMARK and LUPIN which gained in the range of 1-2%. Technically, the index is currently trading near the resistance levels of 7850-7950 levels and any breach of the range may trigger momentum towards 8050-8100 levels. The immediate support for the index is pegged around 7700 levels followed by 7550 levels, while near term resistance for the index is placed around 7850 followed by 7950 levels. For the upcoming week, the index is expected to trade with sideways bias in the range of 7700-7950 levels. Short term traders may adopt stock specific approach on the index for the coming sessions and may look for accumulating stocks like SUNPHARMA & AUROPHARMA on declines.

NIFTY REALTY (244.55) has witnessed significant underperformance when compared to the broader index Nifty 50 as it plunged over 7.50% on week to week basis while Nifty has corrected just over 1.50% in the same time frame. Across the board, selling was seen in the realty sector. The major contributors were DLF, IBREALEST and OBEROIRLTY which plunged over 14%, 16.50% and 13% respectively. Technically, the index is placed below all its major moving averages on daily chart indicating inherent weakness in the counter. On weekly chart, the index has witnessed a breakdown from the levels of 250 and sustenance below which may drag the index towards the next support zone of 235-238 levels which is the previous swings on closing basis. On oscillator front, 14 period RSI is placed around 39-51 levels post negative crossover and has headed lower towards the oversold zone. The immediate support is pegged around 235-238 levels followed by 220-222 levels while on the higher side, resistance can be seen around 250 levels which is the breakdown point followed by 258-260 levels. For the coming week, stock specific movement should play an important role as few of the stocks have hugely fallen and some short covering might be seen amid the expiry week. Hence, it is advisable to not to carry heavy leveraged positions and to hedge the existing positions.

NIFTY BANK (26,958.65) underperformed the Nifty with a loss of 4.46% during the week passed by while the broader index Nifty lost by 1.98%. During the last week, BankNifty recently repelled from its 13 days EMA and is making lower lows indicating its bearish bias in the short term ahead unless it crosses and sustains above 28600 levels. For the index, short term momentum indicators on daily charts are trading below their equilibrium levels pointing southwards, after witnessing resistance from the same, indicating to take a sell on rise approach for short term traders. For the week ahead, the index may trade with a bearish bias if it sustains below 27390 levels. On the news front, HDFC Bank fell after the private sector lender announced management restructuring. In the last three months, the stock has shed more than 10%. IndusInd Bank has underperformed the market by falling 8.85%. The bank’s exposure to stressed groups and the prevailing slowdown in select lending segments added to the woes. On the stock front, no stock in the index closed in green for the week while YESBANK, RBLBANK, INDUSINDBK and BANKBARODA lost by 25.17%, 10.75%, 8.85% and 8.74%. As indicated by the derivatives data, BankNifty may face resistance at 27500 levels followed by 28000 levels. For the week ahead, support for the index can be pegged at 26500 levels followed by 26000 levels.

RELIANCE INDUSTRIES LIMITED: BUY RELIANCE (SEP FUTURE) | CMP: 1280.55 SECTOR: ENERGY

RELIANCE is one of our preferred pick in the energy space and is currently making higher highs and higher lows on the daily charts. The counter has been an outperformer in the last couple of weeks which has shown resilience in the bearish market conditions. The counter is currently trading above the major moving averages with the stock price placed above the good support levels on the daily charts. The stock has also respected the runway gap made on the daily charts around 1220 levels and bounced back sharply in the last week. After crossing stiff resistance of 1200-1220 levels, the stock made northwards journey towards 1300 levels in the recent past exhibiting good price volume action. On the Bollinger band (20, 2) front, the stock is trading around the mean and is pointing in the upward direction. Key supports for the stock is placed at 1240 followed by 1220 levels while resistance is pegged around 1310-1330 levels in the short term period. We expect the stock to continue to trade in the bullish trajectory and may move towards 1300 plus levels. Short term traders may go long on the stock around 1270 levels keeping stop loss below 1240 for the targets of 1320 levels in the September derivatives series.

Sentiment

Initiation 1270

Stop Loss 1240

Target 1320

Lot Size 500

Margin 123000

21-DEMA 1239

Open Interest Shares 51842500

Change in OI 1159500

Cost of Carry (%) -3.81

CUMMINS INDIA LTD: SELL CUMMINSIND (SEP FUTURE) | CMP: 564.95 SECTOR: CG

CUMMINSIND has witnessed fall consecutively from past four weeks and has shown underperformance from its broader index. The stock is in cycle of lower lows and lower highs indicating inherent weakness in the counter. Technically, the stock is placed below all its major moving averages and on oscillator front, 14 period RSI has seen a negative crossover and is placed around 31-39 levels indicating further downside room in the counter. Also, on the Bollinger band (20, 2) the stock has been testing the lower band from the highs of 740 and is unable to witness any sign of recovery affirming the bearishness in the counter. On derivative front, short addition has been witnessed on week to week basis, concluding the weakness in the counter to continue in near future. Hence, for the coming week, it is advisable to go short in the counter on bounce keeping a stop loss placed above 600 levels for the potential downside of 535 levels.


