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 Higher Inflation Reading to weigh on Rupee - HDFC Securities 

• Rupee depreciated for the second day in trot following risk-off sentiments, higher crude oil prices, foreign fund outflows and weaker economic data. Local unit expected to remain under-pressure after weaker than expected industrial output and inflation surges above RBI’s tolerance level.

• Spot USDINR gained 18 paise or 0.23% to 76.14 on Tuesday, reclaimed the short term moving averages. Technically, the pair closed above falling trend line and made higher high on daily and hourly chart indicating short term upward movement. It has resistance at 76.50 and support at 75.80.

• India Inflation rose to 6.95% year on year in March, up from 6.07% in February. Food inflation surged to 7.5% in March from 5.9% in February, driven by a widespread increase in the price of food components. The headline inflation rose to a 17-month high, vindicating the central bank’s pivot toward fighting risks to price stability and raising the prospect of an increase in policy rates.

• India Index of Industrial Production (IIP) rose by 1.7% last month from a rise of 1.46 per cent (revised) in January 2022.Similarly, the industrial production rate was higher on a year-on-year basis. It was weaker than forecast of 2.7% as the rising cost of raw materials weighed on factories.

• Dollar index rose for a ninth day as the euro slumped to a one-month low amid concerns about a prolonged war in Ukraine after Russian President Vladimir Putin said peace talks are at a “dead end.”

• US Treasury 10-year yields dropped 6 basis points to 2.73% after a monthly change in core inflation was below the median estimate even as the annual pace of U.S. consumer prices rose in March by the most since late 1981.

• Oil pushed higher after rallying back above $100 a barrel as Russian President Vladimir Putin vowed to continue the war in Ukraine, which has rattled markets and tightened global crude supply. WTI futures rose 0.5% in Asia after surging almost 7% on Tuesday.

USDINR

Technical Observations:

• USDINR April futures closed above medium term moving averages. The pair also closed well above descending trend line adjoining 77.66 and 76.74.

• It has formed higher highs and lows on intraday chart indicating short term reversal.

• Relative Strength Index of 14 days period reclaimed the breakeven line and currently placed at 50.48. • MACD has given positive cross over and about to cross zero line indicating positive trend.

• Options data indicating maximum pain at 76 strike and addition of open interest at 76 put was on back of hedge demand ahead of economic data.

• USDINR April futures likely to head higher towards 76.50 while support has been shifted to 76.

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