Bank Nifty and How it is calculated?
Bank Nifty holds and represents 12 most liquid and large capitalized stocks from the banking sector which trade on the National Stock Exchange (NSE). It also provides investors and market intermediaries a benchmark that captures the capital market performance of the country’s banking sector.
However, the market rallied 40 percent in March, which was backed largely by liquidity and the hope of re-opening of economies globally after stringent lockdowns. The Nifty Auto index gained 45 percent from its lows.
The market value is of built resistance
On Thursday, 25th June 2020, the shares closed slightly lower. The International Monetary Fund predicted the Indian economy may shrink by 4.5% this year. The NSEI ended at 0.16% to 10,288.90. The BSESN dropped 0.1% to 34,842.10.
The Nifty 50 index has risen to about 37% after 4 years of hitting low. The economy saw foreign investment in the country, despite the continuing pandemic. The world stocks notably hit their lowest in a week by Thursday.
The IMF has predicted the possibility of a global recession in the economy. Investors have been closely monitoring Coronavirus cases across the globe. Mayuresh Joshi, Head of equity research at William O’Neil, Mumbai expresses that liquidity is what is compensating for the growth downgrades and increasing coronavirus cases in the economy. The hope remains that central bankers will continue putting liquidity infusing policies into action.
However, Gautam Shah has a different view.”The action of last one week looks like the Nifty 50 is in a transition phase and the technical setup got weaker now,” said the founder and chief strategist at Goldilocks Premium Research in an interview with CNBC-TV18.
He expressed that 10,500-10,700 looks like a wall of resistance.”Now indicate on the chart that the market probably is setting up for a breakdown. If the index closed below 10,280 levels, then it could see 9,950 and then eventually 9,600 in coming weeks. The risk reward to go long is not justified now,” he further said.
He also said that the leadership was not going to come to too many sectors.” it is the time to be conservative and cautious as there are conditions that the breakdown may be seen in the coming sessions.”
Shah believes the bigger rally in pharma, chemical, insurance, Midcap IT, gold, and silver is yet to happen, whereas the rest is looking toppish now. Bank Nifty rallied 28 percent from its March lows, continuing to underperform not only to Nifty50 but also other major indices and global markets.
“If the 21,200 levels get violated then 20,500-19,500 can be seen and eventually it can break 18,000 as well. It provides the best shorting opportunities. Medium and long term charts also do not indicate that one can be a buyer in the index at these levels. Hence, be careful in Nifty as well as Bank Nifty,” he said in a statement.
“It suggests that the index discounted too much, this rally is not likely to sustain. These are not levels to enter, better lighten up positions as over the next couple of weeks, there could be reversal not only in auto but also capital goods and oil & gas sectors…We have 10,700 targets for the Nifty Pharma index, and eventually it may hit 12,000 marks. We continue to be positive on the sector. If Nifty50 and Bank Nifty break down, the focus would shift to pharma only,” Shah said.
The country’s equity benchmark is said to a possibility of furthering and extending their gains after rising 11.4 percent in the past six trading sessions. On Wednesday, Nifty reclaimed the psychologically crucial 10,000-mark for the first time since March 13. Most technical and derivatives analysts expect that the index will touch 10,500 in June. The index ended up 82.45 points, or 0.8 percent, at 10,061.55 on Wednesday and analysts expect the Bank Nifty to continue rising and touch 22,000-22,500.
Final Thoughts of Bank Nifty
Amit Gupta, Head of derivatives, of ICICI direct, said in a statement, “We believe the Nifty will hit 10,300 in June and the support is expected around 9,500. The 9,500 call option has seen the closure of positions and positions are being built in 10,300 and 10,500. This rally will be led by banking, metals, and consumer stocks.
We expect the Bank Nifty to touch 22,500. People should build a stock-specific portfolio particularly in beaten-down stocks.” While Rohit Srivastava, the Founder of Indiacharts.com expressed “We may see the 10,550-mark soon which is a 61 percent retracement of entire fall we have seen from January. Gains will sustain given the macro outlook on the dollar — which has started to weaken and is reducing pressure on emerging markets.
The Bank Nifty has fallen more than the Nifty and it will continue to play catch-up.”