Gold: Strong Dollar affecting gold prices in 2015; Sell

Gold settled down -0.31% at 26137 as hopes for a successful resolution to Greece's debt talks boosted assets seen as higher risk, such as stocks. Greece's government confirmed it would ask for an extension to its loan agreement with the euro zone, which it distinguishes from its full bailout programme. The market is awaiting further direction from the minutes of the U.S. Federal Open Market Committee's (FOMC) policy meeting later, but looked vulnerable to further losses with the absence of Chinese buyers during the Lunar New Year break. Gold has come under pressure from expectations the Fed will raise interest rates as early as June this year, potentially lifting the dollar and boosting the opportunity cost of holding non- yielding assets, such as bullion. The U.S. Commerce Department said that the number of building permits issued last month decreased by 0.7% to 1.053 million units. The report also showed that U.S. housing starts declined by 2.0% last month to hit 1.065 million units from December’s total of 1.087 million units, worse than expectations for a decline of 1.7% to 1.070 million. A separate Commerce Department report said that producer prices fell by 0.8% last month, compared to forecasts for a 0.4% decline. Year-over-year, the producer price index was flat in January. The core producer price index eased down by 0.1% last month, compared to forecasts for a gain of 0.1% and following an increase of 0.3% in December.

Fed Minutes Show Reluctance To Raise Interest Rates Just Yet

The Federal Reserve was in no hurry to signal a possible interest rate hike in January, according to the minutes of the Fed's most recent policy meeting. However, that meeting took place before January's exceptionally strong jobs report was available, and a number of policy makers have since indicated a willingness to raise rates in June. The Fed said information reviewed for the January 27-28 meeting showed that economic activity expanded at a solid pace over the second half of 2014, and that labor market conditions had again improved in recent months. Even so, members agreed to continue to include language indicating that the Fed can "be patient" in beginning to normalize the stance of monetary policy, particularly given the dramatic drop in energy prices and low inflation. Dropping language that Fed officials will be patient might cause "undesirably tight" financial conditions, some policy makers feared. A number of officials argued in favor of keeping rates at zero "for a longer time," and "many" on the Fed said a premature rate hike would harm the recovery.

Greece Likely To Seek Bailout Extension

Greece is expected to request an extension of its bailout agreement for six months on Wednesday, reports said quoting government officials. At the Eurogroup meeting on Monday, Greece resisted an extension of the current bailout program. Eurozone finance ministers granted Greece time until Friday to apply for extension. The current EUR 240 billion Greek bailout program will expire on February 28. The European Central Bank is set to decide on whether to continue the emergency lending provided to Greek banks.

Strong Dollar affecting gold prices in 2015

The strength of the dollar is a double-edged sword, and it remains to be seen which edge is the sharper. Demand for dollar-denominated commodities such as gold typically weakens on a stronger greenback as it makes the metal more expensive for holders of other currencies, lowering its hedge appeal. In 2015, the Fed will raise interest rates as the ECB launches its own Quantitative Easing program and the Bank of Japan considers more loosening measures. With the U.S. unemployment rate dropping below 6% and wages beginning to rise, the central bank has no choice but to begin the process of normalizing monetary policy. With stocks expected to provide less return, the dollar will become more attractive to yield hungry investors and their demand for the greenback should drive Gold below $1000.

Gold demand in India slipped 14 per cent to 842.7 tonnes in 2014, says WGC

Gold demand in the country declined by 14 per cent to 842.7 tonnes in 2014 as compared to the previous year, mainly due to government policies putting restrictions on imports, according to the World Gold Council (WGC). The overall demand for the yellow metal stood at 974.8 tonnes in 2013, says a WGC report titled 'Gold Demand Trend 2014'. In value terms, the demand for gold dipped by 19 per cent to Rs 208,979.2 crore in 2014 as compared to Rs 257,211.4 crore in 2013, the report said. The total jewellery demand in the country for the last year was up by eight per cent at 662.1 tonnes as compared to 612.7 tonnes in 2013. In value terms, domestic jewellery demand in 2014 stood at Rs 208,979.2 crore, a fall of 19 per cent from Rs 257,211.4 crore in 2013. Total imports of the precious metal stood at 769 tonnes, including grey market, as compared to 825 tonnes in 2013. The robust demand comes despite tighter gold import rules, some of which were removed only in the latter part of 2014.

Recommendation: Sell gold @ 26400-26500 with a stop-loss placed above 26850 for targets of 26050-25760-25320.

MCX Feb Copper - Inverse Head & Shoulder

MCX Feb Copper; after testing its 3 year low of 332 levels, copper prices started inching higher in a short covering mode. In this process it has developed a “inverse head & shoulder” pattern on daily/4 hours chart. Currently prices are hovering around its neck-line resistance of 357.70 levels and on a convincing close above the same will get the confirmation about the trend reversal and intact further uptrend for near-future. According to chart pattern the length between neck-line to head will be the immediate target on upside i.e. 383 levels. However, anysharp decline below the right shoulder of 346 levels will negate the pattern and drag the prices into negative territory.

