RULE THE MARKET - Karvy Onlinecontent.karvyonline.com/contents/kstreetissue045.pdf · and...

ISSUE: 045

13TH JULY, 2019

RULE THE MARKET

From The Desk Of Research Head

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Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither KSBL nor any associate companies of KSBL accepts any liability arising from the use of information and views mentioned in this report. Investors are advised to see Risk Disclosure Document to understand the risks associated before investing in the securities markets. Past performance is not necessarily a guide to future performance. Forward-looking statements are not predictions and may be subject to change without notice. Actual results may differ materially from those set forth in projections. Associates of KSBL might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. Associates of KSBL might have received compensation from the subject company mentioned in the report during the period preceding twelve months from the date of this report for investment banking or merchant banking or brokerage services from the subject company in the past twelve months or for services rendered as Registrar and Share Transfer Agent, Commodity Broker, Currency and forex broker, merchant banker and underwriter, Investment Advisory services, insurance repository services, consultancy and advisory services, realty services, data processing, profiling and related services or in any other capacity.KSBL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. Compensation of KSBL’s Research Analyst(s) is not based on any specific merchant banking, investment banking or brokerage service transactions. KSBL generally prohibits its analysts, persons reporting to analysts and their relatives from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover.KSBL or its associates collectively or Research Analysts do not own 1% or more of the equity securities of the Company mentioned in the report as of the last day of the month preceding the publication of the research report. KSBL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report and have no financial interest in the subject company mentioned in this report. Accordingly, neither KSBL nor Research Analysts have any material conflict of interest at the time of publication of this report. It is confirmed that KSBL and Research Analysts, primarily responsible for this report and whose name(s) is/ are mentioned therein of this report have not received any compensation from the subject company mentioned in the report in the preceding twelve months. It is confirmed that Research Analyst did not serve as an officer, director or employee of the companies mentioned in the report. KSBL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Neither the Research Analysts nor KSBL have been engaged in market making activity for the companies mentioned in the report. We submit that no material disciplinary action has been taken on KSBL by any Regulatory Authority impacting Equity Research Analyst activities.

Fiscal external borrowings – India will have to move ahead with cautionCentre’s borrowing solutions and their likely effects

The Central Budget 2019’s proposal to raise part of the government’s borrowings in external markets and in external currencies has pleased the bond market and found favour with several economists. Given that the Centre’s total market borrowings for the current fiscal is at a high of Rs. 7.1 lakh crore, the move to raise part of the borrowings from overseas can ease the risk of oversupply of government bonds in the domestic market. Large government borrowings may lead to a crowding-out effect on the private sector and add pressure on domestic rates and liquidity. The resultant rise in yields can have a cascading effect on interest rates in other segments of the financial market which may lag the transmission of rate cuts by the RBI.

The issuance of international sovereign bonds which will facilitate inclusion into global bond indices is also important to draw greater foreign inflows into the Indian debt market. Currently, India’s representation in the global debt market indices is relatively small compared to other emerging markets. Given that a lack of liquidity and effective benchmarks have kept foreign investor interest tepid in India’s corporate bond market, sovereign issuances can also open the floodgates of liquidity for Corporate India. Also, foreign investor’s holdings in Indian debt thus far have been low, offering enough space in this case. FPIs currently constitute about 3.6% of government securities holdings. In the Indonesian bond market, it is a whopping 38% while that in Malaysia it is about 24%. However, these countries are also more vulnerable to an exodus of funds from their bond markets.

Structural changes necessary to absorb sudden financial shocks

This is where India will have to move ahead with caution. So far, the RBI has been slowly increasing the cap on FIIs in the G-Secs market. The continuous caution in controlling short-term borrowings is necessary. Global shocks can lead to increased selling pressure on emerging market bonds. Also, a sound financial market infrastructure like clearing, payment and settlement systems and custodian services among others is a prerequisite for foreign investor access. However, the lower borrowing cost argument should not prompt a daring attempt by the Centre. Despite a notable interest rate differential in borrowing overseas (greater than 3% in dollar terms), hedging cost of reportedly 4% would imply a similar cost in rupee terms. To contain the volatility risk, broadening the investor base to include other domestic institutions like insurance companies and pension funds apart from banks are also important as they can step in to offset some of the pressures in times of heightened capital outflows. These structural aspects may need to be dealt with before taking up the Budget’s proposals.

CONTENTSEquity 1-6

Derivatives 7-8

Commodity 9-12

Currency 13-15

TeamDr. Ravi Singh

Syed Hasan Jafar

Aditya Kistampally

Viplav Dhandhukia

Srinivas Krishnan Bobba

Vaishali Paruthi

Chetan K Waghray

Konpal Pali

Mahesh Keshavrav Bendre

Sayali Shrikant Gadkari

Vivek Lohumi

Vivek Ranjan Misra

Veeresh Hiremath

Siddhesh Ghare

Ramesh Chanchala

Ravi Pandey

Ravikanth P

Kushal Asthana

Arpit Chandna

Vinod J

Amit Kumar

Karvy Head Office

Karvy Stock Broking Limited, Plot No.31/P, Karvy Millennium Towers, Nanakramguda, Financial District, Gachibowli, Hyderabad, Telangana-500032, India.

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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:

• The renewable energy sector received $1.5 Bn of foreign direct investment (FDI) in FY19; 20.1% higher than the previous fiscal.

• The bilateral trade between India and the US could reach USD 238 Bn by 2025 from the current USD 143 Bn given the present dynamics of the commercial engagement said a US-based India centric advocacy group.

Agriculture:

• India lowered import taxes on an additional 400,000 tonnes of corn to 15% to offset a rise in the price of animal feed in the country following a drought last year.

Banking:

• India’s state-owned banks had classified Rs. 1.50 Tn ($21.76 billion) worth of loans as “willful defaults” in 2018-19 with the biggest lender State Bank of India accounting for nearly a third, the finance minister said in the parliament.

• Global investment firm Blackstone has bought a 97.7% majority stake in Aadhar Housing for about Rs. 2,200 crore that caters to the housing financing needs of low-income households.

Auto:

• South Korean auto major Hyundai will invest about Rs. 1,400 crore ($200 Mn) over the next three years to develop affordable electric vehicles for the Indian market.

Power:

• A month after securing a $495 Mn equity commitment from existing investors, GIC of Singapore and Abu Dhabi Investment Authority (ADIA), Greenko Energy Holdings has received another $329 Mn of funding at a $6.5 Bn enterprise valuation through a rights issue.

NEWS

INTERNATIONAL NEWS

• Gold prices fell on Thursday erasing gains made early in the day after stronger than expected consumer inflation in the US cast doubts on expectations of aggressive rate cut by the US central bank.

• Brazilian antitrust watchdog Cade has approved Mexican lender Inbursa’s acquisition of a roughly 33% stake in the Brazilian unit of payment technology company Global Payments Inc.