WEEKLY VIEW OF THE MARKET

NIFTY (10829.35): Indian equity benchmark index Nifty 50 closed lower by 1.98% during the week. The index came under heavy selling pressure over fading hopes of a stimulus to revive economic growth after the Chief Economic Advisor K. Subramanian said the Indian economy does not need a fiscal stimulus to tackle the ongoing economic slowdown. However, the markets saw a breather on Friday on expectations of FPI tax rollback and some measures by the government to boost growth. In this regard, the Finance Minister on Friday has announced about 6 reform oriented measures concerning Taxation, Banking, Housing and Auto sectors which may turn positive for the markets. In the current scenario, Nifty may trade with a bullish bias if it sustains above 10800 levels. For the week ahead to watch, market participants may lay their focus on RBI Monetary and Credit Information Review, Federal Fiscal Deficit (Jul), GDP Quarterly (YoY) (Q1) and Infrastructure Output (YoY) (Jul) data releasing on 30th Aug which may actively determine the course of market’s direction. On the derivatives front, Open Interest data suggests that the index may find its supports around 10700 followed by 10500 levels while on the higher side, 11000 and 11500 may act as strong resistance.

DERIVATIVE STRATEGIES

DERIVATIVES

TYPE: BULL CALL SPREAD

FIRST LEG Buy one lot of NIFTY 29 AUG 10900 CE @ 73

SECOND LEG Sell one lot of NIFTY 29 AUG 11100 CE @ 19

BEP 10954.00

MAX PROFIT 10,950.00

MAX LOSS 4,050.00

RATIONALE The index is expected to trade with bullish bias in the near term.

TYPE: BUY CALL IN BANKNIFTY

FIRST LEG Buy one lot of BANKNIFTY 29 AUG 27000 CE@ 325

MAX PROFIT Unlimited above BEP

BEP 27,325

STG OUTFLOW 6,500

STOP LOSS 100 Option points

RATIONALE The index is expected to trade with bullish bias in the near term.

TYPE: BUY CALL IN ASIANPAINT

FIRST LEG Buy ASIANPAINT August 1580 CE @ 15

BEP 1595

MAX PROFIT Unlimited

MAX LOSS 9000

STOP LOSS 2.00 (option levels)

RATIONALEAsian Paint is one of the stocks which is trading at all time highs and the stock on Friday has given confirmation of uptrend after correcting for few days. It has retraced from the key major supports and the stock has support at 1540 levels based on derivative data. Its derivative activity suggests long built up throughout the month. Hence, bullish view for near term.

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TYPE: PUT RATIO IN COALINDIA

FIRST LEG Buy 1 Lot of COALINDIA AUGUST 190 PE @ 4.50

SECOND LEG Sell 2 Lots of COALINDIA AUGUST 180 PE @ 1.35

BEP 189 and 172

MAX PROFIT 18040

STOP LOSS 165 Spot levels

MAX LOSS Unlimited below LBEP of 172 and 3960 above UBEP of 189

RATIONALE

COALINDIA has lost more than 8% for the month and is continuously clocking fresh 52 wk lows on a consistent basis. The stock is consistently trading below all the major moving averages on all time frames (daily, weekly as well as monthly chart), indicating inherent weakness in the counter. The stock has fallen for the second consecutive week which suggests that any pullback can be used as an opportunity to exit the stock. On the momentum oscillator front, the 14 period RSI is placed below the signal line on the daily as well as the weekly chart which re-affirms the negative view in this counter.

