Dhanteras & DiwaliDhanteras & DiwaliSPECIAL REPORT ON

24th October, 2019

It’s a time of celebration as the auspicious “Dhanteras” and festivals of lights “Diwali” are on the way to sparkle

blessings on us. These are auspicious occasions are known as to bring prosperity in our lives.

SMC Commodity Research Team has come up with special report on these occasions which will throw light how some

commodities gave good returns despite the hit of all odds and slowdown amid many geo political issues. We have

calculated the return on commodities from last Diwali to 18th of October. Below table is giving ideas that how particular

categories performed in this period.

1

Oil Seeds and Edible oil: Trade war grilled the sentiments

of agri commodities as well. Soybean, cotton etc. were few

of them. Though China treated soft commodities well and

the agri trade resumed once again. Here in India, erratic

monsoon raised the fear of crop loss and it gave good

support to the prices, especially in Soybean. Despite

smooth supply edible oil managed to trade in a range.

Spices: It was a time of big movements in spices.

Cardamom saw whopping rise, made all time high with

acute shortages, whereas Jeera, turmeric and

cardamom turned weaker on poor export demand

together with some rise in supply.

Energy: This counter reflected the actual health of world

economy. Surrounded by all negative news of slowdown,

trade wars, political issues of Middle East and multiple

revision of GDP numbers by many agencies amid

increase in production wiped out the profit of crude prices.

It couldn’t stay at higher levels and saw negative return of

around 17%. While, natural gas posted a negative return

due to warmer weather in U.S.

Bullion: Clearly the bullion counter has emerged as

winner with around 20% return as safe haven demand

amid depreciation in currencies resulted in new highs in

gold; not in India only but in many countries. Geopolitical

tensions, Brexit, US China trade war, jittery stock

market, poor performance of bond market, amid slow

down issues.

Other commodities: What caught the attention most

were mentha, guar, castor etc. These are export oriented

commodities, which moved down on poor export demand

from traditional importer. India couldn’t get the benefit of

US China trade war in case of agro commodities. Cotton

was one of the victims which gave negative return of 17%.

Maize was cynosure among all which gave more than

48% return on low production amid better demand.

Base metals: These counters didn’t perform as bad as the

major economies. Many stimulus, rate cuts spree by many

major central banks amid some production cut saved the

counter from major fall. Supply side tightness supported

many commodities, viz nickel, copper, lead, zinc; it was

only aluminium which which was 10% down.

Diwali Returns (Y-O-Y)

Oil Seeds

Coriander 6197.00 5980.00 -217.00 -4%

Cardamom 1430.00 2539.20 1109.20 78%

Nickel 848.60 1164.60 316.00 37%

Turmeric 6466.00 5966.00 -500.00 -8%

Jeera 20525.00 16220.00 -4305.00 -21%

Spices

Guar Seed 4588.00 3890.00 -698.00 -15%

Soybean 3373.00 3857.00 484.00 14%

Ref. Soy Oil 754.00 753.55 -0.45 -0.06%

CPO 560.40 558.70 -1.70 -0.30%

RM Seed 4099.00 4138.00 39.00 1%

Others

Cotton 22300.00 19470.00 -2830.00 -13%

Guar Gum 9936.00 7262.00 -2674.00 -27%

Kapas 1199.00 1099.00 -100.00 -8%

Castor Seed 5840.00 4436.00 -1404.00 -24%

Cocud 1923.00 2269.00 346.00 18%

Chana 4384.00 4386.00 2.00 0.05%

Maize 1523.00 2247.00 724.00 48%

Wheat 2037.00 2070.00 33.00 2%

Copper 442.55 441.15 -1.40 -0.32%

Mentha 1761.70 1201.80 -559.90 -32%

Aluminium 142.90 132.50 -10.40 -7%

Base Metals

Natural Gas 257.40 158.60 -98.80 -38%

Crude Oil 4556.00 3796.00 -760.00 -17%

Energy

Gold 31589.00 37890.00 6301.00 20%

Commodity 7th November, 18th October, Change Change 2018 2019 in Rs. in %

Bullion

Silver 38257.00 45431.00 7174.00 19%

Lead 139.30 156.30 17.00 12%

Zinc 182.20 185.80 3.60 2%

Short Term Outlook

On MCX, the Gold may face strong resistance at 39900 & find support near 36380 which has provided strong support to

prices in the past. Overall price movement suggests that sideways to upside move, whereas break below the trend-line

support may post some correction.

On MCX, prices are likely to dip and find support around 50 day SMA which currently reads at Rs. 36378.

A short term bounce can again be witnessed from supports 36378 which can take prices higher towards Rs. 39400-39500

range in next 1-3 months.

Long Term Outlook

MCX Gold

2

We have seen lots of big moves in 2019 so far. Now commodities are trading in a range as investors

are in fix. Ambiguity in Brexit and US and China trade deal heightened the uncertainty in the market

and most probably these two big issues not going to resolve in 2019 and likely to enter in 2020 as well.

It will take few quarters to see positive impact of recent stimulus by various central banks and rate cut

spree on major economies; facing slowdown. Hence opportunities are comparatively lower, but

definitely there in the market.

On the other hand, the downside will remain capped for MCX, Silver supports of Rs.42500-42700 will always provide

support to the commodity and buying from those levels will continue to reward investors with gains. An upside of 49000-

50000 is expected.

On MCX, the downside for Silver may find support near Rs. 43424 and may find resistance at 48200.

Short Term Outlook

A short term dips near 44400 can again be used as a buying opportunity from 1-3 months horizon.