TRENDSHEETSymbol CMP S2 S1 R1 R2 TREND

SENSEX 38736.23 37842 38289 39330 39923 Down

NIFTY 11552.50 11284 11418 11729 11906 Down

NIFTYBANK 30601.45 29749 30175 31199 31797 Down

BAJFINANCE 3377.50 3087 3232 3620 3863 Down

YESBANK 94.20 81 88 99 104 Down

TITAN 1101.20 948 1025 1224 1347 Down

IBULHSGFIN 665.95 602 634 717 768 Up

RELIANCE 1280.50 1221 1251 1305 1330 Up

INDUSINDBK 1509.50 1404 1457 1562 1615 Up

HDFCBANK 2393.90 2303 2349 2457 2520 Down

TCS 2107.60 2005 2056 2174 2240 Down

SBIN 363.60 344 354 371 378 Up

MARUTI 5971.45 5668 5820 6203 6435 Down

FORTHCOMING EVENTSCOMPANY NAME EVENT EX-DATE

Eris Lifesciences Ltd Buyback of shares 12 JULY 19

Dr. Reddy’s Final Dividend- Rs. 20.0 15 July 19

Hero MotoCorp Ltd Final Dividend- Rs. 32.0 16 July 19

Federal Bank Final Dividend- Rs. 1.4 17 July 19

Bajaj Consumer Care Ltd Result Update 15 July 19

Wipro Ltd Result Update 17 July 19

ICICI Lombard General Insurance Co. Ltd Result Update 19 July 19

KSTREET - 13TH JULY 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

-0.05

-0.04

-0.04

-0.03

-0.03

-0.02

-0.02

-0.01

-0.01

0.00 Nifty

Sensex

BSE Midcap

BSE Smallcap

Nifty N

ext 50

Nifty M

idcap 100

-0.06

-0.05

-0.04

-0.03

-0.02

-0.01

0.00

0.01

0.02

Auto

Bank

Services

FMC

G

Pharma

IT Metal

Energy

Consum

ption

Realty

-0.04

-0.03

-0.03

-0.02

-0.02

-0.01

-0.01

0.00

0.01

0.01

Nasdaq

Dow

Jones

S&P 50

0

Nikkei

Hang Sang

Sanghai Com

p

FTSE 100

CA

C 40

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

GLEN

MA

RK

PHA

RMA

CEU

TICA

LS LTD

APO

LLO H

OSPITA

LS EN

TERPRISE

IND

RAPRA

STHA

GA

S LTD

ALK

EM LA

BORA

TORIES

LTD

GU

JARA

T STATE

PETRON

ET LTD

BATA

IND

IA LTD

DILIP BU

ILDC

ON

LTD

IND

IABU

LLS VEN

TURES

LTD

HEG

LTD

DEW

AN

HO

USIN

G

FINA

NC

E CO

RP

-15.00

-10.00

-5.00

0.00

5.00

10.00

SUN

PHA

RMA

CEU

TICA

L IN

DU

S

YES BAN

K LTD

VED

AN

TA LTD

HERO

MO

TOC

ORP LTD

ZEE ENTERTA

INM

ENT

ENTERPRISE

OIL &

NA

TURA

L GA

S C

ORP LTD

IND

IABU

LLS HO

USIN

G

FINA

NC

E L

BAJA

J FINSERV

LTD

BAJA

J FINA

NC

E LTD

TITAN

CO

LTD

-800.00

-600.00

-400.00

-200.00

0.00

200.00

400.00

600.00

800.00

05-07-19 08-07-19 09-07-19 10-07-19 11-07-19

FII/FPI DII


BEAT THE STREET - FUNDAMENTAL ANALYSIS

Cyient Ltd CMP Rs.538.3Target Price Rs.695.0Upside 29.1%

• Overall revenue stood at Rs. 46175 Mn; growth of 17.9% YoY and 10.1% in CC terms. Services revenue at $580 Mn; yearly growth of 6.3% (7.6% in cc terms) whereas DLM revenue at

• $ 79.7 Mn with a yearly growth of 29.3%. Services business contributed 88% to overall revenue and remaining 12% was from DLM business. We expect overall revenues to have a high single digit growth in FY20E and FY21E.

• We believe revenue to grow at a CAGR of 8.7% over the period of FY19-FY21E. We expect execution of pushed out deals and investments made in developing new technology solutions to contribute significantly to the revenue growth in the coming years.

• Since the management has indicated that it is finding it hard to find right talent, we believe that EBITDA is likely to be impacted by higher salaries to new employees. However, we believe margins to improve in the coming quarters due to the cost optimization program being implemented by the management.

• The better export incentives and effective tax rate are also expected to aid PAT growth. We expect earnings to grow at a CAGR of 9.4% over FY19-FY21E.

• Cyient Ltd is in investment mode due to its NBA program which we believe will add to the revenue of the company in few years.

VALUE PARAMETERSFace Value (Rs.) 5.0

52 Week High/Low (Rs.) 821/520.3

M.Cap (Rs. Bn/US $Bn) 59.8/870.8

EPS (Rs.) 42.4

P/E Ratio (times) (FY21E) 10.7

Dividend Yield (%) 2.8

Stock Exchange BSE, NSE

P/E CHARTValuation

Strong deal pipeline and realization of pushed out revenues in the coming quarters gives us revenue visibility. Thus, we recommend a “BUY” rating for Cyient Ltd. for a target price of Rs. 695 with an upside potential of 29.1%. We value the stock at its 3-year historical one year forward average PE of 13.7x to its FY21E EPS of Rs. 50.5. Key risks include adverse impact on margins due to tight labor market and slower than expected recovery in Aerospace & Defense vertical.

EQUITY

% OF SHARE HOLDING

in Rs.Mn ACTUAL ESTIMATE

YE Mar FY19 FY20 FY21

REVENUE 46175 49855 54584

EBITDA 6328 8505 9312

EBITDA(%) 13.7 17.1 17.1

PAT 4771 5266 5712

EPS(Rs.) 42.4 46.6 50.5

RoE (%) 19.4 19.4 18.9

PE (x) 15.3 11.6 10.7

22%

44%

23%

11%

Promoter

FIIs

DIIs

Others 0

20

40

60

80

100

120

Jun-

18

Jul-

18

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

May

-19

Cyient Sensex

22%

31%

0%

47%

Promoter

FIIs

DIIs

Others 0

20

40

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80

100

120

Jul-

18

Aug

-18

Sep-

18

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-18

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-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

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-19

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-19

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19

M&M Sensex

22%

44%

23%

11%

Promoter

FIIs

DIIs

Others 0

20

40

60

80

100

120

Jun-

18

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18

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-18

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18

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-18

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-18

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-18

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19

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19

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-19

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-19

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-19

Cyient Sensex

22%

31%

0%

47%

Promoter

FIIs

DIIs

Others 0

20

40

60

80

100

120

Jul-

18

Aug

-18

Sep-

18

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-18

Nov

-18

Dec

-18

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19

Feb-

19

Mar

-19

Apr

-19

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-19

Jun-

19

M&M Sensex


BEAT THE STREET - FUNDAMENTAL ANALYSIS

Mahindra & Mahindra Ltd. CMP Rs.631Target Price Rs.778Upside 23.3%

VALUE PARAMETERSFace Value (Rs.) 5.0

52 Week High/Low (Rs.) 992/598

M.Cap (Rs. Bn/US $mn) 798/11641

EPS (Rs.) 38.8

P/E Ratio (times) (FY20E) 7.6

Dividend Yield (%) 1.4

Stock Exchange BSE

EQUITY

P/E CHART

% OF SHARE HOLDING

in Rs.Mn ACTUAL ESTIMATE

YE Mar FY19 FY20 FY21

REVENUE 528482 573106 634030

EBITDA 75301 79940 86535

EBITDA(%) 14.2 13.9 13.6

PAT 54239 52751 57244

EPS(Rs.) 38.8 40.3 43.7

RoE (%) 16.6 14.2 13.9

PE (x) 8.6 8.3 7.6

Investment Rationale• During Q4FY19, M&M net sales grew by 4.7% YoY to Rs. 138 Bn driven by

5.7% auto volume growth and 4.9% increase in average realizations. EBITDA margins compressed by 160 bps YoY to 13.5% on account of decline in gross margins and higher product launch cost associated with its Auto division. Net profit before extraordinary items declined by 3% YoY to Rs. 10.7 Bn. Higher profit during the quarter was aided by higher other income which grew by 49% and lower tax rate (29.1%) during the quarter.

• During FY19, M&M sold 321,934 tractors and witnessed 1.4% growth YoY. Tractor division reported 6.8% sales growth to Rs. 168.7Bn aided by 5.3% increase in average realizations. Segmental margins declined by 3 bps to 23.2% during the year on account of high commodity prices. During the year, the Company focused on stabilizing its inventory which is currently at comfortable level of 4-5 weeks. Its new brand, Trakstar is witnessing higher traction and is likely to gain 2-3% market share over 2-3 years. Management expects domestic tractor market to grow at ~5% in FY20.

• During the year, the Company reported sales of 491,060 vehicles in its automotive division, an increase of 11.4% YoY. Automotive division reported 13.4% sales growth to Rs. 346 Bn. During the year, segmental margins declined by 108 bps to higher commodity cost and higher discounts. Going forward, Management expects cumulative volume from its three new launches (Marazzo, Alturas G4 and XUV300) to drive incremental volumes for the Company. The Company achieved 27.9% market share in UV segment in India. M&M also introduced new products in Trucks and Buses segment. It has covered entire range of commercial vehicle segment in India. We expect M&M’s Automotive division to report 8.3% volume CAGR over FY19-21E.