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7KSTREET - 24TH AUGUST 2019

DERIVATIVES

FII ACTIVITY IN INDEX FUTURES FII ACTIVITY IN STOCK FUTURES

TOP 6 LONG BUILD UP

Stock Name LTP % Price Change Open Int % OI Change

MGL 846.25 4.89 3477000 162.57

NESTLEIND 12438.65 3.62 449000 17.2

WIPRO 251.4 0.88 36582000 13.85

MARUTI 6254.35 4.67 3589000 12.57

JUBLFOOD 1154.5 3.72 3033000 9.62

APOLLOTYRE 165.6 0.82 10128000 6.1

BANKNIFTY OPTION OI CONCENTRATION CHANGE IN BANKNIFTY OPTION OI

TOP 6 SHORT CLOSURE


GLENMARK 368.15 1.94 5293000 -15.05

VOLTAS 612.65 1.85 3337000 -10.51

NTPC 118.5 0.59 64886000 -9.24

MRF 57859.5 1.82 26000 -8.4

TATAELXSI 649.25 4.14 2225000 -7.87

CADILAHC 220.4 1.22 12170000 -7.63

TOP 6 SHORT BUILD UP


NMDC 80.05 -22.17 35556000 33.35

LICHSGFIN 424.85 -11.54 10891000 28.7

RAMCOCEM 721.1 -1.17 1736000 28.1

HAVELLS 647.2 -0.64 8361000 24.81

BAJAJFINSV 6884.6 -7.46 1056000 20.99

ITC 236.1 -6.68 113777000 18.54

TOP 6 LONG CLOSURE


TATAPOWER 54.5 -2.85 49140000 -14.97

APOLLOHOSP 1440.85 -2.02 1375000 -12.89

KAJARIACER 466.3 -3.21 1467000 -12.89

MUTHOOTFIN 611.95 -3.64 2256000 -12.3

SRF 2809.85 -2.65 926000 -11.83

HINDZINC 202.45 -2.13 6404000 -11.5

NIFTY OPTION OI CONCENTRATION CHANGE IN NIFTY OPTION OI

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Call Put


COMMODITIES

BULLIONGold prices went lower on the weekly basis and posted worst losses in nearly five weeks as market is eyeing US Federal Reserve’s Monetary Policy outlook for the next interest cut decision. Two central bank officials said on Thursday the US economy does not need more stimulus at this point while another said he was “open-minded.” The decision of lower interest rate would decrease the opportunity cost of holding non-yielding bullion and would impact dollar negatively. Separately, gold prices remained higher by 6% so far this month although it went into correction this week but the outlook remained over the concerns of US-China trade war and global growth. Following the US bond yields, the 10 year bond yield curve moved back into inversion territory during last session which is expected to hit financial markets over the worries of weakening global economic growth. As per SPDR, the trust holding has increased by around 27 tonnes so far this month.

ENERGYCrude oil prices recovered and Brent oil traded near $60/bbl in international markets over the lower supplies from the major oil producers offsetting the weaker demand concerns. The market was also eyeing US Federal Reserve’s Monetary Policy. Fed Chairman Jerome Powell is scheduled to deliver a speech later on Friday at a meeting of global central bankers in Jackson Hole providing the future guidance relating to the interest rates cut. The reversal hawkish or dovish comments will support crude oil to trade higher. Brent oil prices are on lower stance in August since July month when IEA & OPEC revised down the demand growth forecast over the concerns of US-China trade war. As per EIA, US commercial crude oil inventories decreased by 2.7 million barrels from the previous week whereas on the product side, total motor gasoline inventories increased by 0.3 million barrels and distillate fuel inventories increased by 2.6 million barrels last week. According to EIA weekly reports, US crude oil imports averaged 7.2 million barrels per day last week which is lower by 497,000 barrels per day from the previous week. Separately, OPEC & Russia’s production cut and reduced exports from Iran & Venezuela lend the bottom support to the prices. According to OPEC data, OPEC‘s market share in global oil supply stood at 30% which is down from 34% a decade ago and from the highest level of 35% in 2012. In the latest tiff between US & China, Trump administration has questioned China’s interference in oil and gas activities in waters claimed by Vietnam.

METALSMetals were on a negative note for the week ended on 23rd Aug taking cues about the expectation in further rate cuts by Fed. Though the initial two days were supportive for the prices, later in the week, prices faltered heavily. Narrowness in automobile production and sales could be observed in July 2019, as they were down by 5% and 12.1% to 1.8 million and 1.808 million vehicles respectively compared to June 2019. As per the data released from China’s NBS, refined copper production during July 2019 was up 4.8% on a yearly basis to 800,000 tons. During the seven month period of 2019, the total output was 5.35 million tons, which was up by 5.5% on a yearly basis. China’s copper production was 1.69 million tons in July, up 2.2 % on a yearly basis. The total output from January to July was 11.29 million tons, up 8.9% on yearly basis. China produced 470,000 tons of lead in July, up 13.2% year on year. The total output from January to July was 3.48 million tons, up 17.1% year on year. Refined copper output from China was up by 212 tons during June 2019, up 1.8% on a monthly basis and down 24.9% year on year, data from General Administration of Customs showed. The refined copper imported by China from Chile, Australia, Peru and Japan were 49,065 tons, 8,212 tons, 10,590 tons and 11,812 tons respectively. China’s crude steel production expanded by 5% on a monthly basis and stood at 85.22 million tons in July. For the seven month period, the production stood at 577.06 million tons, standing 9% higher than the same period last year. As per ICSG reports, world mine production levels declined by 1% in Jan-May 2019, with concentrate production declining by 0.2% and solvent extraction-electrowinning (SX-EW) by 3.5%. Production in Chile, the world’s biggest copper mine producing country, declined by 3% mainly due to lower copper head grades. Concentrate production in Indonesia declined by 55% as a consequence of the transition of the country’s major two mines to different ore zones leading to temporarily reduced output levels. Zinc markets have witnessed a surplus in June by 10,900 tonnes from a deficit of 38,200 tonnes in May as per the ILZSG data released yesterday. Lead market deficiency widened still to 65,000 tonnes in the whole of six month period of 2019 compared to 37,000 tonnes during the same period of 2018 which shall support the prices.

COTTONCotton futures extended its weekly gains on tighter inventory levels amid growing fear of yield reduction resulting with reports of crop damage in some part of Maharashtra. Reports of crop damage due to above normal monsoon rainfall led to water logging in major cotton growing district in Punjab and Maharashtra added positivity to prices during the week. Moreover, increased landed cost of imported cotton in line with tumbling value of Indian currency against US dollar also supported cotton prices during the week. Indian currency

has depreciated by more than 5% in last one month impacting imports badly. Imports have increased in recent months due to tighter supply situation in physical market and now depreciation of Indian currency has resulted in expensive imports in India. India has imported about 20 lakh bales of cotton till end of July and likely to realize 9-10 lakh bales of imports in coming month. Cotton Association of India has projected total import for year 2018-19 at 31 lakh bales that is almost double the last year. In the meanwhile, gains in the MCX cotton prices were also supported by short covering triggered with lower production forecast for Gujarat. Expectation of fall in yield due to erratic monsoon rainfall supported prices at futures platform. At sowing front, cotton acreages under cotton in Gujarat have surpassed the last three years averages of 25.86 lakh hectares and reported at 25.99 lakh hectares till 13th Aug compared to 26.74 lakh hectares of prior year for corresponding period. Cumulative cotton acreages in India has been higher by 5.4% y/y so far reported at 118.7 lakh hectares till 9th Aug compared to 112.60 lakh hectares of prior year. At global front, ICE cotton futures traded down due to lack of progress of trade negotiation between US and China. Moreover, reports of weaker export sales data released by USDA also impacted market sentiments negatively. Meanwhile, USDA released its monthly supply and demand estimation report for the month of Aug and raised its cotton production estimates for US by 2.4% compared to last month and estimated at 22.52 million bales of 480 lb each in year 2019-20.

