INSUBCONTINENT EXCLUSIVE:
This week was a nightmare, not only for the bulls but also for the government and the regulators
RBI, Sebi and the government together tried to curtail the contagion in the market through various initiatives such as allowing OMCs to tap
the ECB route to raise up to $10 billion, which will take the pressure off dollars and might help calm the currency market
Also, a quick revamp to the ILFS board brought in confidence in the debt market, which will in a way help ease liquidity concerns
All these initiatives will have tangible effects and the market will soon react rationally to the policy initiatives
These are path-breaking moves, which will certainly have a long-term impact on the panic-like mood in the market
Additionally, when everyone is talking about crude oil reaching $100 a barrel level, people seldom understand the crude oil dynamics and
blindly try to call the shots
Crude has surprisingly created a false breakout with an engulfing bear pattern amid the $100 a barrel calls, which means there is a high
probability of reversal and prices are likely to cool down soon
If WTI crude futures fall below $74, it would be a confirmation to an end of the ongoing rally.
Event of the Week
Friday's RBI move to keep
interest rates unchanged and maintain status quo was surprising as the Street expected a 0.25 per cent rate hike in order to curb rupee
The Monetary Policy Committee's stance has moved from dovish to 'calibrated tightening', which is dangerous for the currency market
This move had an instant impact on our currency, which moved lower and crossed the Rs 74 to the dollar mark for the first time
All markets - currencies, crude and equities - have become hyperactive, but hopefully crude will calm soon and the rest are expected to
Technical Outlook The real chart to watch in order to understand the true state of the market is NiftySmallCap100 Index
This index has fallen sharply to touch the lower end of the channel
Indicators are in deeply oversold mode, which gives a ray of hope that the bottom is near and a sharp bounceback is expected any time
Traders are advised to take selective long positions in the form of Call options to mitigate the risk of further panic selling in the
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Expectation for the Week:The market has been witnessing selling across the board
Even good quality stocks have been battered in line with the broader market
However, the current fall was in isolation with global developed markets, which give a ray of hope that a bounce will emerge soon as
valuations have corrected a lot across the board
We think the market will calm down once corporate earnings start pouring in
Given the oversold state of the market, sharp rallies can be expected
Investors are advised to hold on to their quality stocks and mutual fund units
SIP investors should double their SIP amounts
The Nifty50 closed the week 5.6 per cent lower at 10,316.
Base MetalsBase metals remained positive this week, with Aluminium and Zinc
rallying the most amongst the complex
Zinc prices got support from reports that Chinese stockpiles in the Shanghai metal exchanges fell this week
Additionally, surcharges on physical metal in Shanghai of quantity above $200/MT have hit their highest since November 2013, which has lent
support to the metal prices.
A private forecaster out of China has said that refined zinc production in China has been low because of the
However, the forecaster believes that demand is not very robust which may have limited further upside of the commodity
The Alumina market still remains in a tight supply this year due to the outage at Norsk Hydro's plant in Brazil, US sanctions on Russian
producer Rusal and a strike at Alcoa's AA.N alumina refineries in Australia that was resolved last week.
The market is also worried about
aluminium stocks on the LME market, which at 979,800 MT have more than halved since January last year and are at their lowest since early
2008.
Meanwhile, Copper rose this week on the back of deficit expectations this year for the commodity
The copper market should see a deficit of 92,000 MT this year and a deficit of 65,000 MT in 2019, the International Copper Study Group
(ICSG) said.
Additionally, total inventories of copper in LME warehouses fell to 194,175 MT, the lowest since December
This also supported prices
Looking ahead, Aluminium and Zinc prices continue to move higher supported by their respective fundamentals
With China also coming back from holidays next week, some more upside could be seen for base metals.
However, uncertainty about how metals
demand will be hit by trade wars, rising US interest rates and a slowdown in China are weighing on industrial metals prices
Domestic base metal prices remained on the higher side and ended with gains, with the exception of Lead prices
Technically, Zinc, On the monthly chart, MCX ZINC has confirm "Bullish Hammer Candlestick Pattern" after giving a brief correction from its
all-time high level, it has halted its downside move at 164 level which is 50.00 per cent Fibonacci Retracement of its previous upside move
from 97 level to 232 level which indicates that the ZINC could accelerate its upward movement.
On the weekly chart, MCX ZINC is trading
above its 100 Weekly Moving Average which is placed at 193 levels this suggests a positive strength in the counter if sustain above this 193
level.
On the daily chart, MCX ZINC has given breakout of "Double Bottom" formation which indicates that the bullish rally will continue for
near term.
A weekly momentum indicator RSI reading is at 52.80 levels with a positive crossover as well as RSI has given a breakout of
Downward Sloping Trend Line which points out for a positive breath in the counter
Furthermore, MACD indicator on weekly basis has given positive crossover which adds more bullishness in the counter.
Based on the above
technical structure, we are expecting an upside movement in the counter in few trading sessions.
Crude OilOil prices remained firm this week
as investors still remained focused on US sanctions on Iran, which take effect on Nov
4 and are designed to cut crude exports from the No
3 producer in OPEC.
China's Sinopec Corp has reduced its loadings of crude oil from Iran by half for the month, as the state refiner comes
under intense pressure from Washington to comply with a US ban on Iranian oil from November
Reuters reported that based on the prevailing supply contract between the top Chinese refiner and the National Iranian Oil Company (NIOC),
its loadings would be reduced to about 130,000 barrels per day (bpd)
This would be 20 per cent of China's average daily imports from Iran in 2017.
Markets brushed off a rise in crude oil inventories from the
United States after data showed that US crude inventories jumped close to 8 million barrels last week, quadruple of analyst's expectations
and the biggest build since March 2017.
Statement from Saudi Energy Minister Khalid al-Falih who said that the kingdom had increased output
to 10.7 million barrels per day in October and would pump more in November were also ignored , as speculators continued to buy on any fall
Looking ahead, we believe that the markets could continue to remain tense because of the looming US sanctions against Iran's oil exports
that are scheduled to start from Nov
However, we also believe that fundamental data outside of Iran has not turned bullish in our view.
United States has increased their crude
production , a recent data showed that their output jumped by a third since mid-2016 to a record 11.1 million barrel per day (bpd)
Many private forecasters believe that their output will rise further to 11.3 million bpd.
IMF has warned that expensive energy could spell
problems for the global economy
We believe that the inflationary combination of higher oil costs and weakening currencies, including India's rupee, Indonesia's rupiah and
the Philippine peso, could cause a global economic slowdown that would slow down oil demand in these countries.
However, the question for
now remains whether the increase in production from other producers US and slowing demand may be enough to offset the supply gap left by
Domestic prices surged higher tracking firm overseas prices
Weak Rupee also pushed prices higher
Technically, Crude Oil, on the weekly chart, is trading in its Higher Top High Bottom channel formation has reached to its four years high
level where overall sentiments remain bullish until we see a reversal pattern formation.
On the daily chart, MCX CRUDEOIL has formed a long
Bearish Candlestick after retreating from its four years high level which is a sign for some correction if it starts to trade below 5450
level.
Based on above technical parameters, Alternative scenario indicates that if the key support of 5400 level holds then there is a
chance that the price can reverse to its Bullish trend but if a Bearish Reversal confirms then a downside move could test to 5200 level.
