HDFC Bank contributes 50 percent to fall in BSE Bankex, Nifty trades below 21,700

CASA (current account, savings account) ratio was broadly flat sequentially at 37.7 percent for HDFC Bank in the quarter gone by. CASA is a relatively cheap source of funds for banks. The higher the share of CASA in deposits, the lower is the cost of funds

Shares of HDFC Bank lost around 7.57 percent intraday after the market reacted cautiously to the results announced by the country's largest private lender. BSE Bankex was down by 1929 points or 3.56 percent around 2.15 pm on January 17 and HDFC Bank was found to be contributing 50 percent to the fall in the index.

“Post correction, the stock (HDFC Bank) is available at attractive valuations if you have a 3 to 5 years investment horizon. Staggered manner buying may be a good idea for HDFC Bank. The risk reward ratio is getting favourable now,” Monarch Networth Capital said. All BSE Bankex constituents were trading in the red with HDFC Bank topping the laggards.

The metal index was the second worst-performing index after Bankex on January 17. BSE Metal index slipped 2.39 percent intraday. Tata Steel, SAIL and Hindalco are trading down by more than 2 percent each with SAIL slipping by more than 4 percent.“For Steel manufacturers, this quarter is good, however, the next quarter will be a little difficult due to cost pressures. The spread will be adversely impacted. At current levels one needs to be cautious as the valuations are not attractive,” Monarch Networth Capital said.

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Weakness is seen in bank and metal stocks and in some pockets of the auto sector. As expected, the volatility is seen in the markets at near life highs. For Nifty traders, the sacrosanct levels of 21,800-21,900 is breached.

“Put writing at 21,800-21,900 suggests caution as the market slips below. Watch for a hold at 21,800. A failure may lead to further selling. Recent sessions show long unwinding on Sensex and Nifty, with investors adopting a cautious approach and booking profits daily amid broken key levels. Bank Nifty faces a significant dent as 47,500 support breaks, with a shift to 47,000, which is also under pressure. Profit-booking in the second half becomes a trend.

Despite a 20 percent gain in Sensex and Nifty over the last year, ongoing earnings season prompts investors to secure profits. Midcap and smallcaps hold marginally green, providing market confidence. Expect potential stability in the second half unless the Nifty fails to recover from 21,800, leading to a potential correction to 21,500, according to Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities.

Analysts note that markets overlooked challenges and traded higher, despite India's retail inflation reaching a four-month high of 5.69 percent in December. The concerning aspect is the food inflation at 9.53 percent. With inflation on the rise, the RBI is expected to maintain the repo rate and policy stance in the February policy meeting. Additionally, India's industrial growth rate has dropped to an eight-month low of 2.4 percent in November.

"From a technical perspective, Nifty sees a make-or-break support at 21,501 mark, and a close below this would bring more pressure on the index towards 21,150 in the coming week. Volatility would continue with good and bad news. FIIs are turning to net buyers day by day while uncertainty about the timing and speed of Federal Reserve rate cuts. A recovery and close above the 22126 mark would be a hurdle to watch," Prashant Tapse, an analyst at Mehta Equities, said.

Traders should be light on long trades and wait for make-or-break support levels. Banks bringing more pressure led by HDFC Bank Q3 earning below Street expectations, Tapse added.

The IT pack is holding the ground with the likes of TCS , HCLTech and Infosys managing to trade in green even as L&T makes a fresh life high.

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