SOYBEAN Soybean futures traded mixed to higher for most part of the week ended on 23rd Aug due to growing fear of fall in yield in major soybean growing states. Reports of crop damage due to heavy rainfall in Madhya Pradesh and Maharashtra added concerns over yield reduction keeping prices higher at major trading centres. Moreover, reduced arrivals in physical market and expectation of rise in import duties on RBD palm oil also helped prices to trade higher during the week. On sowing front, sowing area gap between previous year and current year has been narrowed due to improved rainfall activities in central region. Total acreages under soybean were reported at 111.46 lakh hectares till 16th Aug compared to 110.95 lakh hectares of prior year, higher by 0.5% y/y. Soymeal export was reported at 26006 tonnes in July 2019 compared to 63748 tonnes of prior year for corresponding month down by 59% on yearly basis. On global front, CBOT soybean futures traded mixed to down on improved crop condition in US. Meanwhile, USDA has lowered the US soybean production forecast by 165 million bushels to 3.68 billion bushels in its latest monthly supply and demand estimation report. India’s soyoil imports fell 9.3% to 319,606 tons in July according to Solvent Extractors’ Association of India. Cumulative import of soybean oil from Nov 2019-July 2019 was reported at 2011658 tons lower by 5.5% on yearly basis. Base import tariff on soyoil has been increased up to $737 per tons from $705 per tons fortnight ago. The Solvent Extractors’ Association of India released the monthly Import data of vegetable oil (edible & non-edible) for the month of July 2019 that showed cumulative import of vegetable oil was up by 26% Y/Y reported at 1,412,001 tons compared to 1,119,538 tons in July 2018, consisting 1,347,882 tons of edible oils and 64,119 tons of non-edible oils.

GUARGuar seed and gum futures resumed its downtrend during the week ended on 23rd August as prices moved down more than a 3.5% on account of selling pressure in the market. Sudden progress in acreage and improved sowing activity pull down the prices in the market. Market participants cut their positions due to subdued export demand in the market. During the week, normal to heavy rainfall was observed in Western Rajasthan region. Continuous fall in gum/seed ratio to 1.96 to 1.97 in weeks had indicated muted demand for gum for the export and industries purpose. However, cumulative monsoon rainfall in Ganganagar, Hanumangarh and Jaiselmer had been below normal till the second half of August recorded at -30%,-33% and -33% of LPA. According to the sowing data released by the Ministry of Agriculture Govt. of Rajasthan, the farmers have planted 1826.1 thousand hectare Moong as on 22nd August against 1875.4 thousand hectare planted in the same period a year ago and Bajra acreage stood at 3829.2 lakh hectare as on 22nd August against 3731.5 lakh hectare planted in the same period last year whereas farmers had planted around 2756.4 thousand hectare of Guar against the 2732 Lakh hectare YoY. After making low of Rs. 4244 per quintal, guar seed most-active, September contract settled the weekly session at Rs. 4277 per quintal, fell by 3.78% wherein gum futures for the same expiry made a low of Rs. 8247 per quintal from the previous week and end the week at Rs. 8316 per quintal tumbled by 3.72%. During the week in Rajasthan, arrivals were recorded around 12936 quintals from 19th to 23rd August which was up by 47% from the last week.


