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Commodity outlook by Tradebulls Securities: Buy copper, silver

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Indian rupee is not trading at its fair value around Rs 71/$ after Chinese Yuan hit the lowest point of 7 against USD. This has not been seen since 2008. Removal of Article 370 and weak Chinese Yuan has hit Indian rupee hard and our currency has depreciated rapidly. It seems RBI is not too keen and may intervene if volatility rises. On August 7, RBI announced 35 basis point rate cut and we expect Indian rupee to depreciate till 71.50-71.70 per US dollar. On the downside, 70.60 remains strong support.


Gold is trading at 6 years high in COMEX while in Indian rupee, Japanese Yen, Canadian and Australian Dollar, South African Rand, it is trading at all time high. The main driver behind gold’s upmove is escalating trade tensions between the US and China. After US President Donald Trump announced 10 per cent tariffs on the remaining $300 billion of Chinese imports, China let the yuan to weaken and rise above 7 against the US dollar for the first time in more than a decade. Technicals have turned bullish for gold and the next target in COMEX comes to $1520 and $1550. There are no current signals on the chart indicating short term top is near so we expect the ongoing bullish trend to continue. Silver will also continue to outperform and traders should not try to short them as the underlying trend is very bullish.



Crude oil has bounced from 7 week low but the trend still looks weak as investors are focusing on the demand side. With increasing trade war and weakening currency, it becomes expensive for India and China to import crude oil. This will affect demand and so the market is bearish on crude oil. Supply of crude continues to be stable and the market until now has ignored US inventory which has shown withdrawal since the past 6 weeks. Oil demand is in its peak season, but demand for OPEC oil remained below 30 million barrels per day in July. Strengthening US Dollar, emerging recession worries and accelerating EV sales are underlying reasons why oil prices are struggling to stay above $68 in Brent.

Recommendation:


Buy Copper | TGT 448 | Stoploss 435


Copper had made ‘piercing line’ candlestick formation around 432 which means temporary bottom has been placed. Negative fundamental news of US-China trade war had taken toll on copper prices but now it is reacting positively as we are seeing some short covering. RSI_14 has also recovered is now around 49.81. Above 50, RSI_14 will be in positive territory and we may see more upside in copper prices. Buy Copper at current level for expected upmove till 448 and maintain stoploss of 435 closing basis.


Buy Silver around 43100 | TGT 44000 | Stoploss 42400


Silver has outperformed gold and on the daily scale, there isn’t any reversal candlestick formation which is indicating short term top. Prices have increased too fast and the trend is positive so investors should not be in short position. We believe silver can retrace till 43100 where again it would be an ideal opportunity to go along with a target of 44000 and stoploss of 42400. So instead of chasing prices at a higher level, let silver settle around 43100 before taking long position.

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Market Updates

Sitharaman’s sops for NBFCs may perk up lending, ease liquidity stress

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Illustration by Binay Sinha


To further ease the liquidity stress in the non-banking sector and nudge them to revive their lending activities, Finance Minister (FM) Nirmala Sitharaman on Friday announced a slew of measures for non-banking financial companies (NBFCs) and housing finance companies (HFCs). The government hopes this will result in more credit support for purchase of houses, vehicles, and consumption goods.


The government has provided additional support of Rs 20,000 crore to the stressed housing finance companies from National Housing Bank (NHB). With this, the additional liquidity support for the HFCs from NHB has gone up to Rs 30,000 crore.



In the Union Budget last month, the FM had encouraged public sector banks (PSBs) to buy high-quality pooled assets of NBFCs up to Rs 1 trillion for which the government would provide a one-time six-month partial credit guarantee for the first loss of up to 10 per cent.


The Reserve Bank of India (RBI) had also chipped in by tweaking banks’ bond-holding norms. This will allow banks to borrow an additional Rs 1.34 trillion exclusively for buying such pooled assets and giving loans to NBFCs. The FM on Friday said this partial credit guarantee scheme will be monitored at the highest level in each bank. Through this, it is expected that many of the assets will get quickly pooled and NBFCs will receive the necessary liquidity. “NHB has already settled some of the issues. NBFCs are receiving money from the banks and are moving towards funding,” said Sitharaman.


Sanjaya Gupta, managing director, PNB Housing Finance, said “This will support growth and ease the liquidity crunch. HFCs will now get an additional Rs 20,000 crore from NHB. The initiatives have potential to kick start the real estate sector.”


The government has also permitted NBFCs to use Aadhaar-authenticated bank KYC to avoid repeating the same process when a customer approaches it for credit. This has been a long-standing demand. The necessary changes in the Aadhaar regulations and Prevention of Money Laundering Act rules will be made, the FM said.


“This will streamline the process and also reduce frauds,” said Raman Aggarwal, chairman, Finance Industry Development Council.


The government has also asked PSBs and NBFCs to fast-track their collaboration to provide credit to micro, small and medium enterprises, small traders, self-help groups, and micro finance industry client borrowers.

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PACL Case: Sebi panel invites expression of interest for 28,974 properties

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Sebi


A committee headed by Justice R M Lodha has invited expression of interest (EoI) from prospective buyers for a total of 28,974 properties belonging to PACL Group.


Market regulator Sebi had set up a committee headed by former Chief Justice of India R M Lodha following a Supreme Court order to refund money to investors in the matter of PACL Group.



As per the notice issued by Sebi, the committee has divided the total 28,974 properties belonging to PACL group in four zones — east, west, north and south — with maximum properties being located in the southern zone.


Regarding PACL properties, the apex court’s order dated July 30 observed “we also leave it open to the committee to receive any further offers and to explore them after duly publishing a further notice on the website,” the notice said.


In pursuance of apex court’s order, the committee “invites Expression of Interest from prospective buyers clearly indicating therein, list of properties in each zone, its circle rate, the offer amount and other relevant details,” the Friday notice said.


“The proposal should be for properties in each zone aggregating in value not less than Rs 1,000 crore,” the notice added.


The notice further said that the last date of receipt of proposals is September 9.


PACL, also known as Pearl Group, had raised Rs 60,000 crore from public in the name of agriculture and real estate businesses and was found by Sebi to have collected these funds through illegal collective investment schemes over 18 years.

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Improved market access for domestic retail investors with Aadhaar-based kYC

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Markets, Investors, Indices, Stocks


The government will allow Aadhaar-based KYC for domestic retail investors, and necessary amendments to the rules under the Prevention of Money Laundering Act will be issued.


Announcing a slew of measures to boost the economy, the government said the Depository Receipt Scheme 2014 is expected to be operationalised soon by Sebi. “This will give Indian companies increased access to foreign funds through American Depository Receipt (ADR)/ Global Depository Receipt (GDR),” she said.



In order to improve market access for the domestic retail investors, Aadhaar-based KYC will be permitted for opening of demat account and making investment in mutual funds. In this regard, necessary notification for amendments in PMLA rules would be issued.

Besides, steps would be taken with regard to offshore rupee market.


“To bring offshore rupee market to domestic stock exchanges and permit trading of USD-INR derivatives in GIFT IFSC, Ministry of Finance is working with RBI to introduce this measure shortly,” the government said.

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