Valuation

We expect M&M’s overall volumes, sales and PAT to grow at a CAGR of 7.1%, 9.5% and 2.7% over FY19-21E respectively. Based on its core earnings, M&M is currently trading at 7.6xFY21E earnings. On account of attractive valuations, we retain our BUY rating on the stock with a price target of Rs. 778 (PER of 11xFY21 core EPS + Rs.297 Subsidiary Valuations.

22%

44%

23%

11%

Promoter

FIIs

DIIs

Others 0

20

40

60

80

100

120

Jun-

18

Jul-

18

Aug

-18

Sep-

18

Oct

-18

Nov

-18

Dec

-18

Jan-

19

Feb-

19

Mar

-19

Apr

-19

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-19

Cyient Sensex

22%

31%

0%

47%

Promoter

FIIs

DIIs

Others 0

20

40

60

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100

120

Jul-

18

Aug

-18

Sep-

18

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-18

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-18

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-18

Jan-

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Feb-

19

Mar

-19

Apr

-19

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-19

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19

M&M Sensex

22%

44%

23%

11%

Promoter

FIIs

DIIs

Others 0

20

40

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100

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Jun-

18

Jul-

18

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-18

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18

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-18

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-18

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-18

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19

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19

Mar

-19

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-19

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Cyient Sensex

22%

31%

0%

47%

Promoter

FIIs

DIIs

Others 0

20

40

60

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Jul-

18

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-18

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-18

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-18

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19

Mar

-19

Apr

-19

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M&M Sensex


EQUITY

BEAT THE STREET - TECHNICAL ANALYSIS

Biocon Limited

BIOCON is making repeated cycles of higher highs and higher lows on the weekly and monthly charts and is currently placed above the major long term supports. Historically, after clocking a peak of 359 odd levels in the month of September 2018, the counter witnessed a steep round of profit booking which dragged the stock towards lower levels of 235-245 levels which is the previous breakout levels made in the December 2017. The stock is currently revolving above the said levels on the weekly charts and has remained untouched in the recent traction in the broader markets indicating the inherent strength in the counter. Analyzing the recent volume price action, the volumes have been encouraging in the recent up move indicating strong hands have started accumulating the stock at these support levels. On the other hand, the stock is looking bullish and is showing strength around crucial support levels of 240-250 where an unfilled gap is placed on the weekly charts indicating the strong momentum in the stock may resume from current levels where the risk-reward ratio is highly favourable. On the oscillator’s side, RSI (14) is trading in the comfortable zone trading well around its short and medium term moving averages fuelling the bullishness in the stock. The overall chart structure looks very positive for medium to long term perspective with good price volumes action in the last couple of weeks. On the Bollinger band (20, 2), the stock is facing with sideways bias with volatility burst expected on the upper side indicating that the momentum is likely to continue towards the higher levels with the current price rolling on the lower band and is all set to move higher towards the other end. We expect the counter to resume the outperformance in the coming trading months and may move towards 300 plus levels in medium to long term time frame of 10-12 months. Any correction towards the recent support levels of 230 levels may be utilized to average the positions.

United Spirits Limited

United Spirits Limited (MCDOWELL-N) abbreviated to USL is an Indian alcoholic beverages company and the world’s second-largest spirits company by volume. It is a subsidiary of Diageo and headquartered at UB Tower in Bangalore, Karnataka. USL exports its products to over 37 countries. USL has more than 140 liquor brands of which 15 brands each sell more than one million cases annually while 3 brands each sell more than 10 million cases annually. It is a high performing business and a subsidiary of global leader, Diageo. Its portfolio includes premium brands such as Johnnie Walker, Black Dog, Black & White, Vat 69, Antiquity, Signature, Royal Challenge, McDowell’s No 1, Smirnoff, Captain Morgan and Four Seasons. MCDOWELL-N has rallied from 354 to 801 and has corrected to 78.40% Fibonacci retracement levels of the said rally i.e. around 451 and bounced back from there to close above 50% Fibonacci retracement levels indicating end of the correction and a possible fresh leg of rally from these levels. Stock is on the verge of breakout from symmetric triangle chart pattern on weekly chart suggesting uptrend from these levels. Adding to it, Heiken candlesticks 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. On Bollinger bands, the stock has tested the upper band while the bands are expanding indicating positive momentum. At the current levels, the stock has given an excellent opportunity for medium to long term investors to accumulate the stock around 575-580 levels for the potential upside targets of 700-720 levels over next 6-9 months keeping a stop loss below 490 levels.

STOCK BIOCON

CMP 253.60

ACTION BUY

ENTRY 248-250

AVERAGE 230

STOP LOSS 218

TARGET 1 305

TARGET 2 320

TIME FRAME 6-9 MONTHS

STOCK MCDOWELL-N

CMP 587.30

ACTION BUY

ENTRY 575-580

AVERAGE 510

STOP LOSS 490

TARGET 1 700

TARGET 2 720

TIME FRAME 6-9 MONTHS


EQUITY

Sentiment

Initiation 120

Stop Loss 126

Target 112

Lot Size 3300

Margin 70000

21-DEMA 121

Open Interest Shares 27155700

Change in OI 27155581

Cost of Carry (%) 11.84

SECTORAL SNIPPETS

NIFTY REALTY (280.55) has ended the week with a cut of around 0.60% outperforming the benchmark Nifty 50 which closed with a cut of 2.23% during the same period. The breadth of the REALTY index was negative as 4 out of 10 stocks in the index ended on a positive note while 5 ended on a negative note and IBREALEST ended on a flat note. The stocks which gained the most last week were GODREJPROP, SOBHA, MAHLIFE and PHOENIXLTD which gained around 1.72%,1.48%,1.00% and 0.99 respectively while stocks which lost the most were OBEROIRLTY, BRIGADE, SUNTECK PRESTIGE and DLF which lost around -4.77%,-1.02%,-0.68%, -0.56% and -0.45% respectively. Technically, the said index is trading above its daily & weekly 20-period Simple moving average (SMA) indicating a bullish bias the near term. The Daily 14-period RSI is trading below its 9 periods EMA indicating choppy bias in the near term. Going ahead for the coming week, the index has support at 269 levels and below it at 260 levels while resistance is pegged at 290 levels and above it at 298 levels.

NIFTY PHARMA (8,144.30) has been the biggest outperformer in the current week and ended with gains of more than 2.70% on weekly basis. After a long period of underperformance, the index managed to buck the trend after taking support around the previous monthly swing low of 7900 levels. At current juncture, the index has entered in to the previous consolidation range of 7900-8300 levels and is expected to trade in the same for few more sessions. Technically, the index is now having support around 8000 followed by 7900 levels while resistance is pegged at 8220-8300 followed by 8400 levels for the near term. On the stock front, BIOCON has formed good base and around its long term support on the daily charts followed by SUNPHARMA, CIPLA & LUPIN which have witnessed good buying interest last week. In the near term, we expect the index to remain in the consolidation phase and may trade with bullish bias coupled with various stock specific actions.

NIFTYFINSE (13,365.95) has been under pressure last week and closed the week with a negative return of around 3.24%. The index underperformed Nifty last week and generated a negative return of around 3.24%. Whereas, Nifty has closed the week with a negative return of 2.23%. The index is in uptrend and making higher high. The historical price action suggests that the any meaningful dip in the index may attract market participants. Currently, index is trading in the range of 13300- 13450 levels from a couple of trading sessions. The recent fall in the stock has placed the stock near its support of 13220 levels. The index has seen stock specific movement. Most of the stocks from the financial space closed the week in red. The immediate support in the index comes around 13200 levels and below that are 13000 levels. The index may find resistance around 13550 levels and above that are 13800 levels. The stocks from the sector that have closed the week with positive bias are BHARATFIN,EDELWEISS, HDFCLIFE and MSF and generated positive return of around 0.61%, 1.56%, 1.46% and 1.87%. Whereas, the stocks like BAJAJFINSV, BAJFINANCE, HDFC, IBULHSGFIN, ICICIPRULI, IIFL and M&MFIN have closed the week with negative return of around 8.12%, 9%,1.23%, 8%, 3.40%, 5.67% and 3.47% respectively. The stock specific action is expected from the sector in coming week. Holding our positive view in the index for the week and we expect it to trade in the range of 13000-13800 levels.

