Favorable risk-return for a long position in Bank Nifty; Prefer Icici Bank, Indusind Bank: Jm Financial Services


JM Financial Services believes that on a weekly basis, the risk / reward ratio is very favorable for a long position in Bank Nifty, in particular led by private banks. On the private banking side, two banks that they like, especially from an investment point of view, are ICICI Bank and IndusInd Bank.

Rahul Sharma, Associate Director and Head of Technical and Derivative Research at JM Financial Services, shared his perspective on technical market trends going forward.

Sharma said: “Nifty hit its target of around 17,800 almost last week and after that the Chinese issue took things to the next level, especially India VIX and S&P 500 VIX hit record highs. about four months. The last time this happened when India VIX, essentially the volatility indicator rose, was when there were inflationary fears. Bond yields rose in the United States in May and now we have the Chinese issue, which is pulling the markets down. ”

According to him, the most important thing to watch out for here is that the market width has gone down and strong support for Nifty is seen in the 17,317-17,350 area. If this level breaks, the correction may deepen and we could see 17,000 tested on Nifty on an immediate basis.

However, overall if one were to see the big picture then people have been waiting for this correction for a long time and finally when this correction plays out it would be a good investment opportunity to accumulate new longs. , to enter new longs at lower levels, said Sharma.

“Nifty’s behavior this week will be the deciding factor in how this train runs. If 17,300 are kept there is a good chance that we can bounce back by tomorrow because China is closed today, has been closed yesterday, and there could be regulatory action tomorrow, which could see the markets rebound. The next few days would be very crucial. on the Chinese side and that will largely dictate how we play from that important crucial 17,300 support area, ”Sharma said.

Speaking of the Nifty Private Bank Index, Sharma said, “When Bank Nifty took the market leadership, bringing it almost to the 18,000 range, we saw this correction occur. If you see the long term ratio charts of Bank Nifty vs Nifty it is trading at very crucial support meaning the ratio should go up and this can happen when Nifty goes down or Bank Nifty goes up.

“On a weekly basis, the risk-returns are very favorable for a long position in Bank Nifty, in particular led by private banks. On the private banking side, the two banks we like, especially from an investment perspective, are ICICI Bank and IndusInd Bank, ”said Sharma.

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Sharma added: “ICICI Bank has been the leader in the field of private banking. The chart setup was quite robust and all the dips were taken into account. Thus, we would not be surprised if a level of Rs 800-825 was reached in ICICIC Bank in the short term and we could see the outperformance continue at the same time. “

“On the other hand, we saw an IndusInd Bank breakthrough last week. The breakout is retested, but we believe that as long as the market does not broadly give up the Bank Nifty at 36,200 and the Nifty at 17,300, the decline will be absorbed and we may see the Bank Nifty rally continue once again. more, on the backs of private banks, ”he said.

“PSU banks have started to improve, but have entered areas of consolidation again, and we have to wait until the configuration of PSU banks improves, but as far as private banks are concerned, the situation is relatively better. compared to the entire banking basket, ”said Sharma.

For the whole discussion, watch the video

(Edited by : Dipika gosh)

First publication: STI


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