On the weekly chart, Nifty Bank made a high of 43,078.90, before settling last week at 40,345.30 level. The index lost 5.09 per cent for the week. The banking Index has slipped below its 50-DMA, which indicates short-term weakness. However, its 200-DMA remains around 39,750 levels.
The index support has shifted towards 39,000-39,500 levels while the resistance is placed around 42,200
Momentum indicator RSI and MACD have inclined on the negative side. Heavy weights banking stocks remain under the bear grip. Until the index regains 42,200 level, there would be selling on every rise. Nifty Bank Put options distribution shows that 39,000 has the highest open interest (OI) concentration, followed by the 38,500 strike, which may act as support for the current weekly expiry. Nifty Bank Call strike of 42,000 witnessed significant OI concentrations and may act as resistance for the current expiry.
On the weekly chart, the index has formed a Bearish Engulfing pattern, indicating there could be more sell off expected in the coming week. However, a sharp pullback cannot be ruled out.
PSU bank stocks are losing grip. It would be a good time to book profit and wait for the next leg for entry.
The rollover for Bank Nifty stood at 84.06 per cent against 86.28 per cent last month. According to the rollover data and a somewhat lower roll-cost after the present price action, the market range may shift lower with constrained upside. FII action in the cash market was on the negative side, as they are net sellers of Rs 29,232.3 crore this month.
A negative research report on the companies in the Adani group was what started the sudden decline in the Indian market. Due to their significant exposure to the group, PSU banks in particular are being impacted by this on the banking stocks. Investors may find out it might be the right time to accumulate quality stocks at the current fall.