The moving averages in MACD has given an upside crossover and the momentum indicators RSI & Heiken Ashi both are trading in a positive zone by supporting the view.

Strategy: MCX Feb Copper:

Buy 1 lot above 358 for the target of 383 with a stop loss 345…Cmp 355.75

Risk/return ratio: 1: >1.9

Risk: 13000 (on 1 lot)

Return: 25000 (on 1 lot)

Weekly Commodities:

MCX March Natural Gas

MCX March Natural Gas rose to as high as 189.30 levels, before making a temporary top there and turned into weak mode by forming a “bearish engulfing” candlestick pattern on weekly charts. Also it has completed 23.6% Fibonacci level of the previous fall and ensuring the way down towards the swing low of 158 levels. Hence, any rise will be limited at 173 levels and bring some selling pressu re from the same.

RSI & Heiken-ashi momentum indicators both are continued to stay in positive zone.

Candlestick/chart pattern: “Bearish Engulfing”

Recommendation: Sell at entry around 173, target price 158 with stop-loss at 180.

MCX April Copper

After consolidating in a range of 356 to 367 levels over a period of two weeks, MCX copper futures have provided a breakout through the consolidation phase and managed to close well above the same. Further risk remains on upside toward 50% Fibonacci level of 378.20 levels. Hence, any dip can be used to accumulate fresh longs at 367 levels.

RSI coupled with heiken ashi momentum indicator both are placed in positive zone by supporting the view.

Recommendation: Buy around 367, target price 378 with stop-loss at 361.

MCX March Lead

MCX Mar Lead’s bearish outlook remains unchanged, as long as prices continue to decline in a “descending channel”. Currently, prices are on verge to test its support line of 103.60 levels. So me pullback is expected from lower levels that can take the prices towards the channel resistance of 109 levels, however overall view remains weak and one can utilize to create fresh shorts at higher levels.

RSI-14 period has gone into negative territory and long-term momentum indicator MACD has also given a breakdown through the signal line by supporting the view.

Candlestick/chart pattern: - “Descending channel".

Recommendation: Sell around 109, target price 103.60 with stop-loss at 111.15.

Weekly Commodities: Buy MCX Apr Gold for a target price of 26780

MCX April Gold

Comex Gold dived to as low as USD1190/0z last week, but a strong rebound from those levels kept the prices in a positive tone by forming a “bullish hammer” candlestick pattern on weekly charts. This signifies that the temporary bottom has formed at the recent lows and uptrend is intact for the near- future to test 38.2% Fibonacci level of USD1235 level s.

Hence, any fall can be hold at 1200 mark and bring some buying pressure from the same. MCX Apr Gold too ended as a bullish hammer on weekly charts. Further rally can see towards 26560 & 26780 levels, where as a support lies at 26950 levels.

Spread Strategy: Buy MCX Mar Lead; Sell MCX Mar Aluminum

Inter-Commodity Spread: 

An inter-commodity spread is taking an advantage from the price behavior of two different commodity futures with a same expiry date. Means going long on one commodity future and short in other commodity future.

Strategy:

The spread between Lead & Aluminum 31st Mar 2015 expiry futures contracts is hovering in the range of 4.9 to -4.65 levels for the last 60 days. Currently the spread difference is at 3.30 levels and that is expected to become -0.90 in short-term. In current scenario one can take the advantage of the price movement and initiate short position in lead and long position in aluminum at the current market price.

MORNING MANTRA

Dear Customer,

 

Markets always tend to be interesting with something or the other happening all the time. Our Morning Mantra is released before the opening bell and it includes the market commentary along with Corporate & Global news for the day.

 

• U.S. stocks kicked off the week on a high note, posting solid gains on Monday, as international markets rallied and investors looked toward the Federal Open Market Committee's meeting and policy statement on Wednesday.

Dow Jones	17977.4	+228.1	+1.29%
Dow Futures	17855.0	+202.0	+1.14%
Hangseng	23982.3	+32.8	+0.14%
Nikkie	19411.6	+165.5	+0.86%
SGX Nifty	8711.5	+45.5	+0.53%

 

