Nifty Bank Index Shows Signs of Weakness in June; Experts Assess the Situation

The Nifty Bank index, which had been on an upward trajectory for the past three months, has encountered some challenges in June.

While the benchmark Nifty50 has seen a slight increase, the banking index has declined by approximately 1% during the month.

The failure of the banking index to maintain its momentum has prevented the Nifty from reaching its all-time high level. Despite hovering near it in recent weeks.

Financial experts and brokerage firms are optimistic about the index and banking stocks but advise caution and consideration of important levels before making investment decisions.

According to Vinay Rajani, a Senior Technical & Derivative Analyst at HDFC Securities, the Nifty Bank index is currently facing strong resistance at the 44,000-44,100 level. On the other hand, the 43,300 level provides robust support.

Rajani suggests that a clear directional move will occur once the index breaks out of the range between 43,300 and 44,100.

He advises protecting long positions with a stop loss at 43,300 and short positions with a stop loss at 44,100. If the index surpasses 44,100, it could potentially rally towards 45,000 in the following month.

Nifty Bank Index Faces Pressure in June; Analysis by Experts

Jatin Gedia, a Technical Research Analyst at Sharekhan by BNP Paribas, points out that although the Bank Nifty reached a new all-time high.

The momentum indicator on the weekly charts did not confirm the rally, indicating a loss of momentum.

Gedia suggests that a consolidation phase is highly likely given the significant run-up in recent months. He highlights key support levels at 43,100 and 42,250, which correspond to Fibonacci retracement levels.

Gedia considers a dip towards these levels as a potential buying opportunity from a medium-term perspective.

Despite the short-term volatility, brokerage firms maintain confidence in banking stocks. Nomura, a global brokerage firm, believes that Indian banks are in a favorable position.

They highlight factors such as strong capitalization, benign credit cycles, and robust profitability, expecting a multi-year credit cycle ahead.

While net interest margins (NIMs) may see a gradual moderation, sector valuations are attractive. And a 17% return on equities (RoEs) is anticipated across the sector from FY23-25. Nomura recommends ICICI Bank, Axis Bank, and IndusInd Bank as top picks.

The Nifty Bank index has faced challenges in June, experiencing a slight decline after a period of gains. Experts provide insights into resistance and support levels and suggest a consolidation phase may be imminent.

Despite short-term weaknesses, brokerage firms express confidence in the banking sector’s fundamentals. Highlighting strong capitalization, low non-performing loans, and sustainable return on assets.

While near-term concerns exist, the sector is seen as a solid investment choice from a medium to long-term perspective, with a potential for market share gains among private banks.

How Bank Nifty Points Are Calculated

The Bank Nifty points are determined using the free float market capitalization method, which’s similar, to how many other major indicesre calculated. In this approach a companys market capitalization is figured out by multiplying its stock price by the number of shares for trading in the market.

Then the index value is computed using the combined free float market capitalization of all constituent stocks and a base market capital value. This base value takes into account both the base index value and the date it was established.

The “Current Market Value” represents the free float market capitalization of companies included in the index at any given time. The Bank Nifty index undergoes recalculation to accurately reflect real time changes, in stock prices.

How Many Banks Are in Bank Nifty

The Bank Nifty, also referred to as the NIFTY Bank Index is made up of 12 liquid stocks, from Indias banking sector that are listed on the National Stock Exchange (NSE). This selection encompasses a blend of both private sector banks.

The composition of the Bank Nifty is reviewed regularly. May be altered according to criteria set by the NSE. These criteria take into account factors such, as market capitalization and trading volume to ensure that the index accurately portrays the performance of Indias banking industry.