COMMODITIES

COPPER

TRENDSHEET

Commodities 16-Aug 23-Aug % Change 52 Week High% Change from 52

Week High52 Week Low

% Change from 52 Week Low

MCX Gold (Rs/10 gms) 37938.0 38212.0 0.7% 38666.00 -1.17% 29540.00 29.36%

MCX Silver (Rs/Kg) 43824.0 43968.0 0.3% 44584.00 -1.38% 34981.00 25.69%

MCX Crude Oil (Rs/bbl) 3896.0 3874.0 -0.6% 5669.00 -31.66% 2993.00 29.44%

MCX Natural Gas (Rs/mmBtu) 156.3 153.9 -1.5% 358.70 -57.10% 144.60 6.43%

MCX Copper (Rs/kg) 446.0 442.5 -0.8% 469.35 -5.73% 397.40 11.34%

MCX Lead (Rs/kg) 153.3 153.9 0.4% 168.00 -8.39% 123.80 24.31%

MCX Zinc (Rs/kg) 183.6 182.4 -0.7% 233.65 -21.96% 165.80 9.98%

MCX Nickel (Rs/kg) 1138.6 1116.5 -1.9% 1161.90 -3.91% 735.00 51.90%

MCX Aluminium (Rs/kg) 140.9 139.0 -1.4% 167.80 -17.19% 124.75 11.38%

NCDEX Soybean (Rs/Quintal) 3791.0 3674.0 -3.1% 3915.00 -6.16% 3149.00 16.67%

NCDEX Refined Soy Oil (Rs/10 kg) 759.2 758.0 -0.2% 784.00 -3.32% 713.60 6.22%

NCDEX RM Seed (Rs/Quintal) 3928.0 3931.0 0.1% 4244.00 -7.38% 3711.00 5.93%

MCX CPO (Rs/10 kg) 548.9 556.6 1.4% 609.80 -8.72% 483.40 15.14%

NCDEX Castor Seed (Rs/Quintal) 5604.0 5744.0 2.5% 6300.00 -8.83% 4512.00 27.30%

NCDEX Turmeric (Rs/Quintal) 6972.0 6838.0 -1.9% 7360.00 -7.09% 5870.00 16.49%

NCDEX Jeera (Rs/Quintal) 16840.0 16895.0 0.3% 21000.00 -19.55% 15140.00 11.59%

NCDEX Dhaniya (Rs/Quintal) 5880.0 5946.0 1.1% 7688.00 -22.66% 4507.00 31.93%

MCX Cardamom (Rs/kg) 3443.0 3003.6 -12.8% 4265.30 -29.58% 1293.10 132.28%

NCDEX Wheat (Rs/Quintal) 2080.0 2076.0 -0.2% 2162.00 -3.98% 1770.00 17.29%

NCDEX Guar Seed (Rs/Quintal) 4312.5 4305.0 -0.2% 4869.50 -11.59% 4074.00 5.67%

NCDEX Guar Gum (Rs/Quintal) 8550.0 8405.0 -1.7% 10510.00 -20.03% 8070.00 4.15%

MCX Cotton (Rs/Bale) 20780.0 20960.0 0.9% 23350.00 -10.24% 19520.00 7.38%

NCDEX Cocud (Rs/Quintal) 3304.0 3117.0 -5.7% 3380.00 -7.78% 1595.50 95.36%

MCX Mentha Oil (Rs/kg) 1323.3 1302.0 -1.6% 1846.10 -29.47% 1176.00 10.71%

TECHNICAL RECOMMENDATIONS

CRUDE OIL

COTTON

Copper August contract delivery futures are trading around Rs. 445/kg on MCX platform, marginally lower from the previous week’s closing price of Rs. 443.75. LME copper 3M forwards have broken the long term consolidation phase support levels around $5770 and trading below the same. At present prices are trading low and the weekly and daily 8, 13 EMA resistance $5850-5950 levels. The weekly momentum indicator RSI-14 has approached the oversold zone (28). Therefore, in the beginning of the next week, we might see mere pullbacks towards the break out print. Lower side supports are seen around $5600/5550 levels. Overall bearish trend is in progress and we recommend building short positions from higher levels. Recommendations:Copper August MCX: Sell at 446-447 TP 438 SL 453

Crude oil September contract prices are trading around Rs. 3970/barrel. Prices are trading within a confined range of Rs. 3800-4100 since last several consecutive weeks. In the current week, prices have breached the daily 8, 13 EMA support level around Rs. 4020-4030 levels and hovering below the same. The momentum indicator RSI-14 has recovered from oversold zone 28 to 58. In the bigger scenario bearish trend is in progress, we are anticipating oil prices to breach consolidation phase support levels around 3800 levels and to extend fall towards 3700 to 3650 levels. Thus, we recommend building short positions and hold.Recommendations:Crude oil September MCX: Sell at 3950 TP 3700 SL 4100

Cotton August contract delivery futures at the MCX platform are trading around Rs. 21130/bale. Prices are moving higher since last three consecutive weeks after making a low of Rs. 19520/bale. In the bigger scenario, bearish trend is in progress and we are anticipating prices to resume the bearish trend. At present, prices are trading near the weekly 8, 13 EMA resistance levels (21300, 21400) and also trading near the daily 100 EMA resistance levels. Also, prices are witnessing the Fibonacci 61.8% resistance levels at the same levels. The daily and weekly momentum indicator RSI-14 has moved from overbought zone to normal zone (30 to 50). While combining above technical factors, we are anticipating prices to move lower and we recommend selling from lower levels. Recommendations:Cotton August MCX: Sell at 21200-21300 TP 20500 SL 21700


COMMODITIES

MCX CRUDE- PRICE, VOLUME & OPEN INTEREST MCX NATURAL GAS – PRICE, VOLUME & OPEN INTEREST

CALENDAR SPREAD NYMEX - CRUDE OIL CALENDAR SPREAD NYMEX – NATURAL GAS

NEWS DIGEST

• US economy is in a “favorable place” and the Federal Reserve will “act as appropriate” to keep the current economic expansion on track, Fed Chair Jerome Powell said on Friday in remarks that gave few clues about whether the central bank will cut interest rates at its next meeting or not.

• Oil prices clawed back the previous day’s losses on Friday, with Brent nudging above $60 a barrel, as tighter supplies from key producers offset slowing demand growth while investors await clues from the Federal Reserve on US monetary policy.

• MCX cotton edged higher for the 11th consecutive session and climbed to 3-week high on Tuesday to close at Rs. 21,140 per bale due technical buying by the market participants.

