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Commodity outlook by Tradebulls Securities: Buy Zinc, sell Natural Gas



Trading Strategy

Indian rupee recovered smartly to trade sub Rs 71.50/dollar on the back of strong Yuan after China postponed implementing tariffs and sending an olive branch to US. USD/CNY is trading at 7.08 from last week’s 7.15 prompting our rupee to strengthen from 72.62 to 71.50. Going forward, we expect rupee to test levels of 71.30-71.20 before consolidating. Next week’s US Fed will also play an important role in giving further direction to our rupee. Any rate cut from the US will weaken US Dollar and may appreciate our rupee. Rupee is expected to trade in the range of 71.20-71.90 this week.

Gold has been pushed below $1,500 and tested its support of $1,484 before bouncing back to $1,495. Strong US equity market and rebound in bond yields have pushed gold and silver prices down. The correction was much needed and for short term, bullions are expected to remain in downward pressure but overall, we are very much bullish in precious metals. Next week’s Fed rate cut will also pave for further direction in bullions. ‘Buy on dips’ strategy still exist as long as $1,475 is not breached.

Any rate cut should help gold/silver prices propel upward. Gold has strong support around Rs 36,800 and we expect gold to bottom out around that level. In Silver, we expect Rs 44,450 support to hold. Silver continues to outperform gold but now we believe Gold/Silver ratio is at par; so going forward, gold would be our first preference.

Crude oil fell despite higher-than-expected inventory withdrawal from the US as investors are worried about demand side weakness. Brent crude is trading around $61 and reason for the fall in crude oil prices are US President Trump firing Bolton after which investors are anticipating somewhat ease in the tension of US-Iran and Iran’s oil flowing into the market. Crude oil once again has come back into its familiar range of Rs 3,850 – Rs 4,100. We expect crude oil to remain confined in this range as there is no news to trigger any volatility or break out from the said range.

Buy Zinc

Target: Rs 192

Stop loss: Rs 184

After consolidating and taking support at Rs 180.60, zinc has bounced strongly till Rs 186. The short-term moving average of 13 and 20 has given buy signal crossover and RSI_14 is trading above 50 giving extra confirmation of buy signal. It has minor resistance around Rs 190 and if it manages to breach that level, we can see it going till Rs 192 so buy at current level with an expected target of Rs 192 and stop loss of Rs 184.

Sell Natural Gas

Target: Rs 173

Stop loss: Rs 195

Natural Gas has seen sharp upmove from Rs 152 to Rs 191 in short term. RSI_14 has also been in the overbought region from 78.80 and has now reversed back to 69.90. On the daily scale, the uptrend has seen pause around Rs 191, which happens to be its 200-day moving average (DMA). So Rs 191 – Rs 193 is strong resistance zone for it. Natural Gas made ‘Bearish Belt Hold’ Candlestick pattern on Thursday which again gives confirmation of selling pressure and we expect it to ease near Rs 175 – Rs 173 levels. So, sell with stop loss of Rs 195 closing basis.


Disclaimer: The analyst may have positions in any or all the commodities mentioned above.


Market Updates

Top 1,000 listed firms may see tax savings of Rs 37k cr on tax cut: Crisil



Corporation tax: FY17 might see 1-1.5% cut

CRISIL Research on Sunday said top 1,000 listed companies could see tax savings of Rs 37,000 crore on account of the corporate tax cut.

“Over the past few days, a slew of measures have been introduced to address the slowdown in the Indian economy. Friday’s announcement, however, is the most material…Our analysis indicates these 1,000 companies could see tax savings of Rs 37,000 crore, or nearly a fourth of the total savings anticipated by the government,” it said in a statement.

The drop in tax rate would now bring India at par with most Asian economies, it added.

“CRISIL Research’s analysis of nearly 1,000 companies — spread across 80+ sectors such that they cover more than 70 per cent of NSE’s market capitalisation — indicates that effective tax rates had risen over the past 5 years,” it said.

These companies, including oil & gas and financial services, account for nearly a third of the tax paid by India Inc.

“These estimates are based on profit before tax for fiscal 2019. Given that we expect 5-6 per cent growth in India Inc revenues and Ebitda (earnings before interest, tax, depreciation and amortisation) for this fiscal, the savings could end up a tad higher,” it added.

In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent, inclusive of all cess and surcharges for domestic companies.

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Market Updates

Onion shoots up to Rs 70-80 per kg; Centre considers imposing stock limits



onions, onion price, onion

The Centre is mulling imposing stock limits on onion traders as the retail prices of the key kitchen staple have shot up to Rs 70-80 per kg in the national capital and other parts of the country owing to supply disruption in the wake of excess monsoon rains in the major growing states, according to sources.

