Nifty Bank reclaims 42,800 level; can it sustain the momentum?

The index is trading higher with healthy volume which points towards positive momentum.

The primary and intermediate trend of Bank Nifty is bullish as the index is trading above its important short-term and medium-term moving averages while momentum indicators and oscillators are showing strength in the current uptrend.

Many banking stocks have been witnessing healthy gains in the recent past as investors remain positive about their growth prospects.

The March quarter earnings of top banking players such as ICICI Bank and HDFC Bank have been broadly in-line with estimates.

As Mint reported earlier, ICICI Bank reported a 27.64 per cent jump in consolidated net profit, while HDFC Bank reported a 19.8 per cent jump in net profit for the January-March quarter.

On April 24, the Nifty Bank index witnessed a strong breakout on the daily chart with a sharp surge in volumes.

Kunal Shah, Senior Technical & Derivatives Analyst at LKP Securities believes that the index remains in a strong buy mode and any dip should be an ideal opportunity to add on the log positions.

“The lower-end support is visible at 42,300 which will act as a cushion for the bulls and the potential upside targets are 43,000 and 43,300,” said Shah.

The Nifty Bank index has gained over 5 per cent in April so far and if it ends in the green for the month, it will be its second consecutive monthly gain.

Deepak Jasani, Head of Retail Research at HDFC Securities pointed out that Bank Nifty looks strong as it has broken out from the downward sloping trend-line, connecting the highs of December 14, 2022, and January 24, 2023.

Jasani said while the primary and intermediate trend of Bank Nifty is bullish, the sharp up move may be followed by some profit booking.

“Short-term resistances are seen at 43,078 and 43,578, which happen to be the previous swing highs. Considering the sharp-up move seen during the last few days, the possibility of a running correction should not be ruled out. Therefore we advise buying at lower levels keeping a stop loss at 41,500 levels,” said Jasani.

Rahul Ghose, Founder & CEO at Hedged – an algorithm-powered advisory platform is of the view that the Bank Nifty rally still has some steam left on the upside.

“If you look at the options data going into the May series, the short straddle players are creating straddles at the 43,000 level. These are in-the-money strike options which denote bullishness and also were created when Bank Nifty was at the 42,300 level,” said Ghose.

“Further, a breakout above 43,200 will also confirm an inverse head and shoulder pattern on this index which would have its first target at 44,000. Any healthy rally should have a consolidation before its next move up. This is exactly what Bank Nifty has done in the recent few days and thus this move should sustain as long as prices don’t close below the 20 EMA (exponential moving average) which is currently at 41,200,” Ghose said.

Amol Athawale, Technical Analyst (DVP) at Kotak Securities said that a promising uptrend wave and higher high and higher low series formation on daily charts indicate the continuation of the uptrend wave in the near future.

“For the trend-following traders, 42,000 would act as a sacrosanct support zone while 43,000-43,300 could act as an immediate resistance zone,” said Athawale.

“The short-term texture of the index is bullish but due to temporary overbought conditions, we could see rangebound activity. Hence, buying dips and selling on rallies would be the ideal strategy for short-term traders. However, below 42,000, the uptrend would be vulnerable,” Athawale said.

Rohan Patil a technical analyst at SAMCO Securities observed that the Nifty Bank index has been outperforming the benchmark

index Nifty for the past few weeks and has first taken the initiative to witness a bullish breakout on the charts.

He highlighted that the banking index traded in a flag pattern formation for almost five months and finally witnessed a bullish breakout above 41,500 levels on the weekly time frame. Similarly, on the daily timeframe, prices too witnessed a breakout above the horizontal trendline and prices were continuously playing above its 9 and 21 EMA.

(The flag pattern is normally considered a continuation pattern, where prices consolidate and post-breakout continue to move in its prevailing direction.)

“We will still consider buying the banking index at these levels as prices are trading above its short- and medium-term EMA. In the coming days, 42,000 – 41,800 will be sacrosanct support for the Bank Nifty, while 44,000 could be an immediate hurdle,” said Patil.

“A break above 44,000 will infuse buying towards new lifetime high levels. Similarly, a break below 41,800 will open the gate for 41,000 levels on the lower side,” Patil said.

Rameshver Dongre, Research Analyst – Equity Research at CapitalVia Global Research also agrees that the trend for the Bank Nifty index is bullish and this trend has resumed this year after an interval of correction.

Dongre believes the current upward trend can continue.

“It passed through a significant resistance level of 42,000 last week and has continued to rise with positive sentiment. In addition, the MACD Histogram is above the zero line with a positive crossover on the daily charts, so the upward trend can continue,” said Dongre.

“To that end, one should adopt a buy-at-support strategy, with the 42,450–42,500 range serving as strong support. On the upside, after the 43,000 level, one could expect 43,700 levels with a stop loss of 41,900 levels,” said Dongre.

Disclaimer: The views and recommendations given in this article are those of individual analysts and brokerage firms. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.