Significant heavyweights in the Nifty Private Bank basket are going to lead the show, and we should be stick to them.
The Nifty Private Bank index jumped 4.12 percent weekly and topped all sectors in the week gone by. On a monthly basis, it traded in the record-breaking range of 16.60 percent. Earlier, the Bank Nifty registered a record-breaking field of 13 percent in March 2019, soon after India struck Pakistan’s Balakot following the Pulwama suicide bombing. Nifty Private Bank missed reaching its previous top by 3.20 percent when there was a spectacular recovery last week. The Nifty was 3.5 percent away from crossing 12,103, its best record.
Nifty Private Bank failed to find a new high mainly due to a substantial weakness in Yes Bank and RBL Bank. Since June 2019, when the market touched the highest high of 12,103, Yes Bank was at Rs 154, and RBL Bank at Rs 705. From there, they have fallen to Rs 49 and Rs 286, a near 70 percent erosion for Yes Bank and 40 percent for RBL Bank.
Stocks that have the highest weight and contribute almost 65 percent to Nifty Private Bank improved their previous highs. For the week, 16,500 and 16,270 will be major supports. On the higher side, 17,100 and 17,209 will be hurdles. Currently, it is at 16,700 and chances of hitting 16,500 are bright.
Technically, the Nifty closed below 11,539, an indication of weak markets and may result in a gradual decline towards 11,400, with a significant support at 11,450.
Below 11,400 it would fall to 11,300, which is 38.20 percent retracement of the rise from 10,670 to 11,694. If the market is firm and in the force of crossing previous high (12,103), then it would not fill the bullish gap that the Nifty has kept between 11,416 and 11,382. On Monday, we can expect firework below 11,490.
From the basket of Private Bank Nifty, we like HDFC Bank and ICICI Bank. We are expecting further weakness in RBL Bank and Yes Bank. Technically, HDFC Bank, which is trading at Rs 1,244, is set to hit Rs 1,450. The strategy should be to buy HDFC Bank at each major supports like Rs 1,225, Rs 1,200, and Rs 1,175. Keep the final stop loss at Rs 1,150 for all long trading positions.
ICICI Bank has ended a dull range at Rs 375, and since the last three quarters, is closing above it. Based on the current formation, the stock is heading for Rs 550; however, buying is advisable if it corrects to Rs 430 or Rs 420. Keep the final stop loss at Rs 400 for the same. On the higher side, sustenance above Rs 470 would change the range for it.
The stock that has dragged the sentiment heavily is Yes Bank closed below the support of Rs 53, which is harmful to it and is now heading for Rs 43 levels. From 2010 to September 2013, the stock remained comfortably above Rs 43 despite a significant weakness in the market. A close below Rs 42 for Yes Bank would undoubtedly bring some negative news flow.
It was completely unexpected that the RBL Bank could fall to Rs 285 from the highs of Rs 700. It has eroded 40 percent within three months. Though the stock has managed to come back to Rs 370 from Rs 285, technically it is not showing any signs of strength and sustenance below Rs 350 would change the trend. Below Rs 350, it could fall to Rs 220.
In brief, significant heavyweights of the basket are going to lead the show, and we should be stick to them.
(The author is Senior Vice-President - Equity Technical Research at Kotak Securities.)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.