NIFTY BANK (30,601.45) underperformed the Nifty with a loss of 2.78% during the week passed by while the broader index Nifty lost by 2.19%. During the last week, the index moved with a downward bias in the range of 31370-30340. For the week ahead, the index may trade with a bullish bias until and unless 30220 levels are taken off from upside. On the earnings front, private sector lender IndusInd Bank on Friday reported 38.3% jump in its net profit at Rs. 1,432.50 crore for the June quarter of this fiscal. The bank had posted a net profit of Rs. 1,035.72 crore in the corresponding period of the preceding fiscal ended March 2019. The lender’s net interest income rose to Rs. 2,844 crore as compared to Rs. 2,122 crore in the year-earlier quarter. Total income grew to Rs. 8,624 crore during the June quarter of 2019-20 under review as against Rs. 6,369 crore in the same period of 2018-19. On the asset front, the lender witnessed an uptick with the gross non-performing assets (NPAs) rising to 2.15% of the gross advances at the end of June 2019 as against 1.15% by end of June 2018. Likewise, the net NPAs or bad loans too jumped to 1.23% from 0.51% in the year-ago period. On the stock front, YESBANK and RBLBANK gained by 7.03% and 1.40% respectively during the week while PNB and AXISBANK lost by 7.58% and 6.46%. As indicated by the derivatives data, Bank Nifty may face resistance at 30800 levels followed by 31000 levels. For the week ahead, support for the index can be pegged at 30500 levels followed by 30000 levels.

MARICO LIMITED: BUY MARICO (JUL FUTURE) | CMP: 371.30 SECTOR: FMCG

MARICO is trading with bullish bias on the daily charts making repeated cycles of higher highs and higher lows. The stock is our preferred pick in the FMCG space and has outperformed few of its peers in the last couple of sessions. The counter is currently trading above the major moving averages with the stock price placed above the good support levels on the daily charts. After crossing stiff resistance of 360-365 levels, the stock made northwards journey towards 380 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 365 followed by 360 levels while resistance is pegged around 380-382 levels in the short term period. We expect the stock to continue to trade in the bullish trajectory and may move towards 380-382 levels. Short term traders may go long on the stock around 369 levels keeping stop loss below 362 for the targets of 379 levels in the July derivatives series.

Sentiment

Initiation 369

Stop Loss 362

Target 379

Lot Size 2600

Margin 172000

21-DEMA 370

Open Interest Shares 7771400

Change in OI -421200

Cost of Carry (%) 2.27

MOTHERSON SUMI SYSTEMS LIMITED: SELL MOTHERSUMI (JUL FUTURE) | CMP: 119.05 SECTOR: TELECOM

MOTHERSUMI has witnessed huge correction of 3.50% in the last trading week and has underperformed its broader index. The stock is in cycle of lower lows and lower highs and for this week it witnessed a runaway gap while it plunged downwards 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 42-45 levels indicating further downside room in the counter. Also on the Bollinger band (20, 2), the stock has resisted near the mean and started its move towards the lower band affirming bearishness in the counter. On derivative front, short addition is being 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 keeping a stop loss placed above 126 levels for the potential downside of 112 levels.


WEEKLY VIEW OF THE MARKET

NIFTY (11552.50): Indian equity benchmark index Nifty 50 closed lower by 2.19%. The index posted weekly losses after some of the Budget proposals spooked market sentiments. The major reasons can be attributed to tax on buyback of shares from companies, a move to raise public float to 35%, no big fiscal stimulus plan and a higher income tax levy on high net individuals which hurt sentiments. However, we expect the focus would shift to the earnings season from the initial overhang of the Union Budget in the coming sessions ahead. In the current scenario, Nifty may trade with a bearish bias unless and until 11650-11625 levels are taken off from downside and sustained. For the week ahead to watch, market participants may lay their focus on WPI Inflation data releasing on 15th July and on the Q1 results of large-cap companies 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 11500 followed by 11400 levels while on the higher side, 11600 and 11700 may act as strong resistance.

DERIVATIVE STRATEGIES

DERIVATIVES

TYPE CALL RATIO IN BANK NIFTY

FIRST LEG Buy 1 lot of BANKNIFTY 18JUL 30600 CE @ 184

SECOND LEG Sell 2 lot of BANKNIFTY 18JUL 30800 CE @ 103

BEP Upper BEP 31022

MAX PROFIT 4440

MAX LOSS Unlimited above UBEP

RATIONALE From last couple of sessions, Bank Nifty is trading with mixed bias. However, finding support on dips. Going forward, index is likely to find support at lower levels and eventually resume its uptrend. Therefore, one may initiate call ratio spread in the index.

TYPE BUY CALL IN NIFTY

FIRST LEG Buy one lot of NIFTY 25JUL 11600 CE @ 65

BEP 11665

MAX PROFIT UNLIMITED ABOVE BEP

MAX LOSS 4875

RATIONALE Benchmark index Nifty after placing a swing low near 11461 levels witnessed recovery in last few sessions. Going forward, index on sustaining above the lows is likely to scale higher. Therefore, one may consider buying call option in the index.

TYPE BULL CALL IN TATAGLOBAL

FIRST LEG Buy 1 lot of TATAGLOBAL 25JUL 260 CE @ 4.75

SECOND LEG Sell 1 lot of TATAGLOBAL 25JUL 270 CE @ 1.75

BEP 263

MAX PROFIT 18900

MAX LOSS 8100

RATIONALEThe stock price after making a swing high near 277 levels witnessed profit booking from higher levels. In last two sessions, prices found support above its 50-DEMA and witnessed pullback with spurt in volume and rise in open interest indicating buying interest in the counter. Therefore, one may initiate bull call spread in the counter.

TYPE BUY PUT IN ENGINERSIN

FIRST LEG Buy 1 lot of ENGINERSIN 25JUL 105 PE @ 2.75

BEP 102.25

MAX PROFIT UNLIMITED BELOW BEP

MAX LOSS 12650

RATIONALE The stock has witnessed selling pressure with spurt in volume and stock is poised below its long term average. Also in the last session, stock witnessed rise in open interest with fall in price indicating short accumulation in the counter reaffirming underlying weakness in the counter.

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7KSTREET - 13TH JULY 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

PVR 1747.5 4.23 828000 46.53

OIL 174.2 0.4 8304000 33.64

DISHTV 31.1 2.47 104258000 21.31

TVSMOTOR 433.2 2.1 7819000 15.56

MFSL 418.5 0.55 2778000 15.17

NIITTECH 1347.45 1.81 1529000 13.92

BANKNIFTY OPTION OI CONCENTRATION CHANGE IN BANKNIFTY OPTION OI

TOP 6 SHORT CLOSURE


IGL 310.35 4.34 3850000 -35.72

GLENMARK 451.35 4.83 6549000 -21.53

HEROMOTOCO 2569.8 2.29 2405000 -18.88

MRF 56074.7 0.13 26000 -18.26

CESC 780.5 1.63 851000 -17.46

BIOCON 253.6 5.62 12760000 -8.39

TOP 6 SHORT BUILD UP


RECLTD 148.8 -10.71 62490000 97.78

INDIGO 1356.85 -13.13 4457000 70.76

BATAINDIA 1344 -7.25 2166000 43.72

BSOFT 74.6 -16.09 3341000 29.45

BHEL 64.8 -7.63 52133000 27.17

SRF 2748.1 -7.85 1132000 27.16

TOP 6 LONG CLOSURE


HEXAWARE 358.3 -1.71 2045000 -13.13

RAMCOCEM 772.1 -0.66 1013000 -8.92

CANBK 284.4 -2.32 10876000 -8.87

BANKBARODA 125.95 -3.45 49662000 -8.58

RELCAPITAL 57.9 -6.91 14871000 -7.45

VOLTAS 588.65 -4.39 4049000 -7.39

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COMMODITIES

BULLIONGold prices witnessed both sided movement during the week ended on 12th July

2019. During first two trading sessions, market was in range bound ahead of US

Federal Reserve Chairman’s testimony before US Congress as well as release of

minutes of last month’s meeting. During his testimony before US congress, Fed

Chairman reiterated that the central bank would go for rate cut in their next meeting.

