By Anand James
Nifty PSU Bank Index saw good traction with all of the index constituents gaining close to 5% on an average. Major gains were seen in SBI, Bank of Baroda, Canara Bank, Punjab National Bank and Union Bank which contributed around 80% to Nifty PSU Bank index. 77% of the banking stocks in the F&O segment have seen short covering this week. Nifty Bank was driven by gains in ICICI Bank, State Bank of India and Kotak Bank which together form around 44% of Nifty Bank Index. These three stocks are either in or close to the overbought zone. However this is the characteristic of a bull market, and with several bank results being announced in these few days, this space is likely to be buzzing, and Nifty Bank is likely to beat the Nifty.
But, more importantly, all eyes would be on banks whether they would provide the muscle for Nifty to fight the impact of falls in IT stocks. For Nifty, our favoured end point for last week’s move was 19,850-950, and though there was a brief penetration above the upper range, momentum failed to sustain. However Friday’s sharp turn lower has eased the prospects of a collapse especially with several micro supports close by, ready to step in. This encourages us to look for upsides early next week, aiming for 20,160, with expectations of banking stocks to throw in their weight, even if IT plays spoilsport.
However, inability to float above 19,680, would negate the upside views, exposing 19,460. Sensex too had embarked on a downside trajectory, but we expect a revival should we see support from 66,400.
(Anand James, Chief Market Strategist at Geojit Financial Services. Views expressed are the author’s own. Please consult your financial advisor before investing.)