Bank Nifty’s next upside trigger after 5000-point rally: Here’s what could take index to new all time high

Bank Nifty soared 13% in the span of two months, outperforming the benchmark Nifty 50 and just just short of crossing its all-time high on Monday.

Bank Nifty
SBI, Bank of Baroda, HDFC Bank are key triggers for Bank Nifty.

Bank Nifty has risen about 5,000 points in the last two months, nearly hitting its all-time high; but analysts are divided on whether the momentum will continue, with the market now looking at SBI quarterly results for an upside trigger. The banking index has gained about 13% since mid-March, outperforming NSE Nifty 50, which has gained 8.4%. Earlier Monday, Bank Nifty came within two ticks or 0.1 points of taking out its all-time high of 44,151.8 points. However, the index erased some gains on Tuesday, dropping 170 points to close below the psychological mark of 44,000.

The upcoming SBI earnings this week might have a positive impact on the banking index. The index is “awaiting some significant trigger like the SBIN result, which can help resume the momentum,” said Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities. However, Swapnil Shah, Director – Research, Stoxbox said: “We believe that the current momentum would be difficult to sustain in the near term.” Bank Nifty rallied almost 1,000 points in the last two days, and is pausing before moving ahead. 

HDFC Bank share price impact on Bank Nifty: Ripe for short-term correction

The weakness in Bank Nifty on Tuesday, 16 May could be attributed to HDFC Bank’s weakness, said A R Ramachandran, Co-founder & Trainer, Tips2trade. As HDFC stock traded ex-dividend, it fell over 1%, dragging the index. “Bank Nifty is trading sideways to negative due to pressure from the HDFC Bank which is adding pressure of almost 180 points,” added Jay Thakkar, Head – Alternate Research, Capital Market Strategy, Sharekhan.

Ramachandran added that the banking index was overbought as well, making it ripe for a short-term price correction. “Firstly, expectations of strong fourth-quarter results fueled gains in the early part. Following this, actual robust numbers across the board by the banking sector helped the Bank Nifty to log handsome gains,” said Swapnil Shah.

SBI earnings’ possible impact on Bank Nifty

State Bank of India will announce its Q4FY23 earnings on 18 May, which will also be crucial because the PSU Bank index requires some trigger. If SBI quarterly numbers beat street estimates, Bank Nifty is very much poised to scale new highs in the near term, according to Raj Vyas, Portfolio Manager, Teji Mandi.

Bank of Baroda: Biggest trigger for Bank Nifty so far

“In terms of outlook, the biggest trigger will be Bank of Baroda’s Q4 numbers. Bank of Baroda came out with its numbers and net profit is Rs 700 crore higher than the consensus estimates at Rs 4,775 crore and net NPA is also lower than what the consensus estimates were. So overall it looks like a good set of numbers for Bank of Baroda,” said Raj Vyas. Bank of Baroda’s numbers have helped Bank Nifty move upwards from 44,017 levels to 44,071 levels, he added. 

Bank Nifty: Options OI data

Bank Nifty’s open Interest data on 16 May shifted from the highest call writers at the 44,000 level to the highest put writers being at the same level. Traders were seen booking profits close to the all-time high level as this level coincided with the resistance band of Nifty 50 between 18,500 and 18,600. “Having said that, the strength in the Bank Nifty Index is likely to sustain as any correction that happens because of profit booking from this point as well will meet with buying pressure. It is only a matter of time till that all time high gets taken out and the same can be expected in the May series itself or the very first week of the June series,” said Rahul Ghose, Founder & CEO, Hedged.

Bank Nifty Outlook

Bank Nifty is near record high levels, as a result of which, analysts believe that there could be significant profit booking. However, the upside momentum will not pause for too long, as they believe the index is strong enough to withstand any minor correction. “The overall outlook continues to be on the upside with a positive bias. Currently, INDIA-VIX is marginally on the higher side compared to last week, still well below the short-term averages in general, indicating we might have some wide swing. Still, overall momentum will likely continue on the upside,” said Rajesh Palviya.

“It’s make or break for the Bank Nifty. A move below 43,850 may accelerate the profit booking towards 43,600-43,500 levels, while a move above 44,250 will neglect the short-term bearish formation,” said Rohan Patil, Technical Analyst, SAMCO Securities.

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First published on: 17-05-2023 at 08:56 IST