While sticking onto interest cut decision, US Federal Reserve Chairman Jerome

Powell said that the US economy is in dire situation due to disappointing factory

activity, and a simmering trade war. This view was also echoed by Fed members in

their meeting minutes. Soon after this news, the gold prices rallied on next trading

session as lower interest rate attracted safe haven buying in the yellow metal.

However, the gains were not sustained as the weekly jobless claims, consumer price

index and producer price index came better than expected at 224000, 0.3% and

0.3%, respectively. On domestic front, MCX gold futures rallied to fresh all time high

of Rs. 35145 per 10 grams. The gains were not sustained in later part of the week due

to muted demand in the physical market.

ENERGYCrude oil prices hit a six-week high this week as oil rigs in the Gulf of Mexico were

evacuated ahead of a storm while an incident with a British tanker in the Middle

East highlighted tensions in the region. US oil producers on Wednesday cut nearly

a third of Gulf of Mexico crude output after first major storms of the Atlantic

hurricane season threatened offshore oil production and began soaking Louisiana

with heavy rains. The British government said on Thursday that three Iranian vessels

tried to block the passage of a BP-operated tanker through the Strait of Hormuz but

withdrew after warnings from a British warship. The standoff followed a warning by

US President Donald Trump that US sanctions on Iran would soon be “substantially”

increased as part of Washington’s drive to curb Iran’s nuclear activities and regional

behavior. An intensifying tropical storm in the US Gulf of Mexico on Thursday cut

more than half the region’s oil output, with energy companies evacuating staff from

nearly 200 offshore facilities and a coastal refinery. US Oil firms shut more than 1

million barrels per day of oil production, 53% of Gulf of Mexico’s output and 1.2 billion

cubic feet per day of natural gas production. According to EIA, Crude inventories

fell by 9.5 million barrels in the week till July 5 compared to analysts’ expectations

for a decrease of 3.1 million barrels. US crude oil production will rise to an all-time

high of 12.36 million barrels per day (bpd) in 2019 from a record high of 10.96 million

bpd last year. Meanwhile, US crude exports are gaining traction in Europe as even

Ukraine turns into a significant consumer of American barrels at the expense of

Russian supplies amid heightened US political pressure on Moscow and problems

over contaminated Russian oil. China’s Ministry of Commerce released the second

and final batch of 2019 crude oil import quotas on July 2, lifting the import quotas for

this year by 56.85 million metric tonnes (mt). Market participants are likely to take a

cautious approach ahead of two major events happening at global level.

METALSMetals were up during the initial three sessions of the second week of July after

the trade talks eased and dollar index fell heavily considering the probability of

reduced rate cut expectations at Fed minutes held this Wednesday. Towards the end

of week, prices stabilized after a host of data was expected from Chinese end on

Saturday. According to China’s Customs data, aluminium scrap imports for May were

at 177,000 tons which was up 15.8% from April and 57.6% on year. During the five

months of 2019, imports fell 9.6% on a yearly basis to about 662,000 tons. The May

imports from the US stood at about 43,000 tons, up 18.6% on the month. A total

of 264,500 tons of zinc concentrate imports was seen in China in May which was

up 47.5%, a 85,200 tons from April and 2,400 tons from May 2018 as per the data

from China Customs. China’s TC/RC for zinc have been held at an all-time high of

$240 a tonne since May suggesting China’s smelting capacity has not matched the

processing need for concentrate. Refined Tin exports from Indonesia surged 36%

annually to 7,620.9 tonnes in June according to the Trade Ministry data suggesting

a downfall in the prices. On a monthly basis, China’s new energy vehicle sales were

up in June with wholesale volume up at 134,000 units, 38.7% a month ago and 98.7%

from a year ago. A total of 264,500 tons of zinc concentrate imports were seen in

China in May which was up 47.5%, 85,200 tons from April and 2,400 tons from May

2018 as per the data from China Customs. Retail sales of passenger vehicles during

June in China were up for the first time on a yearly basis to 1.8 million units compared

to the fall observed during May – 2019. According to SHMET, China Southern Power

Grid plans to invest more than 170 Bn yuan in grid construction in the Pearl River Delta

region in five years to meet increasing electricity demand in the fast-growing region.

COTTONMCX Cotton futures extended its weekly losses for the week ending on 12th July

on accelerating sowing activities in central region. Moreover, subdued buying from

millers and improved supply due to increased imports also weighed on prices during

the week. Planting activities have gathered pace during last week as total sowing

area under cotton for year 2019-20 has increased on yearly basis till end of 12th July.

Ministry of Agriculture showed about 77.71 lakh hectare was sown under cotton till

12th July compared to 77.50 lakh hectare of prior year. Farmers has shown good

interest towards cotton cultivation in Gujarat as acreages under cotton in Gujarat is

estimated to be higher by 64% on yearly basis reported by 18.76 lakh hectare against

11.44 lakh hectare of prior year. Meanwhile, Cotton Association of India reduced its

production estimates for cotton in India to 312 lakh bales during year 2018-19 in its

recent report. Similarly, ICE Cotton futures traded down reacting negatively to the

USDA monthly supply and demand estimation report for the month of July as USDA

projected higher beginning and ending stocks compared to last month. Beginning

stocks were raised by 3.5 lakh bales of 480 lb each to 5 million bales due to decrease

in domestic consumption and exports during year 2018-19. Consumption was

estimated at 3.10 million bales wherein exports for year 2019-20 were projected at

17 million bales. Ending stocks in 2018-19 was raised by 3 lakh bales to 6.7 million

bales. The total cotton supply estimated by the CAI during the period from October

2018 to June 2019 is 347.84 lakh bales of 170 kgs each which consists of the arrivals

of 303.56 lakh bales upto 30th June 2019, imports of 11.28 lakh bales upto 30th June

2019 and the opening stock at the beginning of the season on 1st October 2018 at

33 lakh bales.

RUBBERInternational TOCOM rubber futures traded on a negative note during the week

ended on 12th July 2019 due to muted demand by the major players in the physical

markets whereas continuing trade war concerns between US and China is another

factor putting pressure on the global rubber market. As per the ANRPC, world

natural rubber consumption improved by 1.0% YoY over the four months to April to

4.591 million tonnes. During the week, some of the rubber farmers in Sumatra and

Kalimantan are seeing production decline due to a fungal disease as per Indonesia’s

Coordinating Ministry for Economic Affairs. US and China are set to re-launch trade

talks this week after a two-month break. Chinese securities regulator has approved

the introduction of TSR-20 futures contracts from 12th Aug 2019. Thailand exported

around 353.690 tonnes of NR rubber in May 2019, up by 4.01% M-o-M basis while

down by 17.96% from the preceding year. During first 5 months of 2019, total natural

rubber exports from Thailand totaled 1,992,756 ton by 7.28% YoY. Thailand exported

11.66 million units of tyres up by 4.08% from the same time previous year. Thailand’s

overall export during the first 5 months reached around 54.24 million units, a gain by

1.11% on Y/Y. The United Planters Association of South India (UPASI) has opposed the

tyre industry’s demand for zero import duty on natural rubber. According to UPASI,

the increased imports and thereby un-remunerative prices results in producers not

tapping leading to a drop in production.

SOYBEAN Soybean futures traded down during last week on advancement of monsoon in

major soybean growing states. Weighing on the soybean prices were the improved

planting activities in India amid sluggish demand in physical market. Moreover,

tumbling value of meal prices and adequate stocks in physical market also kept

prices under pressure for most part of the week. Planting activities have gathered

pace in recent days due to favorable weather conditions. Total area under soybean

was reported at 51.94 lakh hectares till 12th July against 64.08 lakh hectare of prior

year for corresponding period lower by 19% on yearly basis. About 27.49 lakh hectare

was covered under soybean in Madhya Pradesh till 12th July compared to 34.7 lakh

hectare of prior year. At global front, Chicago Board of Trade soybean futures traded

higher reacting positively on the USDA monthly world supply and demand estimates

report for month of July. The US Department of Agriculture in a monthly report

lowered its estimate of US 2019-20 soybean production to 3.845 billion bushels,

down from 4.150 billion in June but above an average of analyst expectations. The

USDA lowered its estimate of the US soybean yield to 48.5 bushels per acre down

from 49.5 in June and roughly in line with trade expectations. Brazilian government

crop supply agency Conab increased its estimate of Brazil’s 2018-19 soybean crop to

115.0 million tonnes from 114.8 million in June but left its forecast of 2018-19 soybean

exports unchanged at 68 million tonnes.


