Bank Nifty rangebound, directionless: Here’s what will help banking index breakout; US debt, RBI key to watch

 

Bank Nifty may witness a significant breakout if impending US debt ceiling negotiations and conjectures

around a pause in US Federal Reserve’s interest rate adjustments are resolved.

Bank Nifty, despite multiple attempts in the last one month, has failed to cross its all-time high of 44,151.80 so far. Since the last few sessions, it has remained range-bound and directionless, making investors anxious as the monthly derivatives expiry comes closer. While the fall of major banks in the US and Europe has capped the Bank Nifty’s growth, analysts believe that the US debt ceiling talks will further affect the global markets and a failure to reach a resolution will have catastrophic consequences on the global economy. Meanwhile, if Bank Nifty manages to surpass 44152-44200 levels then it may rally towards 44500, analysts said.

Bank Nifty to remain directionless until 43446-44095 levels are taken out

Bank Nifty is trading in a narrow range of 43446-44095 since the past five trading sessions. And unless these levels are taken out, the index is directionless, Om Mehra, Equity Research Analyst at Choice Broking said. Prashanth Tapse, Senior VP (Research), Mehta Equities believes that despite unfavourable global cues the index has been rising and the positive catalyst lies in the net buying of shares by both FIIs and DIIs at Dalal Street. “Bank Nifty’s breakthrough at 44153 could propel it towards the psychological 45000 mark,” Prashanth Tapse said.

When will Bank Nifty break the current directionless range?

“Bank Nifty could experience a significant breakout if impending debt ceiling negotiations and conjectures around a pause in Federal interest rate adjustments are resolved, either through a conclusion to the debt ceiling talks or a decision by the Federal Reserve to hold interest rates steady,” said Sonam Srivastava- Founder at Wright Research. Bank Nifty’s immediate support and resistance levels, according to her, are placed at 43871-43798 and 44049-44154, respectively.

US debt ceiling impasse continues to affect Nifty, Bank Nifty

“The US debt ceiling impasse continues to affect markets. Since failure to reach a resolution will have catastrophic consequences for the global economy and markets, a resolution of the crisis at the eleventh hour is the most likely scenario. But markets will be on tenterhooks till then. A global risk-on and rally is the most likely scenario after the resolution of the impasse,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services. According to him the declining inflation and a possible rate cut by the RBI by the end of 2023 are clear positives for the market.

Stability in Bank Nifty heavyweight stocks: ICICI Bank, Axis Bank, IndusInd Bank, HDFC Bank

“Bank Nifty individual heavyweight components remain stable with the likes of ICICI Bank, Axis Bank and IndusInd Bank approaching fresh breakout levels. On the other hand, HDFC Bank is holding its immediate level quite strongly. This implies that the index is gearing up for a fresh breakout and once it gives a close above 44200 levels, it can witness a move towards 45000 swiftly,” said Gaurav Bissa, VP, InCred Equities.

Bank Nifty expected to rally towards 44500-45000 if it breaches crucial zone of 44152-44200

Based on technicals and options statistics 44152 and 44200 will be the most crucial zone to surpass. Above that it would rally towards 44500 and in the best scenario 45000, said Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities. He believes that as the index is approaching monthly expiry it is mandatory to surpass the above crucial levels, till then it will remain sluggish and range bond. Supports exist at 43700 and 43300. Based on the performance of Bank Nifty constituents it should cross the level of 44150/44200 in the near term, he added.

RBI MPC decision, GDP data to guide Nifty, Bank Nifty

The Nifty Bank rally has been very subdued as all important Q4FY23 bank results have been factored in along with markets waiting for important events like the US debt ceiling issue, India GDP data and RBI monetary policy decision in the 1st week of June. “Technically, 43380 will remain a strong support on the daily charts. A close above resistance of 44150 could lead to a target of 46111 in the near term,” said A R Ramachandran, Co-founder & Trainer, Tips2trades.

Call writers may panic if Bank Nifty breaks 44100

“Bank Nifty is on the verge of a potential breakout, which would be confirmed if it moves above the resistance level at 44100. Once this resistance is taken out, call writers (option sellers) may start to panic, anticipating further upward movement in the index,” said Kunal Shah, Senior Technical and Derivative analyst at LKP Securities.

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