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Bank Nifty. which broke out of a resistance at 44,400 yesterday, failed to capitalise on it. The bulls failed to produce a follow through rally and consequently, the bears made a comeback. Thus, the index, which was up by 1 per cent at a point yesterday, saw a sharp drop and ended the session flat.
Following this, the index began with a gap-down today at 44,276 versus Thursday’s close of 44,496. Bank Nifty is now trading around 44,100, down 0.9 per cent.
Supporting the bearish bias, the advance/decline ratio of the index stands at 2/10. Bandhan Bank, up 0.8 per cent, and AU Small Finance Bank, up 0.5 per cent, are the only gainers in the index. Punjab National Bank, down 1.8 per cent, is the biggest loser.
Both private and public sector banks have seen a sell-off. In fact, all the sectors are in the red today, indicating a broad-based selling. Nifty PSU Bank and Nifty Private Bank have lost 1.3 and 0.6 per cent, respectively.
Bank Nifty futures
The August contract opened today at 44,350 versus yesterday’s close of 44,559. After marking a high of 44,399, the contract witnessed a sharp fall. It is currently trading around 44,050.
The contract is now approaching the support band of 43,870-44,000. A fall below this level is less likely today. On the other hand, the recovery might not happen or it will be a limited one, probably to 44,200.
In case Bank Nifty futures slip below 43,870, the downside could extend to 43,500. It might even see a drop to 43,000. However, such a fall might not occur today where it might take a few more sessions. But note that, for this to happen, the support at 43,870 should be decisively breached.
Trading strategy
As it stands, even though the trend is bearish, initiating a short position now is not advisable for two reasons. One, there is a key demand zone ahead and two, the risk-reward is unfavourable. Given the bearish sentiment, we do not suggest going long either.
Hence, traders can stay away for now and go short if Bank Nifty futures falls below the support at 43,870.
Supports: 44,000 and 43,870
Resistance: 44,200 and 44,500
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