GOLD

COMMODITIES

TRENDSHEET

Commodities 5-Jul 12-Jul % Change 52 Week High% Change from 52

Week High52 Week Low

% Change from 52 Week Low

Comex Gold (S/oz) 1396.70 1410.10 1.0% 1434.00 -1.67% 1161.40 21.41%

Comex Silver (S.oz) 14.92 15.07 1.0% 16.14 -6.65% 13.91 8.32%

Nymex Crude Oil (S/bbl) 57.51 60.22 4.7% 76.90 -21.69% 42.36 42.16%

Nymex Natural Gas ($/mmbtu) 2.42 2.48 2.4% 4.93 -49.79% 2.16 14.64%

LME Copper 3 Month ($/t) 5902.00 5955.00 0.9% 6565.00 -9.29% 5736.00 3.82%

LME Lead 3 Month ($/t) 1869.00 1976.00 5.7% 2215.00 -10.79% 1779.00 11.07%

LME Zinc 3 Month ($/t) 2407.00 2428.00 0.9% 2948.00 -17.64% 2300.50 5.54%

LME Nickel 3 Month ($/t) 12480.00 13130.00 5.2% 14190.00 -7.47% 10530.00 24.69%

LME Aluminium 3 Month ($/t) 1803.00 1828.00 1.4% 2258.50 -19.06% 1750.50 4.43%

CBOT Soybean (cents/bushel) 872.25 896.25 2.8% 931.25 -3.76% 780.50 14.83%

CBOT Soy Oil (cents/lb) 27.44 28.07 2.3% 31.01 -9.48% 26.03 7.84%

CBOT Soy Meal ($/t) 303.80 312.60 2.9% 342.60 -8.76% 280.70 11.36%

LIFFE Sugar (S/t) 319.80 309.70 -3.2% 390.70 -20.73% 300.50 3.06%

ICE Coffee (cents/lb) 109.45 105.50 -3.6% 125.50 -15.94% 86.35 22.18%

ICE Cotton (cents/lb) 63.44 62.36 -1.7% 90.61 -31.18% 60.27 3.47%

ICE Sugar (cents/lb) 12.36 12.36 0.0% 14.24 -13.20% 9.83 25.74%

CBOT Corn (cents/bushel) 434.00 457.00 5.3% 464.25 -1.56% 329.75 38.59%

CBOT Wheat (cents/bushel) 519.25 535.00 3.0% 593.00 -9.78% 416.25 28.53%

TECHNICAL RECOMMENDATIONS

GAUR SEED

SOYBEAN

As on 12th July 2019, Nickel July contact delivery futures at the MCX platform are trading around Rs. 918/kg, up by +3.5% from the previous week’s closing price of Rs. 886.5/kg. Prices are trading above the daily 8, 13 EMA support levels (900/902), and also trading above the daily Bollinger band support levels of 897. Daily momentum indicator RSI-14 is approaching the overbought zone. Overall trend is positive however, in the beginning of the next week, we may see more corrections towards the support levels. Overall, bullish trend is in progress and prices are expected to trade within a range of Rs. 880-940 in the coming week.Recommendations:Nickel July MCX: Buy at Rs. 900-905 TP Rs. 940 SL 880

Guar Seed August contract delivery futures at the NCDEX platform has settled higher Rs 4434/Quintal, up by +1.6% from the previous week’s closing price of Rs 4362. Since last two consecutive weeks prices price moving higher after taking supports around Rs 4230 levels. At present prices are trading above the daily 8, 13 EMA support levels (Rs 4350/4340). The daily momentum indicator RSI-14 is treading around approaching the overbought zone (68). Overall bullish trend is in progress. However, in the beginning of the next week, we may see more corrections towards the support levels since commodity prices have highly deviated from the moving averages and indicators are near the overbought zone. Commodity is expected to trade within a range of Rs. 4500-4200 on a positive note.Recommendation:Guar Seed August NCDEX: Buy at Rs. 4330-4350 TP RS. 4500 SL 4200

Soybean August contract delivery futures at the NCDEX platform has settled higher at Rs. 3687/Quintal, up by Rs. 90 from the previous week’s closing price of Rs. 3597. Prices are trading above the daily 8, 13 EMA support levels (Rs. 3650/3630). The weekly momentum indicator RSI-14 is trading around 50 at a neutral zone. Weekly bearish reversal candle is the supportive factor to extend gains in the coming week. Prices are expected to trade within a range of Rs. 3800-3600 on a positive note in the coming week.Recommendation:Soybean August NCDEX: Buy at Rs. 3550-3560 TP Rs. 3800 SL 3600


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

• Gold rose on Friday and was on track to post a weekly gain supported by an easing dollar and weaker than expected Chinese trade data which stoked global growth concerns. Spot gold has risen more than 11% since it touched the year’s low of $1,265.85 per ounce in May mainly on expectations of aggressive monetary policy easing and growth worries.

• The Cotton Association has further lowered its crop estimate by 3 lakh bales to 312 lakh bales for the 2018-19 seasons mainly due to poor rainfalls in the South. Crop estimate from the Southern zone has been lowered by 3.25 lakh bales to 68.50 lakh bales as per the June forecast compared to the May estimate of 71.75 lakh bales, the association said on July 11.

• China’s soybean imports fell 11.5% in June from May, customs data showed on Friday as the Sino-US trade war and an outbreak of deadly African swine fever curb demand. China brought in 6.51 million tonnes of soybeans in June down from 7.36 million tonnes in May according to data from the General Administration of Customs. It brought in 8.7 million tonnes in June last year.

• China’s unwrought copper imports in June fell 27.2% from a year earlier, official data showed on Friday, as a slowdown in the world’s second-biggest economy continues to weigh on demand for the metal. Factory activity in China which is embroiled in a trade war with the US shrank more than expected in June in a bearish sign for the manufacturing sector that is a key source of copper demand. Even a crackdown on imports of copper scrap that is expected to increase demand for other forms of the metal failed to keep unwrought imports buoyant.

WEEKLY COMMENTARY

• Oil prices hovered near six-week highs on Friday and was on track for a weekly gain as US oil producers in the Gulf of Mexico cut more than half their output because of a tropical storm and as tensions continued to simmer in the Middle East. Brent crude futures were up 57 cents or 0.9% at $67.09 per barrel by 0642 GMT. The international benchmark settled down by 0.7% on Thursday after hitting its highest since May 30 at $67.65.

• Pulses prices have risen by 1-8% after the government raised the minimum support prices (MSP) for the ongoing kharif season. Traders and analysts expect the prices to increase further with most pulses selling below the MSP. They say prices are also rising due to lower crop acreage and rising demand for pulses.

• Shanghai nickel prices recorded their strongest weekly gain since June 2018 as investors bet on the potential demand for the metal in the electric vehicle (EV) battery sector. Shanghai Futures Exchange’s most active nickel contract gained 5.5% this week, the strongest since the week ended June 1, 2018.

• Nickel will continue to outperform the base metals complex over the coming months in line with our bullish price forecast for this year. Speculative buying driven by nickel’s bright EV demand outlook has been the key driver of the metal’s positive price performance in recent months while the breaching of a key resistance level this week suggests prices have further room to run over H2FY19. We highlight significant downside risks on the horizon both in terms of fundamentals and on the macroeconomic front.

