Nifty Bank Outlook: A close above 42,015 level a must for sustained gains

Nifty Bank ended last week at 41,041, up 2.83 per cent. During the week, the index tested an intra-week low of 40,535.90 and intra-week high of 41,274.70.

One of the top gainers in the Nifty Bank index for the week was Bandhan Bank. The scrip gained 9.61 per cent for the week. AUBANK lost 2.75 per cent during the same period.

The banking index has currently moved above the support of the 50-DMA, forcing the bears to remain on the sidelines.

 Indicators as RSI and MACD currently indicate momentum is positively skewed on the daily time frame.

On the F&O side, Nifty Bank April futures traded at a premium of 135 points last week.

Nifty Bank Put options distribution shows that the 39,500-strike, followed by 39,000, has the highest open interst (OI) concentration, which may act as support for the current expiry. The Nifty Bank Call strike of 42,000 witnessed significant OI concentrations and may act as resistance for the current expiry.  On the weekly chart, the index formed a bullish candlestick, indicating the momentum of the previous week is intact.

The banking index has also bounced back from 0.38 per cent of Fibonacci Retrenchment on the weekly chart. Last week, the index witnessed more than two runaway gaps,  but this coming week, it would be important to watch as the index holds an important support of 40,500.  PSU Banking stocks would show some bounce back in coming days and that it would be a good time to enter them for short-term gains.

Among private banks, Axis Bank remained on the weaker side while HDFC Bank gained 4.49 per cent last week. Among PSU banks, Canara Bank and SBI have rebounded from recent lows. 

FPI money should also begin to flow back into Indian markets, as the US Fed rates peak and a fall in rates are being factored in the market. A pause in interest rates by the RBI will be beneficial for the banking sector at this time. Going forward, we believe a close above 42,015 would be important for further the Nifty Bank index to extend rally. 
(The author is Executive Director at Choice Broking)

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