Equity markets have been spooked by the resurgence of COVID cases. On April 19, Sensex crashed 1,374.76 points, or 2.82 percent, to 47457.27, and the Nifty dipped 402.30 points, or 2.75 percent, to 14215.60.
All sectoral indices barring the pharma index are trading in the red with Bank Nifty tumbling over 4 percent while Nifty PSU Bank fell over 5 percent at 09:51 hours.
Bank Nifty fell over 4 percent with the top losers being RBL Bank, ICICI Bank, IDFC First bank, IndusInd Bank, Kotak Mahindra Bank and Axis Bank among others.
PSU Banks are also under pressure with State Bank of India falling over 4 percent while Punjab National Bank, J&K Bank, Central Bank of India, Union Bank of India, Bank of Baroda and Bank of India among others.
Experts see the novel coronavirus pandemic as the biggest reason behind the poor performance of banking stocks, especially the PSU ones.
Stress tests by the Reserve Bank of India (RBI) indicate that the gross NPA ratio of the country’s banking system could rise to 13.5 percent by September 2021 from 7.5 percent in September 2020. If the macroeconomic environment worsens and leads to a severe stress scenario, the ratio can surge to 14.8 percent.
“As the short-term trend of the Bank Nifty is down and negative, we would see a minor pull-back that could lift the index to 33,300,” said Shrikant Chouhan, Executive Vice President (Equity Technical Research), Kotak Securities.
“The strategy should be to buy on dips between 32,000-31,800 and keep a final stop loss at 31,400 on a closing basis. On the higher side, 32,650 and 32,970 would be minor obstacles,” Chouhan said.
Nifty Financial Services was down 4 percent in the morning session dragged by Bajaj Finance which was down over 4 percent followed by M&M Financial Services, HDFC, ICICI Lombard and HDFC AMC.
Nagaraj Shetti, Technical Research Analyst, HDFC securities pointed out that the gap area of 32,400 is going to be a crucial overhead resistance for the banking sector and a sustainable move above this hurdle could open the next upside levels in the near term.
“The banking sector has been underperforming Nifty over the last many sessions and we observe a downtrend as per the negative sequence like lower highs and lows. Any upmove could be a sell-on-rise opportunity in the banking sector. Though the sector has been in the downtrend over the last few months, there is no indication or confirmation of any crucial bottom reversal at the lows,” Shetti said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