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COMMODITIES

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

Commodity Exchange Contract 05-Jul 12-Jul % change

Aluminium LME 3M 1804.50 1821.00 0.91%

Copper LME 3M 5898.00 5937.50 0.67%

Lead LME 3M 1877.00 1964.50 4.66%

Nickel LME 3M 12465.00 13120.00 5.25%

Zinc LME 3M 2409.50 2393.00 -0.68%

Gold CME Aug 1401.20 1405.40 0.30%

Silver CME Sep 15.02 15.14 0.83%

WTI Crude oil CME July 57.73 60.43 4.68%

Natural Gas CME July 2.40 2.41 0.42%

INTERNATIONAL COMMODITY PRICES

Commodity Exchange Contract 05-Jul 12-Jul % change

Soybean CBOT Aug 881.50 904.25 2.58%

Soy oil CBOT Aug 27.55 28.10 2.00%

CPO BMD Sep 2027.00 2027.00 0.00%

Cotton ICE Dec 66.85 63.11 -5.59%

FUTURE PRICES (% CHANGE)

LME WAREHOUSE STOCKS (IN TONS)

Commodity Previous week This week Change % Change

Copper 298300 288200 -10100 -3.39%

Zinc 87125 79375 -7750 -8.90%

Aluminium 956575 926875 -29700 -3.10%

Lead 63725 64775 1050 1.65%

Nickel 154740 150840 -3900 -2.52%

SHANGHAI WAREHOUSE STOCKS (IN TONS)*


Copper 139556 134747 -4809 -3.45%

Zinc 79945 86046 6101 7.63%

Aluminium 451050 428897 -22153 -4.91%

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

GLOBAL STOCK POSITION (IN TONS)

COMEX WAREHOUSE STOCKS (IN TONS)


Copper 34520 35898 1378 3.99%

WASDE report - World Cotton Supply

2019/20 Proj. Beginning Stocks Production Imports Domestic

Use Exports Loss/2 EndingStocks

World Jun 77.53 125.32 44.74 125.27 44.75 0.31 77.26

Jul 79.27 125.79 44.12 124.27 44.15 0.34 80.42

World Less ChinaJun 43.16 97.57 34.24 84.27 44.63 0.31 45.76

Jul 43.91 98.04 33.62 83.77 44.03 0.34 47.43

United StatesJun 4.65 22 0.01 3.1 17 0.16 6.4

Jul 5 22 0.01 3.1 17 0.21 6.7

Total ForeignJun 72.88 103.32 44.74 122.17 27.75 0.16 70.86

Jul 74.27 103.79 44.11 121.17 27.15 0.13 73.72

Major Exporters 4/Jun 26.73 56.78 2.14 34.81 23.64 0.02 27.18

Jul 27.79 57.22 2.14 35.11 23.01 0.02 29

Central Asia 5/Jun 2.29 5.82 3/ 3.99 1.79 0 2.33

Jul 2.49 5.76 3/ 4.09 1.79 0 2.37

Afr. Fr. Zone 6/Jun 1.59 6.01 3/ 0.14 5.61 0 1.85

Jul 1.59 6.01 3/ 0.14 5.61 0 1.85

S. Hemis. 7/Jun 14.86 15.97 0.21 4.67 11.17 0.01 15.19

Jul 15.07 15.97 0.21 4.67 10.97 0.01 15.6

AustraliaJun 1.2 1.9 3/ 0.04 1.8 0 1.27

Jul 1.8 1.9 3/ 0.04 1.8 0 1.87

BrazilJun 12.21 12 0.08 3.6 8.2 0 12.48

Jul 11.81 12 0.08 3.6 8 0 12.28

IndiaJun 7.78 28.5 1.4 25.3 4.8 0 7.58

Jul 8.43 29 1.4 25.5 4.4 0 8.93

Major Importers 8/Jun 44.23 43.52 40 83.09 2.88 0.14 41.65

Jul 44.67 43.52 39.41 81.79 2.9 0.11 42.79

MexicoJun 0.72 1.75 0.85 2 0.55 0.03 0.75

Jul 0.72 1.75 0.85 2 0.55 0.03 0.75

ChinaJun 34.37 27.75 10.5 41 0.13 0 31.49

Jul 35.37 27.75 10.5 40.5 0.13 0 32.99

European Union 9/Jun 0.26 1.78 0.67 0.73 1.67 0.05 0.26

Jul 0.26 1.78 0.67 0.73 1.69 0.03 0.26

TurkeyJun 1.63 4.1 3 6.7 0.38 0 1.65

Jul 1.58 4.1 3 6.7 0.38 0 1.6

PakistanJun 2.83 8 2.9 10.7 0.15 0.03 2.86

Jul 2.73 8 3 10.7 0.15 0.03 2.86

IndonesiaJun 0.61 3/ 3.2 3.2 0.01 0 0.61

Jul 0.51 3/ 3.3 3.2 0.01 0 0.61

ThailandJun 0.2 3/ 1.18 1.15 0 0.03 0.21

Jul 0.2 3/ 1.18 1.15 0 0.03 0.21

BangladeshJun 1.98 0.14 8.3 8.3 0 0.01 2.11

Jul 1.78 0.14 7.3 7.4 0 0.01 1.81

VietnamJun 1.24 3/ 7.6 7.5 0 0 1.34

Jul 1.14 3/ 7.8 7.6 0 0 1.34

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

Mentha Oil

Turmeric

Barley

Cotton

RM Seed

Zinc

Soy Oil

Wheat

CPO

Soybean

Aluminum

Cotton Seed Oil Cake

Gold

Copper

Castor Seed

Guar Seed

Dhaniya

Natural Gas

Jeera

Silver

Guar Gum

Lead

Nickel

Crude Oil

Cardamom


USD/INR

USDINR is trading at 68.79. During the week, it made a high of 68.98 and low of 68.38. The RSI is at 40.62. Moving average of 32 is at 70.13 and 55 is at 70.52. The trend is looking sideways for the week. Hence, we recommend buying at 68.50 TP Rs. 69.30 SL 68.00

EUR/INR

EURINR is trading at 77.29. During the week, it made a high of 77.31 and low of 76.75. The RSI is trading at 39.80. Moving average of 32 is at 77.29 and 55 is at 80.25. The trend is looking sideways for the week. Hence, we recommend buying at 77.00-76.90 TP Rs. 78.00 SL 76.50.

GBP/INR

GBPINR is trading at 86.05. During the week, it made a high of 86.17 and low of 85.26. The RSI is trading at 32.41. Moving average of 32 is at 90.06 and 55 is at 90.94. The trend is looking positive for the week. Hence, we recommend buying at 86.00-85.80 TP Rs. 87.00 SL 85.50.

JPY/INR

JPYINR is trading at 63.42. During the week, it made a high of 63.45 and low of 62.87. The RSI is at 49.57. Moving average of 32 is at 63.55 and 55 is at 63.53. The trend is looking negative for the week. Hence, we recommend selling at 63.70-63.80 TP Rs. 62.50 SL 64.20.

TECHNICAL RECOMMENDATIONMARKET STANCE

Rupee closed the week at 68.69 after hitting weekly high of 68.69 and low of 68.29. Dollar is finding support at around 68.40 levels after breaking key support level of 68.80. Reserve Bank has continued to remain a net buyer of the greenback for the second consecutive month in FY20, buying a net of $2.538 Bn in May. Dollar traded towards a three-week high against major currencies as an unwinding of bets on deep US interest rate cuts pushed Treasury yields higher. A 50 basis point rate cut at a Fed meeting later this month is not likely. A 25 basis point rate cut due to weak inflation and worries about the US-China trade war is a possibility. Moody’s weak growth prospects for India will complicate the government’s fiscal consolidation efforts, weighing on the sovereign’s credit quality. Dollar weakened after Federal Reserve Chairman Powell set the stage for a rate cut later this month, vowing to “act as appropriate”. We expect that 68.40 support for the USD/INR pair will hold and the pair can likely move towards 68.80 levels shortly.

NEWS FLOWS OF LAST WEEK

• US nonfarm payrolls rebounded in June to 224,000, the highest in five months.

• British pound hit a six-month low to the dollar after poor economic data and a rise in expectations that the Bank of England will cut interest rates.

• BoJ Gov Kuroda said will keep short, long-term rates at current low levels for extended period at least through mid 2020.

• UK Parliament backed amendment aiming to prevent a no-deal Brexit.

• A 50 basis point rate cut at a Fed meeting later this month is not likely. A 25 basis point rate cut due to weak inflation and worries about the US-China trade war is a possibility.

• Powell pointed to “broad” global weakness that was clouding the US economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China.

• The minutes from the Fed’s previous policy meeting showed many policy makers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut.

• The core US consumer price index excluding food and energy components rose 0.3% in June, the largest increase since January 2018.

• Reserve Bank has continued to remain a net buyer of the greenback for the second consecutive month in FY20, buying a net of $2.538 Bn in May.

