NSE Bank Nifty index touched an all-time high last week and is close to touching a new peak of 43,000. The banking index has rallied over 16 per cent so far this year, outperforming benchmark NSE Nifty 50, which has risen around 3 per cent. The rally has been on the back of recovery in baking stocks, especially the PSU banks, on account of their robust quarterly performance led by superior asset quality trend and pickup in credit growth. Analysts expect the rally to continue going forward, and the index to continue to scale new highs in the near to medium-term. ICICI Bank Ltd, Kotak Mahindra Bank Ltd, IndusInd Bank Ltd, Karnataka Bank Ltd, State Bank of India (SBI), Canara Bank Ltd, Bank of Baroda Ltd and Union Bank Ltd are among the top picks.
Cool-off in Bank Nifty likely, may scale 45000-50000 once correction is over
Bank Nifty index managed to reach new lifetime high much ahead of Nifty. “However, the recent rally is a result of upside in HDFC Bank and Kotak Bank. Rest of the other heavyweights remained sideways. For the index to sustain at higher levels; we need participation of other private banks too. Now, going ahead since the index is in uncharted territory we do not want to anticipate a top or a reversal point. We would better wait for a support to be broken in order to consider or confirm the profit-booking phase,” said Mehul Kothari, AVP – Technical Research, Anand Rathi Shares & Stock Brokers.
He added, “At this point in time, immediate support is at 41700 and a close below that might trigger a corrective move in the index. Upside is open for the index but as per the OI data; 42500 and 43000 strike CE options have a huge built up and that might be resistance for this week. For short-term, we expect some cool-off in the Nifty Bank index and a corrective move from here would be a healthy sign going towards Union Budget. Overall there is a possibility of 45000-50000 on the upside once the correction is over.”
Bank Nifty well-placed, minor corrections cannot be ruled out
“Bank Nifty index bottomed out in the middle of June’22, forming a low of 32290 and reversing from that level. Since then, the index continues to scale higher and form a series of higher tops and bottoms across all time frames representing sustained strength and bullish sentiments. As the index is well placed and sustaining above its 20, 50, 100, and 200-day SMA, these averages are rising along with the prices reconfirming the bullish sentiments. The index has registered a new all-time high of 42611, and this rally from the June-22 lows was contributed by both private and PSU banks. We feel that this rally should continue, and the index will continue to scale new highs in the near to medium term,” said Rajesh Palviya, VP – Technical and Derivative Research, Axis Securities
He added, “The market undertone is bullish, and the major trend of the index is on the positive side. We feel the bank index should continue to outperform in the upcoming quarters with the expected upside of 44800-45500-48600 levels. Hence any short-term corrections remain as a buying opportunity. Such minor corrections in the upcoming weeks cannot be ruled out. Any correction towards the levels of 41700-41000 presents a good buying opportunity to enter on the long side.”
Top Bank Nifty picks
HDFC Bank and Kotak Bank are expected to scale new highs and are looking strong. “SBI and Indusind Bank are placed positively and any corrections remain a buying opportunity. Investors should focus on these banking stocks for a decent upside from the run-up to the budget. Midcap PSU banks are also offering a good risk reward from the current levels. Our preferred picks are ICICI Bank, Kotak Mahindra Bank, IndusInd Bank Karnataka Bank, SBI, Canara Bank, Bank of Baroda and Union Bank,” Palviya added.
More upside seen till Union Budget 2023
According to Sushant Bhansali, CEO, Ambit Asset Management, banking sector has done reasonably well this year, led by factors such as a revival in credit growth, margin expansion & strong asset quality. “With the recent increase in interest rates, we believe margins may moderate as funding costs go up. However, credit growth should continue driven by higher corporate & stable retail demand. Heavyweights in the index like HDFC bank, and Kotak Bank have not moved in tandem with other Banks due to specific issues. Good Q3 results will ensure momentum sustains & we see further upside until budget. Credit growth, liquidity in the system & interest rate hikes should be the focus for investors in the near term,” he said.
Bank Nifty may rally towards 48000 till Union Budget; stay selective, especially in PSU basket
“In the past instances, the upmove in Bank Nifty was registered largely to the private banking majors but we’re now seeing noticeable traction among the PSU banking pack as well, which is further adding to the buoyancy. Put together, the positioning of the private banking majors combined with the prevailing surge in the PSU pack is pointing towards the prevailing trend to continue. The chart pattern indicates the upside potential of 48,000+ levels. It may first take a breather around 44,200,” said Ajit Mishra, VP – Technical Research, Religare Broking Ltd.
He further said that there could be an intermediate phase of profit-taking after the recent surge and it would be critical for the banking index to hold 38500 levels to maintain the prevailing buoyancy else it would again turn range bound. “Meanwhile, we recommend investors to stay selective, especially in the PSU basket and prefer stocks wherein the recent price moves are in sync with the fundamentals,” Mishra added.
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