As per the data maintained by the consumer affairs ministry, retail onion prices rose to Rs 57/kg in Delhi, Rs 56/kg in Mumbai, Rs 48/kg in Kolkata and Rs 34/kg in Chennai last week. The prices were quoted at Rs 60/kg in Gurgoan and Jammu during the same period.

However, trade data showed retail onion prices skyrocketing to Rs 70-80 per kg towards the end of the last week from Rs 50-60/kg in the previous week.

Onion prices are on the rise despite several measures taken by the central government to boost supply.

“The government has taken several measures in the last few weeks to improve the domestic supply and check further increase in prices of onion. However, retail prices have suddenly shot up in the last 2-3 days because of supply disruption due to excess rains in the growing states,” a source told PTI.

It is a short-term supply disruption and if the situation does not normalise in the next 2-3 days and prices rise, then the government may consider seriously imposing stock holding limits on onion traders, the source said.

According to the Met Department, main onion producing regions especially Maharasthra, Karnataka, Andhra Pradesh, Gujarat, eastern Rajasthan and western Madhya Pradesh have received excess monsoon rainfalls in the last two days.

Right now, stored onions are sold in most parts of the country as fresh kharif (summer) crop will hit the market from November onwards, traders said.

Traders further said that there is enough supply of stored onion of the previous year’s crop in the country but its transportation has been affected because of heavy rains.

Much of the onion is stored in Maharashtra, where rains disrupted the transport of the kitchen staple to other parts of the country, said a wholesale trader from Lasalgoan in Maharasthra, Asia’s largest onion market.

At wholesale market of Lasalgoan, onion prices rose to Rs 45/kg last week, when compared with less than Rs 10/kg in the year-ago period.

The Centre has taken several measures to arrest the prices of onion in Delhi and other parts of the country. It is offloading onion from its buffer stock through agencies like Nafed and NCCF which are selling at around Rs 22/kg and state-run Mother Dairy at Rs 23.90 per kg in the national capital

The state governments have been asked to boost supply in their states lifting central buffer stock. Some states like Delhi, Tripura and Andhra Pradesh have shown interest so far.

The centre has a buffer stock of 56,000 tonnes of onion, of which 16,000 tonnes has been offloaded so far. In Delhi, 200 tonnes a day is being offloaded.

Besides, the Centre has discouraged export of onion by increasing the minimum export price and withdrawing incentives. It is also cracking down on blackmarketeers.

Besides rains, prices are under pressure on likely fall in kharif production of this year owing to less planted area under onion on account of excess rains, the sources added.

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Market Updates

FPIs withdraw Rs 4,193 crore from capital markets in September so far



Ebix intends to merge Yatra Online in its Indian EbixCash subsidiaryforeign investment

Foreign investors have pulled out a net sum of Rs 4,193 crore from the Indian capital markets in September so far, but the trend is expected to reverse on the back of fiscal relief measures announced by the government, experts said.

The Centre on Friday slashed corporate tax rates by around 10 percentage points and said the enhanced tax surcharge will not to apply on capital gains arising from sale of any security including derivatives in the hands of FPIs.

“The measures will act as a catalyst for supporting the slowing investment rate, boost corporate earnings, improve aggregate demand as corporates pass on some of the benefits to consumers and attract FPI flows into India,” said Vijay Chandok, MD and CEO, ICICI Securities.

According to latest depositories data, foreign portfolio investors (FPI) withdrew a net amount of Rs 5,577.99 crore from equities while infusing Rs 1,384.81 crore into the debt segment. This translates into a cumulative net outflow of Rs 4,193.18 crore between September 3-20.

Prior to this, FPIs had pulled out a net Rs 5,920.02 crore in August and Rs 2,985.88 crore in July from the domestic capital markets (both equity and debt).

“FPI outflows which have sustained after the budget are likely to reverse after the new big bang announcements by the Finance Minister. The fact that FPIs continued to sell even after the reversal of the surcharge imposed on FPIs, indicated that they were selling because of the slowdown and the poor prospects for corporate profitability.

“These concerns are no longer valid as the reforms can boost investment, growth and corporate profits. FPIs have to return,” said V K Vijayakumar, chief investment strategist at Geojit Financial Services.

Stating the reasons for FPI outflows, Ajit Mishra, VP Research at Religare Broking, said “apart from the signs of economic slowdown, valuation discomfort kept uneasiness in FPI intact. However, the announcements from Finance Minister have the potential to revive their sentiments.”

Going forward, “political stability will act as an added advantage for India among other high yield economies. Fiscal stimulus by way of tax rate cuts and removal of surcharge from capital gains on sale of shares should also help in attracting both foreign portfolio and direct investment,” said Vinod Karki, Head – Strategy at ICICI Securities.

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