CURRENCY

CURRENCY TABLE

Currency Pair Open High Low Close

USDINR 68.56 68.69 68.29 68.69

EURINR 76.96 77.31 76.94 77.29

GBPINR 85.98 86.08 85.82 86.06

JPYINR 63.11 63.45 63.02 63.44


ECONOMIC GAUGE FOR THE NEXT WEEK

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

12 Jul 19 Jul : China (Mainland) Low FDI (YTD) Jun 2019 Percent 6.8

15 Jul 07:00 China (Mainland) Low China House Prices YY Jun 2019 Percent 10.7

15 Jul 07:30 China (Mainland) High Urban investment (ytd)yy Jun 2019 5.5 Percent 5.6

15 Jul 07:30 China (Mainland) Medium Industrial Output YY Jun 2019 5.2 Percent 5

15 Jul 07:30 China (Mainland) High Retail Sales YY Jun 2019 8.3 Percent 8.6

15 Jul 07:30 China (Mainland) High GDP YY Q2 2019 6.2 Percent 6.4

15 Jul 07:30 China (Mainland) Medium GDP QQ SA Q2 2019 1.5 Percent 1.4

15 Jul 07:30 China (Mainland) Not Rated GDP YTD YY Q2 2019 Percent 6.4

15 Jul 07:30 China (Mainland) Not Rated Industrial Production YTD YY Jun 2019 Percent 6

15 Jul 07:30 China (Mainland) Not Rated Retail Sales YTD YY Jun 2019 Percent 8.15

15 Jul 12:00 India High WPI Inflation YY Jun 2019 2.35 Percent 2.45

15 Jul 12:00 India Not Rated WPI Food Index Jun 2019 Percent 5.1

15 Jul 12:00 India Low WPI Food Articles YY Jun 2019 Percent 6.99

15 Jul 12:00 India Low WPI Fuel YY Jun 2019 Percent 0.98

15 Jul 12:00 India Low WPI Mfg Inflation Jun 2019 Percent 1.28

15 Jul 18:00 United States Medium NY Fed Manufacturing Jul 2019 0.5 Index -8.6

16 Jul 18:00 United States Medium Import Prices MM Jun 2019 -0.6 Percent -0.3

16 Jul 18:00 United States Low Export Prices MM Jun 2019 Percent -0.2

16 Jul 18:00 United States Medium Retail Sales Ex-Autos MM Jun 2019 0.1 Percent 0.5

16 Jul 18:00 United States High Retail Sales MM Jun 2019 0.2 Percent 0.5

16 Jul 18:00 United States Low Retail Ex Gas/Autos Jun 2019 Percent 0.5

16 Jul 18:00 United States Medium Retail Control Jun 2019 0.2 Percent 0.5

16 Jul 18:00 United States Not Rated Retail Sales YoY Jun 2019 Percent 3.16

16 Jul 18:25 United States Low Redbook MM W 13 Jul Percent -2.2

16 Jul 18:25 United States Low Redbook YY W 13 Jul Percent 6.2

16 Jul 18:45 United States High Industrial Production MM Jun 2019 0.1 Percent 0.4

16 Jul 18:45 United States Medium Capacity Utilization SA Jun 2019 78.1 Percent 78.1

16 Jul 18:45 United States Low Manuf Output MM Jun 2019 0.2 Percent 0.2

16 Jul 18:45 United States Not Rated Industrial Production YoY Jun 2019 Percent 2.05

16 Jul 19:30 United States Medium Business Inventories MM May 2019 0.4 Percent 0.5

16 Jul 19:30 United States Not Rated Retail Inventories Ex-Auto Rev May 2019 Percent 0.3

16 Jul 19:30 United States Medium NAHB Housing Market Indx Jul 2019 64 Index 64

16 Jul 01:30 United States Low Net L-T Flows,Exswaps May 2019 USD 46.9

16 Jul 01:30 United States Low Foreign Buying, T-Bonds May 2019 USD 16.9

16 Jul 01:30 United States Low Overall Net Capital Flows May 2019 USD -7.8

16 Jul 01:30 United States Low Net L-T Flows,Incl.Swaps May 2019 USD 40.8

17 Jul 16:30 United States Low MBA Mortgage Applications W 12 Jul Percent -2.4

17 Jul 16:30 United States Low Mortgage Market Index W 12 Jul Index 505.8

17 Jul 16:30 United States Low MBA Purchase Index W 12 Jul Index 275.6

17 Jul 16:30 United States Low Mortgage Refinance Index W 12 Jul Index 1800

17 Jul 16:30 United States Low MBA 30-Yr Mortgage Rate W 12 Jul Percent 4.04

17 Jul 17:00 India Low M3 Money Supply W 05 Jul Percent 10.1

17 Jul 18:00 United States Medium Building Permits: Number Jun 2019 1.298 No. of 1.299

17 Jul 18:00 United States Low Build Permits: Change MM Jun 2019 Percent 0.7

17 Jul 18:00 United States High Housing Starts Number Jun 2019 1.26 No. of 1.269

17 Jul 18:00 United States Low House Starts MM: Change Jun 2019 Percent -0.9

CURRENCY


CURRENCY

17 Jul 20:00 United States Not Rated EIA Weekly Crude Stocks W 12 Jul Barrel -9.499

17 Jul 20:00 United States Not Rated EIA Weekly Dist. Stocks W 12 Jul Barrel 3.729

17 Jul 20:00 United States Not Rated EIA Weekly Gasoline Stk W 12 Jul Barrel -1.455

17 Jul 20:00 United States Not Rated EIA Weekly Crude Imports W 12 Jul Barrel -0.341

17 Jul 20:00 United States Not Rated EIA Weekly Rfg Stocks W 12 Jul Barrel 0.003

17 Jul 20:00 United States Not Rated EIA Weekly Heatoil Stock W 12 Jul Barrel 0.264

17 Jul 20:00 United States Not Rated EIA Weekly Prods Imports W 12 Jul Brl/Day 0.999

17 Jul 20:00 United States Not Rated EIA Weekly Dist Output W 12 Jul Brl/Day 0.022

17 Jul 20:00 United States Not Rated EIA Weekly Crude Runs W 12 Jul Brl/Day 0.148

17 Jul 20:00 United States Not Rated EIA Weekly Refining Util W 12 Jul Percent 0.5

17 Jul 20:00 United States Not Rated EIA Wkly Crude Cushing W 12 Jul Barrel -0.31

17 Jul 20:00 United States Not Rated EIA Weekly Gasoline O/P W 12 Jul Brl/Day 0.47

17 Jul 23:00 United States Not Rated EIA Ethanol Ref Stk W 12 Jul Barrel 23009

17 Jul 23:00 United States Not Rated EIA Ethanol Fuel Total W 12 Jul Brl/Day 1047

18 Jul 18:00 United States High Initial Jobless Claims W 13 Jul 216 Person 209

18 Jul 18:00 United States Low Jobless Claims 4-Wk Avg W 13 Jul Person 219.3

18 Jul 18:00 United States Medium Continued Jobless Claims W 06 Jul Person 1.723

18 Jul 18:00 United States High Philly Fed Business Indx Jul 2019 5 Index 0.3

18 Jul 18:00 United States Not Rated Philly Fed 6M Index Jul 2019 Index 21.4

18 Jul 18:00 United States Not Rated Philly Fed Capex Index Jul 2019 Index 28

18 Jul 18:00 United States Not Rated Philly Fed Employment Jul 2019 Index 15.4

18 Jul 18:00 United States Not Rated Philly Fed Prices Paid Jul 2019 Index 12.9

18 Jul 18:00 United States Not Rated Philly Fed New Orders Jul 2019 Index 8.3

18 Jul 19:30 United States Low Leading Index Chg MM Jun 2019 0.1 Percent 0

12 Jul 17:00 India Low FX Reserves, USD W 05 Jul USD 427.7

19 Jul 19:30 United States High U Mich Sentiment Prelim Jul 2019 98.4 Index 98.2

19 Jul 19:30 United States Low U Mich Conditions Prelim Jul 2019 Index 111.9

19 Jul 19:30 United States Low U Mich Expectations Prelim Jul 2019 Index 89.3

19 Jul 19:30 United States Low U Mich 1Yr Inf Prelim Jul 2019 Percent 2.7

19 Jul 19:30 United States Low U Mich 5-Yr Inf Prelim Jul 2019 Percent 2.3


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