• Asian stocks rose, after a rebound in U.S. equities, as weak economic data eased speculation the Federal Reserve will bring forward plans to raise interest rates.
• The Fed's next statement set to be released on Wednesday following its meeting, investors are on tenterhooks to see whether the Fed will drop the word "patient" from its guidance about the pace at which it will normalize monetary policy.
• Market is expected to open on a positive note and likely to remain strong during the day. 
• KPIT lowers its guidance for FY15 in usd due to cross currency headwind. PAT guidance too has been reduced. Co expects flat PAT in FY15
• Tata Motors Ltd, has bagged orders for more than 4,000 buses from states transport authorities under the second phase of the union government's national urban renewal mission. 
• Amtek Auto set to acquire Scholz Edelstahl of Germany.
• Piramal Enterprises is in advanced negotiations with Apollo Hospitals to buy the latter's fledgling healthcare software venture Health Super Hi-Way, in what would be a unique marriage between healthcare and Big Data if it goes ahead. 
• US-FDA had inspected Granules India’s Gagillapur facility and the inspection concluded with no observations. The inspection was triggered by one of the applicant’s ANDA filing.
• Aditya Birla fabric unit Jaya Shree Textiles eyes Rs 1,000 crore revenue in two years
• Sterlite Copper, part of Vedanta group, is set for a Rs 3,300-crore expansion at Tuticorin in Tamil Nadu.
• Ashoka Buildcon is raising Rs 500 crore via QIP, to fund its aggressive expansion.
• Jindal Power, Balco, and BS Ispat, may end up losing the producing coal mines which they won in the first round of phase I of the auctions. The bids came under the scanner due to extremely low prices quoted by the companies.
• Lupin has inked a pact to acquire an additional 40% stake in South Africa’s Pharma Dynamics, taking its holding in the company to 100%.
• Zee Media’s Board approves rights issue of Rs.196 cr at price of Rs.18/share. The issue would open on March 25, to close on April 8
• Economy Update - Trade Data – Institution Desk: India’s exports contracted for the fourth time in the past five months in February 2015. However, merchandise trade deficit narrowed to the lowest level in almost four years last month (barring September 2013), as imports declined at a faster pace. Interestingly among the top five export items, India’s exports of petroleum products less than halved, while the exports of other four items were largely flat. On the import side, oil imports halved, while imports of valuables - gold, silver and pearls, precious and semi-precious stones were largely unchanged. Notably, non-crude oil non-valuable imports - commodities, capital goods etc - increased last month. Overall, we expect the story of falling exports and a faster decline in imports to continue in March 2015 as well, helping the trade deficit to remain subdued at around US$7bn. Accordingly, we continue to expect India to post its first current account surplus in eight years in the quarter ending March 2015.

Morning Mantra

Dear Customer,

 

Markets always tend to be interesting with something or the other happening all the time. Our Morning Mantra is released before the opening bell and it includes the market commentary along with Corporate & Global news for the day.

 

• U.S. stocks fell, sending the Standard & Poor’s 500 Index to its third straight weekly decline, as a dollar rally weighed on raw-material and industrial companies.

Dow Jones	17749.3	-145.91	-0.82%
Dow Futures	17653.0	-139.00	-0.78%
Hangseng	23871.4	+48.18	+0.20%
Nikkie	19292.0	+37.70	+0.20%
SGX Nifty	8670.5	-21.50	-0.25%

 

• Asian stocks fell as investors awaited this week’s Federal Reserve meeting for clues on the timeline for higher U.S. interest rates. Energy companies led losses as oil resumed last week’s decline.
• Market is expected to open lower and likely to remain weak during the day  
• Shakti Pumps Ltd is aiming to clock revenue of Rs 5,000 crore within next five years with the help of overseas acquisitions to strengthen its global footprints.
• Fortis Healthcare Ltd, has scrapped its proposal to buy Singapore's Radlink-Asia Pte Ltd for 346.53 million ringgit ($93.31 million). 
• Tamil Nadu Newsprint and Papers  commissions a 2L tpa plant. Packaging plant by co to go on stream by year end
• ITC Ltd, is in the process of setting up 20 factories for its FMCG products as it aims to garner Rs. 1-lakh crore revenue from that business alone by 2030. The Company will soon increase prices of cigarette brands like Classic and Gold Flake Kings by up to 15% per pack following the hike in excise duty on cigarettes in the Budget 2015-16.
• Cairn India Ltd, has received a tax notice of Rs 20,495 crore from the Income Tax Department for failing to deduct withholding tax on alleged capital gains by its erstwhile promoter, Cairn UK Holdings Ltd, a subsidiary of Edinburgh-based Cairn Energy Plc.
• RBI removes Zen Technologies from ban list for FII purchase
• Jaypee Group is in talks with Heidelberg Cement and JSW Cement, to form a joint venture which will control the majority of its cement plants as part of an ongoing exercise to reduce debt.
• Natco Pharma – Company Update – Institution Desk: We continue to believe in Natco Pharma’s (NPL) strength in base business in which it may be able to maintain a healthy growth rate on the oncology side and also the non-oncology business growth expected to get a boost from the recent approval granted for the generic version of Sovaldi for Indian market, which is likely to be launched in 1QFY16 (launched in Nepal in 4QFY15). However, we are more excited about its strong US drug pipeline and do not see any risk to earnings over the next four-five years on the back of higher visibility emerging for products like Tamilfu, which is now having a higher chance of being launched in September 2016. Despite the sharp run-up in share price of NPL in the past few days, we continue to believe in its long-term growth. Accordingly, we have assigned Accumulate rating to the stock after downgrading it (from Buy earlier) with a target price of Rs2,262, valuing  its base business (including generic Copaxone tablets) at 17x FY17E EPS and including Rs222 for the Para-IV pipeline.