Banking Stocks Poised For Correction But Bullish In Long Term, Say Analysts
To resume the uptrend towards all-time high levels, bank index must decisively surpass the mark of 47,700, LKP Securities' Kunal Shah said.
Banking stocks are poised for a small correction in the short term, but the overall structure in the space remains bullish, according to market analysts.
The banking index is in an overbought zone and Monday's fall is more of a delayed reaction, according to Hemen Kapadia, senior vice president of institutional equity at KR Choksey Stocks & Securities. "On technical parameters, this move from 47,740 to 47,793 is almost not justifiable (for Bank Nifty). Technically, the daily moving average convergence/divergence, RSI, and scholastic are all in sell mode."
The rally in the past seven sessions shouldn't have happened and it's right to have a correction, Kapadia said. "The small cool-off is coming in with a slightly deeper correction, but the overall structure still remains bullish."
The Bank Nifty encountered strong resistance from bears at higher levels, prompting a downside move, said Kunal Shah, senior technical and derivative analyst at LKP Securities Ltd. "Immediate support for the index is at 47,000–46,800 levels, and a decisive close below this range could intensify selling pressure."
To resume the uptrend towards all-time high levels, the index must decisively surpass the mark of 47,700, Shah said.
India's benchmark equity indices snapped a two-day rally and closed lower due to losses in the shares of HDFC Bank Ltd. and Reliance Industries Ltd.
The Nifty ended lower after refreshing its lifetime high in the third consecutive session at 22,526.60 points.
The NSE Nifty 50 fell by 175.15 points, or 0.78%, to close at 22,318.40 and the S&P BSE Sensex lost 616.75 points, or 0.83%, to end at 73,502.64.
The short-term texture of the market is still on the positive side, said Shrikant Chouhan, head of equity research at Kotak Securities Ltd. "We are of the view that, as long as the market (Nifty 50) is trading below 22,425, the weak sentiment is likely to continue. Below which, the market could slip to 22,250–22,000."
The correction in small caps has been happening for a sixth week in a row, where they are doing weaker than the mid-cap stocks, Kapadia said. "The markets seem to be consolidating a bit; the only worry is the gold going through the roof. That is disconcerting. Normally, you won't expect markets, gold, and crypto to gain together."
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