Bank Nifty tanks in today’s trade; check which stocks to buy, support, resistance, range

NSE’s banking indices Bank Nifty and Nifty PSU Bank tanked in trade on Friday, following Wall Street cues. Bank Nifty sank up to 1.8%, touching a day’s low of 40,390 while Nifty PSU Bank tumbled more than 2%. As the banking sector indices slipped, market experts recommended strategies and shares to buy to make the most of this correction. The rout in the domestic lenders’ shares followed the heightened sell-off seen by Wall Street overnight, where Silicon Valley Bank shares eroded 60% of its value, causing panic in American banking stocks.

The market lacks direction and is faced with selling pressure at higher levels due to extremely volatile global cues over a long period of time. The most recent issue is more US-specific, and there is only a sentimental influence on markets worldwide, said Santosh Meena, Head of Research, Swastika Investmart.

Wall Street’s effect on Bank Nifty

Wall Street’s banks may not have a direct impact of weakness that would affect the Indian banking sector; however, the whole world is facing a tough economic backdrop with sky-high inflation and rising interest rate worrying the concern on growth, said Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities. He added, “Large fund sources like JPM hinted to be prepared for a possible recession ahead. The overall outlook on large US banks would remain cloudy post.”

Also Read

Britannia, Axis Bank, Bajaj Auto, Maruti, Tata Motors among 145 NSE stocks to hit 52-week highs; 10 touch 52-week lows

Where is share market headed after Nifty closes above 18720, Bank Nifty above 44270; check support, resistance

Share Market Highlights: Nifty settles above 18700, Sensex jumps 350 pts; Bank Nifty above 44270, Britannia, BPCL gain

BoB’s proposed stake sale puts spotlight on NSE valuation

“There is hardly any impact that Indian banking system faces led by Wall Street banks. Also, it’s important to note Silicon Valley bank in their system is also a very small bank, it is a regional bank in the US,” said Varun Saboo, Head – Equities, Anand Rathi.

Bank Nifty Outlook

“The market may stay volatile in the lead-up to US job data released today and US CPI figures released next week,” Santosh Meena said, adding, “If block deals aren’t included, FIIs are still in a selling mode, but their short positions in the index futures market have once more increased to 80%. Despite being oversold, the market is not experiencing any substantial short-covering rallies in absence of any positive trigger.”

“Since the beginning of 2023, we have been negative on Bank Nifty for a couple of reasons: For one, rising interest rates lead to higher NPAs for banks. This time, the retail loan book is driving the loan book, which is more susceptible to rate hikes. The second reason was that the credit deposit ratio had risen significantly. To maintain loan growth, banks will have to pursue aggressive deposit growth, which will come at a higher cost. Many banks have seen their CASA deposits fall in the December quarter. As a result, we believe that the Bank Nifty will continue to underperform. We are not convinced that the market has priced in higher NPAs and lower NIMs,” said Sunil Damania, CIO, MarketsMojo.

“We remain extremely bullish on Indian Equities including Financials. Negativity is all round and this is the best time to accumulate stocks. Couple of positive bites around weak US economic data can lead to a sharp pull back in Equities,” said Varun Saboo, Head – Equities, Anand Rathi.

Technical Levels

“In the past one month, Bank Nifty has traded within the broad range of 42,000-40,000. Until this range is breached decisively on either side the range bound action is likely to continue. The strategy to trade this range would be to have a contrarian view at the extremes of the range and take a trade accordingly, ie, around 40,000 levels, one should take a bullish stance and vice versa around 42,000 levels. In terms of support, 40,000-39,800 is a strong support zone while 41,660-41,800 shall act as a crucial resistance zone” said Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas.

“Bank Nifty may continue to correct itself up to a range between 40,000 and 39,700. On the daily chart, the 200-day EMA is indicated close to the 40,000 level and can serve as strong support for the Bank Nifty Index. As long as it continues to trade above 38,900, one should maintain a bullish outlook on it. On the higher side, the levels 41,350 and 42,000 can act as resistance levels,” said Rameshver Dongre, Research Analyst – Equity Research, CapitalVia.

Banking stocks to buy

The correction provides an opportunity for long term investors to get into quality stocks. One can look at stocks like Federal Bank, Kotak Bank from the private banks and from the PSU Banks Basket one can accumulate stocks like PNB and Indian Bank, said Jatin Gedia, Technical Research Analyst, Sharekhan by BNP Paribas. 

Prashanth Tapse, Research Analyst, Sr VP Research, Mehta Equities, said a conservative investor should rise allocation and accumulate best in class businesses during such downtrends like: 

• HDFC Bank 
  CMP: Rs 1594 | Support: Near Rs 1580 | Strong resistance: Near Rs 1649

• SBI
  CMP: Rs 548 | Support: Near Rs 533 | Strong resistance: Near Rs 566
  
• IndusInd Bank
  CMP: Rs 1155 | Support: Near Rs 1105 | Strong resistance: Near Rs 1198