• Oil prices fell sharply on Friday after China unveiled retaliatory tariffs against about $75 Bn worth of US goods, marking the latest escalation of a protracted trade dispute between the world’s two largest economies.

WEEKLY COMMENTARY

• Gold edged lower on Friday, heading for its first weekly decline in four, as investors locked in profits from bullion’s recent strength as they awaited clarity on US interest rate cuts from the Federal Reserve Chairman’s speech at Jackson Hole.

• China will impose an extra 5% tariff on US soybeans from 1st Sep, as well as additional 10% duties on US wheat, corn and sorghum from 15th Dec, the Ministry of Finance said on Friday in Beijing’s latest retaliatory trade measures against Washington.

• Malaysian palm oil futures climbed to a fresh six-month peak on Friday, charting a fourth straight session of gains on expectations that production will be lower than initially forecast. The benchmark palm oil contract for November delivery FCPOc3 on the Bursa Malaysia Derivatives Exchange was up 0.3% at 2,263 ringgit ($540.10) per tonne at the close of trade.

• Copper prices were poised for a second consecutive weekly fall as trade conflict between China and the US, faltering Chinese economic growth and a weakening yuan undermined the demand outlook.

• Crude oil prices edged higher on Friday after two sessions of consecutive fall and supportive US economic data of retail sales that negated some of the fear regarding global recession. Geo political tiff at Middle East sea route concerns ease off after Britain released captured Iran’s tanker on Thursday. But the pressure still mounts as other countries are cautious about the sea route and future scenario.

• Natural gas supplies in US decreased during last week and rising demand expectation pushed prices higher. The weather is expected to be warmer than normal in the east coast and mid-west over the next 8-14 days which should increase cooling demand during the heart of the summer.

• Copper traded on a negative note on Thursday’s session making losses of 0.52% at LME, 0.46% in domestic markets and posted losses at 0.67% on SHFE. The copper prices came into pressure due to trade war concerns and fell after US economic numbers signalled slowdown in US economy.

• Aluminium prices at LME & SHFE rose after China’s daily aluminium production fell on daily basis during July which averaged at 96,000 tonnes against the average daily production of 99,000 tonne in June.

• The falling production cost in China also is one of the factors for reduction in aluminium production along with slump in Alumina prices. The production cost for aluminium smelter fell by 4% averaging at $1,976.69 (13,888 yuan) m-o-m basis.

• The dollar held onto gains after a surge in US retail sales eased the concerns about slowdown in economy, but market remained cautioned against other US economic figures suggesting growing risks for the development outlook.

-0.25

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Volume Open Interest Price (INR/Bbl)


COMMODITIES

PRICES OF METALS IN LME/ COMEX/ NYMEX (IN US $)

Commodity Exchange Contract 16-Aug 23-Aug % change

Aluminium LME 3M 1795.50 1767.00 -1.59%

Copper LME 3M 5754.50 5695.00 -1.03%

Lead LME 3M 2034.00 2065.50 1.55%

Nickel LME 3M 16185.00 15630.00 -3.43%

Zinc LME 3M 2267.50 2238.00 -1.30%

Gold CME Aug 1508.60 1493.80 -0.98%

Silver CME July 14.28 14.28 0.00%

WTI Crude oil CME June 54.94 55.39 0.82%

Natural Gas CME June 2.20 2.15 -2.36%

INTERNATIONAL COMMODITY PRICES

Commodity Exchange Contract 16-Aug 23-Aug % change

Soybean CBOT July 892.75 882.50 -1.15%

Soy oil CBOT July 27.98 27.98 0.00%

CPO BMD Aug 2027.00 2027.00 0.00%

Cotton ICE July 66.23 66.23 0.00%

FUTURE PRICES (% CHANGE)

LME WAREHOUSE STOCKS (IN TONS)

Commodity Previous week This week Change % Change

Copper 330125 331925 1800 0.55%

Zinc 72425 70400 -2025 -2.80%

Aluminium 962350 935200 -27150 -2.82%

Lead 80300 78800 -1500 -1.87%

Nickel 149640 150006 366 0.24%

SHANGHAI WAREHOUSE STOCKS (IN TONS)*


Copper 162830 156573 -6257 -3.84%

Zinc 73857 75211 1354 1.83%

Aluminium 387663 379007 -8656 -2.23%

*Until Wednesday, (Chinese market was closed last week)

GLOBAL STOCK POSITION (IN TONS)

COMEX WAREHOUSE STOCKS (IN TONS)


