Good Morning Toasters!

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

• UPI touches USD 1 Trillion in payments
• Time for another impulsive move – Technical Setup
• News around the world
• An educational concept to keep you learning every day 🙂

Market Watch

Nifty: 17,807.65 | -149.75 (-0.83%)
FII Net Sold: INR 2,279.97 crore

Sensex: 59,610.41 | -566.09 (0.40%)
DII Net Bought: INR 622.92 crore

Deep-Dive 🤿

UPI touches USD 1 Trillion in payments 🚀

What’s up?

• The total value of transactions under the Unified Payments Interface (UPI) in India during the year 2021-22 stood at a whopping INR 84.2 Tn, which assuming an average $$ conversion of 75, amounts of (wait for it) USD 1.1 Tn in payments in the Indian ecosystem
• Dissecting the same number from a different angle, the total number of transactions under the UPI interface were ~46 Billion (😳), which roughly translates to ~4 Bn per month, with this number steadily increasing, since UPI was launched back in April 2016
• Interesting (up for debate, I agree), cash-to-GDP ratio as of end-March is expected to be ~13.3%, which is higher than the 12% this number was before demonetisation (@NaMo), implying that we haven’t made the textbook move from cash to a digital economy (as economists would have us believe)

Some more details please? (Yess, when have we not shared the details?? 😉)

• NPCI (regulatory body) pointed out in their paper released in March, that ‘various studies on payments systems’ have highlighted that ~75% of total volume of retail transactions (including cash) in India are <INR 100; while ~50% of UPI transactions have a value of INR 200 (see image below, for a possible explanation)
• Likewise, the average size of a UPI transactions has categorically declined over the years, starting at INR 2,078 in May 2019, to INR 1,777 in March 2022, implying 1. UPI is being used for small transactions, and 2. UPI is being used by the masses (quote unquote)
• Let’s take a walk down memory lane…before UPI gained prominence, wallets primarily drove digital transactions (Paytm Karo ringing for you too? 🤭); the trend reversed in 2018 when UPI overtook wallets as the preferred mode, and today accounts ~10x of wallet transactions, 0.46 Bn wallets vs 4.62 Bn UPI
• Payments aren’t complete without talking about the cash-to-GDP ratio, which has rebounded from a low of 8.7% post demonetisation in March 2017, to ~14.4% at its peak in March 2021, and 13.3% in March 2022
• This is indicative that while UPI has grown, so has the overall utilisation of cash in the economy, with all major purchases (think: Real Estate, Gold et al.) still being done via the OG method of transaction

Interesting! In conclusion?

• India is a country of contradictions, we have developed a frictionless system of payments, and yet half of the total e-commerce payments are still done in cash-on-delivery (😂)
• 70% of all Tier 2 e-commerce transactions are paid for via cash-on-delivery, with the number touching ~90% for Tier 3 / beyond
• Secondly, (& more importantly), cash is still king, with consumers comfortable making & accepting large transactions in cash (as has always been the case); so while UPI has grown, cash has maintained its position in the economy (across all Tiers of cities)
• UPI will continue to grow within the larger ecosystem, and yet in the same context, cash will remain a significant part of the India growth story, given India’s unique population profile (no hockey stick growth here 😜)

To get this email in your mailbox consistently, and are interested in financial news, click here to Subscribe Now

Around the World 🌎

• Elon means business – Twitter’s biggest influencer is now also it’s bigger shareholder. In a typical Elon move, he asked his followers two weeks ago if Twitter was doing a good job at protecting free speech. With the majority responding in the negative, Musk later revealed that he already owned around ~ 9% of the company at the time (4x the Founder’s share and worth $3 billion). Though Musk is still technically not an activist investor, it is very clear that his motivation lies in improving the platform than owning or profiting from it
• What happens next? Elon’s share has given him a seat and a voice at the board (since the company does not have supershares that give Founders voting control like Google, Meta etc.) Twitter too does stand to gain as Musk brings with himself sufficient financial muscle to compete with other major players and expand into newer products and geographies. If Musk does succeed in his free-speech agenda, it will help Twitter’s credibility and reputation which has been tainted with accusations of bias and left-leaning ideologies lately

Technical Setup

Time for another impulsive move? 👇

• Analysing HDFC Life on a weekly time frame, indicates that the stock has been trading in 3 different stages over the last two years (see image below)
• Post the March 2020 fall, prices gave a good up move (rise) which was followed by a consolidation of prices (distribution)
• Distribution usually leads to decline, and true to its word, the stock has corrected ~30% from its 52-week high

Nice! Tell me more? Any more trend facts? 

• Looking at the chart, shows the stock to be in a steady downtrend, making lower highs (small impulse moves) and lower lows (bigger impulse moves)
• In downtrends, support levels are weak and are usually broken whereas resistance levels are strong and prices usually tend to correct
• Prices currently are trading close to the last swing high which also is the next intermediate resistance level for the stock

Any past moves I can take cue from? 

• Forming a resistance band b/w 720-742, prices gave an impulsive move, with the stock touching ~660 levels, from an entry of 718 (see image below)
• Similarly, forming a resistance band b/w 676-707, prices gave an impulsive love, with the stock touch 585 levels, from an entry of 617
• This indicates that the trend is maintaining strength in past instances, providing confidence in our analysis

That’s Great! How do I enter / exit such a setup? 

• As prices tend to get pushed down close to resistance levels, going short around current levels would be the ideal choice
• A stop-loss can be placed just above the resistance levels, in case prices give a breakout from resistance which will help in limiting your losses
• RR ratio can be set as per your risk appetite, hence your target can be calculated accordingly

Interesting! Final thoughts?

• Currently, prices are still a part of the 4th stage of the trend (decline) and for the decline to end, prices need to give a closing above the previous swing high
• But as they say “Once a trend is in motion, the price will tend to move in that direction.”

Keep a track?

What else caught our eye? 👀

Gangwal – Indigo saga to end

• Co-founder Rakesh Gangwal has appointed 4 banks –  Citigroup, Goldman Sachs, Morgan Stanley and JP Morgan to manage the planned sale of his shares in the airline
• His stake will reduce by 5-7% of his family’s shareholdings (total at 36% worth ~ ₹28,097 crores) and he has already stepped down from the board
• With a resolve to sell all his stake in the next five years, Qatar Airways is looking to add Gangwal to their team and has made various lucrative offers to the veteran

Bandhan Bank may emerge as the winner

• Bandhan Financial Holdings may win the bid for IDFC’s mutual fund business in a deal valued at about ₹4,500 crore beating the Invesco-led group’s offer
• If completed, the deal will be their second largest purchase and will expand the bank’s presence in the financial services sector
• Bandhan Bank has previously stated intentions to enter into the mutual funds and the life insurance business

Educational Topic of the day

Rollover

Rollover is the procedure of moving open positions from one trading day to another.

Most brokers and trading platforms perform the rollover automatically by closing any open positions at the end of the day, while simultaneously opening an identical position for the following business day.