Good Morning Toasters!

In today’s issue of the Morning Toast, we discuss:

• US Inflation risks skews on the upside
• IT is going to the moon!
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty: 16,630.45 | +35.55 (+0.21%)
FII Net Sold: INR 2,263.90 crore

Sensex: 55,550.30 | +85.91 (+0.15%)
DII Net Bought: INR 1,686.85 crore

Global Economy News

US Inflation risks skews on the upside🤦🏻♂️

• US inflation made another new high (c.1982), with Fed headline CPI up 7.9% YoY and Core CPI up 6.4%; inflationary pressures accelerated led by food & energy prices
• Finer details suggested Feb numbers were accentuated by a 3.5% M/ Month jump in the energy index, followed by 1% pick-up in food CPI— the strongest monthly increases since the very stages of the pandemic
• Elsewhere in CPI, prices for motor vehicles have seen a general surge since the early stages of the pandemic, with this trend moderating relatively, across new & used vehicles
• Strong demand for goods from consumers and supply-chain bottlenecks related to the pandemic (relative easing, however) have elevated inflation in the last year, coupled with persistent shipping bottlenecks and shortage of commodities

Damn! And rate hikes? Any views on that? (Yesss my man)

• According to Bloomberg Analyst consensus, the majority of economists expect the Fed to hike rates by 25 Bps in March, with a further 5 rate hikes by the end of this calendar year, to curb headline inflation numbers
• Economic disruptions from Russia’s invasion of Ukraine and the global response could also further stoke inflation, with one rule of thumb (as per Chairman Powell) is a USD 10 per barrel increase boosts overall inflation of 0.2% (damn)
• Elsewhere, the European Central Bank (ECB) in a meeting conducted today, indicated a ‘faster taper and hawkish inclination’, even as the impact on Europe from Russia – Ukraine conflict will be much larger
• A faster tapering points to discomfort at ECB’s end with current asset purchases and inflation prints, which are significantly higher than expected; a response similar to the US Fed

Around the World 🌎

• Amazon Inc (NASDAQ: AMZN)’s board approved a 20-for-1 stock split and also gave authorisation for repurchasing up to $10 bn of the company’s stock for two main reasons – to increase accessibility for potential investors that might be put off because of the high price as well as allow employees more flexibility in how they manage stock-based compensation. The market received the news well and shares rose 3.7% higher in trading on Thursday
• US President Joe Biden issued an executive order calling for Crypto regulation, signalling the federal government plans to take a more active role in regulating the digital assets. Crypto-enthusiasts applauded the news, and Bitcoin prices jumped more than 8%. According to the order, the US President outlined 6 goals, including the need to protect investors, keep markets stable, curb crime, stay globally competitive, boost inclusion and innovate responsibly (vague, but it’s a start?). Russia – Ukraine conflict has also raised concerns that Russia may dodge sanctions by using crypto assets, highlighting the asset’s growing geopolitical importance
• Almost two years since Tesla CEO, Elon Musk announced plans to sell nearly all his physical possessions, including his Real Estate, by announcing on Twitter ‘ will own no house’, the OG Tech Bro has offloaded his 7 properties, all in the California region of USA. Between June 2020 and November 2021, Elon sold all houses for a combined sum of USD 128 Million, making a USD 25 million profit in the process (neat!!). He currently resides in the state of Texas, near the SpaceX facility, which is one of his multiple business interests

Technical Setup

IT to reverse the trend?😝

• Looking at Nifty IT on a daily time frame, we get an indication that the index has been facing stiff resistance (35,250-36,000)
• Currently, prices are trading near the resistance band and the 50-day SMA. The index might show a good up move post breakout
• Looking at such development gives us a good opportunity to look at other IT stocks which might correct with the index

Stocks

Infosys

• Analysing Infosys on a daily time-frame, prices were facing resistance around 1800, before giving a breakout; prices have also managed to break the 50-day SMA, another key level
• Post breakout, prices have retested breakout levels (1800). Entering at retest helps you avoid traps (bull trap in this case)

TCS

• On a daily time frame, prices took support twice making double bottom patterns; prices managed to give a breakout above the resistance level (3580)
• Post breakout prices have retested levels (3580). Entering at retest helps you avoid traps (bull trap in this case)

What else caught our eye?👀

India is not interested elsewhere

• Overall direct overseas investment decreased for India by 67% YoY to USD 753 million (56% MoM) in Feb’22
• February 2021 had in comparison seen an FDI outflow of USD 2.28 billion acc to data by the RBI
• Major investors include ONGC Videsh Ltd, Madhurima International, Titan Company and Imagine Marketing among others

India happy with the polls

• A strong performance by the ruling BJP party in five states including politically significant UP seemed to prove positive in the market with the SENSEX gaining 3%
• Much of these gains were later wiped off due to heavy losses amid sharp losses in the European markets – NIFTY ended the session with a gain of 1.5%
• FMCG stocks gained the most with Hindustan Unilever jumping the highest among Sensex components at 5.2% followed by Tata Steel (4.3%) and State Bank of India (3.7%)

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Educational Topic of the day

Margin Debt

Margin debt represents the amount that an investor owes a broker in their margin account. When a broker approves a margin account for an investor, the margin account is granted a line of credit that can be used to purchase securities.