Copper 41574 42031 457 1.10%

Import of Palm Oils during Nov.’18 to July ’19

Month RBD Palmolein Crude Palm Oil Total Ratio RBD v/s. CPO

Nov.’18 108,911 568,376 677,287 16:84

Dec.’18 130,459 670,244 800,703 16:84

Jan.’19 167,429 645,308 812,737 21:79

Feb.’19 241,101 497,655 738,756 31:69

Mar.’19 312,673 474,770 787,443 40:60

Apr.’19 238,479 449,762 688,241 34:66

May’19 371,060 439,590 810,650 46:54

June ‘19 255,551 421,001 676,552 37:62

July’19 264,718 532,784 797,502 33:67

Total 2,090,381 4,699,490 6,789,871 31:69-12.76%

-5.66%

-3.09%

-1.97%

-1.92%

-1.70%

-1.61%

-1.41%

-1.38%

-1.18%

-0.79%

-0.78%

-0.62%

-0.19%

-0.17%

-0.16%

0.08%

0.31%

0.33%

0.33%

0.70%

0.87%

1.12%

1.40%

2.50%

-14.00% -12.00% -10.00% -8.00% -6.00% -4.00% -2.00% 0.00% 2.00% 4.00%

Cardamom

Dhaniya

Jeera

Guar Gum

Lead

Gold

Castor Seed

Aluminum

Copper

Crude Oil

Barley

Guar Seed

Cotton Seed Oil Cake

CPO

RM Seed

Soy Oil

Silver

Turmeric

Zinc

Wheat

Soybean

Cotton

Nickel

Mentha Oil

Natural Gas

RBD Palmolein Import at Highest Level since May 2013

During the last few months, due to duty advantage given to Malaysia for Palmolein under India-Malaysia CECA Agreement, the country flooded with RBD Palmolein from Malaysia following reduction of duty difference from 10% to 5% between CPO and Palmolein sourced from Malaysia w.e.f. 1st January, 2019. This has seriously affected working of domestic refiners of CPO and capacity utilization further reduced, which can be seen from the following table.


USD/INR

USDINR traded positive during the week, it made a high of 72.03 and low of 71.05. The RSI is at 71.92. Moving average of 32 is at 69.92 and 55 is at 70.54. The trend is looking positive for the week. Hence, recommend buying at 71.30 TP 72.10 SL 71.00

EUR/INR

EURINR traded positive during the week, it made a high of 79.85 and low of 78.78. The RSI is trading at 54.39. Moving average of 32 is at 78.86 and 55 is at 80.05. The trend is looking sideways for the week. Hence, recommend selling at 80.00 TP 79.00 SL 80.30.

GBP/INR

GBPINR traded positive during the week, it made a high of 88.12and low of 86.33. The RSI is trading at 46.75. Moving average of 32 is at 89.39 and 55 is at 90.50. The trend is looking positive for the week. Hence, recommend buying at 87.20 TP 89.50 SL 86.50.

JPY/INR

JPYINR traded positive during the week, it made a high of 67.72 and low of 66.78. The RSI is at 68.02. Moving average of 32 is at 63.91 and 55 is at 63.86. The trend is looking sideways for the week. Hence, recommend buying on dips at 66.80 TP 67.50 SL 66.40.

TECHNICAL RECOMMENDATIONMARKET STANCE

USD/INR closed for the week at 71.66 after hitting weekly high of 72.05 and low of 71.57. At close, the Sensex was up 228 points at 36,701, while Nifty was up 88 points at 10,829. Benchmark indices rebounded from day’s low after news that Finance Minister Nirmala Sitharaman was going to hold a press conference at 5 pm. Nifty has touched a low of 10,637, while Sensex touched low of 36,102 intraday. Markets strongly expect the Fed to cut rates again at its September 17-18 policy meeting from the current 2.00%-2.25%. Though, holding on to the rates would change the market dynamics. US yields ended in positive yesterday at 1.64 up by 2.09%, though it still remains sharply lower overall. Germany is said to be preparing fiscal stimulus measures as a contingency in the event of a crisis. Indian investors remained risk averse considering a host of factors such as economic slowdown, foreign fund outflows and weakness in most emerging market currencies. Moody’s cuts India’s 2019 GDP growth forecast by 60 bps to 6.2% and 2020 GDP growth forecast by 60 bps to 6.7%. India’s wholesale price-based inflation in July fell to a multi-year low of 1.08%. India’s trade deficit in July narrowed to $13.43 Bn from $18.63 Bn a year ago. There is a pause in US-China trade war, some domestic big bang announcement expected from Finance Ministry in the near term to put back the economy back on track. Indian equities likely to bounce back after being beaten down badly for past 2 months, Brent is facing resistance at $60. USD/INR is facing resistance at 72 levels. Having said this, any fresh resumption of US-China trade escalation can again make rupee weak. Probability of this is low as of now as Trump may also be worried about recessionary fears in US on inverted yield fears.

NEWS FLOWS OF LAST WEEK

• Fed will hold its annual gathering in Jackson Hole later in the week, where Chairman Jerome Powell is to deliver a speech.

• Euro fell to multi week low caused by growing expectations of an interest rate cut by the European Central Bank.

• China liberalizes interest rate system, a step closer to free floating currency. China announced that the Loan Prime Rate has to be quoted to customers.

• Indian investors remained risk averse considering a host of factors including fast-spreading economic slowdown, outlook on foreign fund outflows and weakness in most emerging market currencies.

• IMF said that US tariffs on China will not fix the trade deficit and neither will weaken the US dollar through interest rate cuts.

• Fed policymakers were deeply divided over whether to cut interest rates last month but were united in wanting to signal they were not on a preset path to more cuts.

• Japanese Economy Minister Toshimitsu Motegi said there were still gaps that needed to be filled before Tokyo and Washington could agree on a bilateral trade deal.

• SEBI is currently not in favour of minimum public shareholding for listed companies being hiked to 35% from the current 25%.

• Japan’s core consumer inflation came at a two-year low in July, increasing pressure for the central bank to acknowledge price momentum was slowing and expand its radical stimulus program.

