Banking stocks jumped today after falling on Thursday. The favourable global cues and a surge in Bank of Baroda, PNB and Bandhan Bank stocks improved the market sentiment. In the last six sessions, Bank Nifty has closed in red five times, pushing analysts to change their short-term positive outlook to sideways or bearish. Today, Nifty Bank rose 275.65 points or 0.63% to 43,719.25, Nifty Financial Services gained 129.25 points or 0.67% to 19,357.90, Nifty PSU Bank jumped 47.95 points or 1.20% to 4,031.50 and Nifty Private Bank advanced 146.60 points or 0.66% to 22,352.90. All the constituents of the above four indices were trading in green except IEX, Indian Bank and Indian Overseas Bank.
Is Bank Nifty dragging Nifty 50? What’s the reason behind the weakness in banking index this week?
While the Bank Nifty touched a new all time high last month, NSE Nifty 50 is just 100 points away from its 52-week high of 18,887.60. According to analysts, the weakness in Bank Nifty is not letting Nifty 50 touch new highs. “The negative factor is the weakness of Bank Nifty, which is preventing the Nifty 50 from moving to a new record high. It is important to understand the fact that the weakness in Bank Nifty is primarily due to mutual fund selling in HDFC Bank to avoid the 10% ceiling in HDFC Bank after the merger of HDFC Ltd in HDFC Bank due in July. The weakness is due to technical and not fundamental issues. The weakness in HDFC Bank is a buying opportunity for investors with a medium term time horizon,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
Bank Nifty Outlook: Where is banking index headed?
Bank Nifty may fall to 43000 if it sustains below 43500
“Bank Nifty index has experienced a breakdown on the daily chart, accompanied by significant trading volumes. This suggests the increased selling pressure in the index. The index has breached the support level at 43700, which was expected to provide a level of price support. This breakdown below support indicates a potentially bearish signal for the Bank Nifty. If the index sustains below the level of 43500, it is anticipated to face further selling pressure, potentially driving the index towards the next support level at 43000,” said Kunal Shah, Senior Technical & Derivative Analyst at LKP Securities.
Bank Nifty may witness more weakness in near future
“Considering yesterday’s bearish momentum, we may observe more weakness in the near future, with the next support level around the 50-day simple moving average (50sma) at around 43150, followed by the swing low of 42600 recorded in May. On the upside, the previous support level of 43700-43800 will now act as immediate resistance. Traders should take note that this recent weakness is merely a price correction, and the overall trend remains positive. Any further dips should be seen as buying opportunities,” said Rajesh Bhosale, Technical Analyst at Angel One Ltd.
Meanwhile, Bank Nifty has gained over 1.1% year-to-date, Nifty Financial Services rose 1.3%, Nifty Private Bank jumped 1.6% while Nifty PSU Bank has fallen 7.8% in the same period. In comparison, the benchmark, Nifty 50 has jumped over 3% YTD.