Long Term Outlook

MCX Silver

Investors should accumulate gold around 36800-36300 for target of 40000 on domestic market and silver around 44000-

45000 for target of 49000-50000 in medium to long term.

Overview and outlook

This year Yellow metal gold has been the prominent choice among the investors to park their money and diversifying their portfolio

in troubled times of geopolitical uncertainty and global economic slowdown concerns. Safe haven buying was witnessed due to

escalating US China trade tensions, concerns over Brexit, decline in US treasury yields and monetary easing stance by many

central banks globally. Economic uncertainty globally and repercussions of US China trade war globally and central banks buying

are some key factors assisting the recent rally. Yellow metal which was languishing below $1200 in COMEX and 31200 in MCX in

May this year rocketed higher towards $1550 in COMEX and while on domestic bourses it rose from 31200 to above 39800 in

August 2019.

But gold corrected lower from its peaks last month and now prices are moving in narrow range for past few weeks. Meanwhile gold

prices may continue to consolidate as the US-China trade war appears to be coming to an end, and it seems as though more details will

be announced ahead of the Asia-Pacific Economic Cooperation (APEC) meeting scheduled for November 15-16 as President Donald

Trump insists that “the phase one deal can be finalized & signed soon.”

3

Central banks buying

Chances of Fed rate cut in October meeting

Slowing global economy rise demand for gold

Recently International Monetary Fund (IMF) slashed ts 2019 global growth forecast to 3.2 percent, lowering 0.1 percentage points

from their earlier estimate indicating the trade conflict putting a strain on the global economy. Amid forecasts of a weak economic

outlook, investors sought shelter in safe-haven assets like gold.

CME’s Fed Watch tool showed a 91% chance of a 25 basis point cut at the October 29 and 30 meeting of the Federal Open Market

Committee. Comments from Fed policymakers prior to entering the traditional pre-meeting quiet period indicated a bias toward a

third consecutive cut.

British Prime Minister Boris Johnson's plan to lead the United Kingdom out of the European Union by the end of this month has been

dealt a major blow by Parliament. In another day of high political drama, MPs first voted 329 to 299 in favour of the government's

110-page Withdrawal Agreement Bill, signifying support in principle for the Brexit deal Johnson recently brokered with the EU.

However, in a second vote shortly after, legislators rebuffed by 322 to 308 the government's bid to rush the legislation through

Parliament in a move that prompted Johnson to put the Brexit bill on "pause" and could yet put the brakes on the UK's scheduled

October 31 EU divorce date. The EU is currently weighing whether to grant the UK another extension to the deadline for leaving the

bloc after Johnson was forced to request a delay until January 31.

Bullish Factors Impacting Bullions

Uncertainty regarding BREXIT

Central banks across the globe have been buying larger quantities of the precious metal, a phenomenon not been seen since 1971.

China has added almost 100 tonnes of gold to its reserves over the last ten months, underlining its position as one of the leading central

bank buyers of the precious metal. The People’s Bank of China announced over the weekend that its holdings of the yellow metal rose

to 62.64m ounces in September, an increase of 190,000 ounces from August. Last year central banks, led by Russia, bought more gold

last year than at any time since America decided to move off the gold standard in 1971, with around $27bn worth of purchases.

On MCX, price stuck in the wider range of 400-460, where 440 act as strong support and 460 as resistance.

Any dip towards support would be considered as buying opportunity.

MCX Copper

4

Break above 172 levels can be used as buying opportunity for target of 195-220 in next 1-3 months horizon.

On MCX, prices were trading in range of 140-195, where 140 provide strong support and 195 as resistance on shorter frame. Break

on either side will define the trend although bias is towards buying side.

MCX Natural Gas

Present structure suggested that if price break above the resistance of 3680 then a sharp rally can be seen. Buying on dips suggested in counter.

Soybean has trading in downward sloping channel since Jan’19 where long term resistance hold at 3960 & long term support at 3460. After tumbling from trend line resistance prices have shown consolidation in range of 3600-3680, a level where prices hold strong support.

NCDEX Soyabean

5

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6

In agri counter, soybean is looking promising and it can see more upside. China was positive on agri

commodities and ordered fresh consignment; same goes with cotton, if China import more from US then

this counter may see further upside. MCX cotton can achieve the upside of 21000. With acute shortages,

cardamom once again tries to see the upside of 2800-3000 in coming months.

When nothing works bullion is there to act as savoir of portfolio. It has already given handsome return

though with current economic situation, buying should continue in this counter. In energy counter,

Natural Gas can show some good buying momentum in days to come, fulfilling the winter demand. If

OPEC goes for deeper cut, we may see lower level buying in crude as well. Copper supply side is

comparatively tighter and if there is any sign of economic revival, copper would be the first metals to react

in the market. We are marginally positive in red metal copper. One should not ignore nickel as it is known

for its quick move like silver. Any positive news can send it again its higher level near 1300.

Conclusion

Dilip Nath Research Associate Boardline : 011-30111000 Extn: 630 dilipnath@smcindiaonline.com

Subhranil Dey Sr. Research Analyst (Agro) Boardline : 011-30111000 Extn: 674 subhranildey@smcindiaonline.com

Ravinder Kumar Research Associate Boardline : 011-30111000 Extn: 684 ravinderkumar@smcindiaonline.com

Sandeep Joon Sr. Research Analyst (Metal & Energy) Boardline : 011-30111000 Extn: 683 sandeepjoon@smcindiaonline.com

Vandana Bharti (AVP - Commodity Research) Boardline : 011-30111000 Extn: 625 vandanabharti@smcindiaonline.com