CURRENCY

CURRENCY TABLE

Currency Pair Open High Low Close

USDINR 71.14 72.05 71.06 71.66

EURINR 78.94 79.74 78.82 79.22

GBPINR 86.47 88.10 86.36 87.50

JPYINR 66.98 67.58 66.82 67.22


ECONOMIC GAUGE FOR THE NEXT WEEK

GMT Start Date GMT End Date Local Time Country Relevance Indicator Name Period Reuters Poll Unit Surprise

26 Aug 18:00 United States High Durable Goods Jul 2019 1.1 Percent

26 Aug 18:00 United States Medium Durables Ex-Transport Jul 2019 0.1 Percent

26 Aug 18:00 United States Low Durables Ex-Defense MM Jul 2019 Percent

26 Aug 18:00 United States Low Nondefe Cap Ex-Air Jul 2019 0 Percent

26 Aug 18:00 United States Low National Activity Index Jul 2019 Index

26 Aug 20:00 United States Low Dallas Fed Mfg Bus Idx Aug 2019 Index

27 Aug 18:25 United States Low Redbook MM W 24 Aug Percent

27 Aug 18:25 United States Low Redbook YY W 24 Aug Percent

27 Aug 18:30 United States Low Monthly Home Price MM Jun 2019 Percent

27 Aug 18:30 United States Low Monthly Home Price YY Jun 2019 Percent

27 Aug 18:30 United States Low Monthly Home Price Index Jun 2019 Index

27 Aug 18:30 United States Medium CaseShiller 20 MM SA Jun 2019 Percent

27 Aug 18:30 United States Low CaseShiller 20 MM NSA Jun 2019 Percent

27 Aug 18:30 United States Medium CaseShiller 20 YY Jun 2019 Percent

27 Aug 19:30 United States High Consumer Confidence Aug 2019 130 Index

27 Aug 19:30 United States Low Rich Fed Comp. Index Aug 2019 Index

27 Aug 19:30 United States Low Rich Fed, Services Index Aug 2019 Index

27 Aug 19:30 United States Low Rich Fed Mfg Shipments Aug 2019 Index

27 Aug 20:00 United States Low Texas Serv Sect Outlook Aug 2019 Index

27 Aug 20:00 United States Low Dallas Fed Services Revenues Aug 2019 Index

28 Aug 16:30 United States Low MBA Mortgage Applications W 23 Aug Percent

28 Aug 16:30 United States Low Mortgage Market Index W 23 Aug Index

28 Aug 16:30 United States Low MBA Purchase Index W 23 Aug Index

28 Aug 16:30 United States Low Mortgage Refinance Index W 23 Aug Index

28 Aug 16:30 United States Low MBA 30-Yr Mortgage Rate W 23 Aug Percent

29 Aug 18:00 United States Low Corporate Profits Prelim Q2 2019 Percent

29 Aug 18:00 United States High GDP 2nd Estimate Q2 2019 2 Percent

29 Aug 18:00 United States Low GDP Sales Prelim Q2 2019 Percent

29 Aug 18:00 United States Low GDP Cons Spending Prelim Q2 2019 Percent

29 Aug 18:00 United States Medium GDP Deflator Prelim Q2 2019 2.4 Percent

29 Aug 18:00 United States Medium Core PCE Prices Prelim Q2 2019 Percent

29 Aug 18:00 United States Low PCE Prices Prelim Q2 2019 Percent

29 Aug 18:00 United States Low Adv Goods Trade Balance Jul 2019 USD

29 Aug 18:00 United States Low Wholesale Inventories Adv Jul 2019 Percent

29 Aug 18:00 United States Low Retail Inventories Ex-Auto Adv Jul 2019 Percent

29 Aug 18:00 United States High Initial Jobless Claims W 24 Aug 215 Person

29 Aug 18:00 United States Low Jobless Claims 4-Wk Avg W 24 Aug Person

29 Aug 18:00 United States Medium Continued Jobless Claims W 17 Aug Person

29 Aug 19:30 United States Low Pending Homes Index Jul 2019 Index

29 Aug 19:30 United States Medium Pending Sales Change MM Jul 2019 0.1 Percent

30 Aug 18:00 United States Medium Personal Income MM Jul 2019 0.3 Percent

30 Aug 18:00 United States Medium Personal Consump Real MM Jul 2019 Percent

30 Aug 18:00 United States High Consumption, Adjusted MM Jul 2019 0.5 Percent

30 Aug 18:00 United States Medium Core PCE Price Index MM Jul 2019 0.2 Percent

30 Aug 18:00 United States Low Core PCE Price Index YY Jul 2019 1.7 Percent

30 Aug 18:00 United States Low PCE Price Index MM Jul 2019 Percent

30 Aug 18:00 United States Low PCE Price Index YY Jul 2019 Percent

30 Aug 19:15 United States Medium Chicago PMI Aug 2019 47.5 Index

30 Aug 19:30 United States High U Mich Sentiment Final Aug 2019 92.1 Index

30 Aug 19:30 United States Low U Mich Conditions Final Aug 2019 Index

30 Aug 19:30 United States Low U Mich Expectations Final Aug 2019 Index

30 Aug 19:30 United States Low U Mich 1Yr Inf Final Aug 2019 Percent

30 Aug 19:30 United States Low U Mich 5-Yr Inf Final Aug 2019 Percent

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