Nifty Bank broke its previous high of 41,840 on Friday to hit a new high of 42,345.50 after nearly two months of consolidation. Over the past month, the index has made a higher and lower formation that indicates strength. It is also trading above a 21-day moving average.
Immediate support for the index has moved towards the 41,300-41,500 range while resistance is placed at 43,000. The momentum indicator’s Relative Strength Index (RSI) and MACD are showing a pattern positive.
Nifty Bank managed to hit a new high as HDFC twins outperformed.
Among private banks, we expect HDFC Bank and Axis Bank to lead. While in the PSU banking pack, Canara Bank, SBI and Bank of Baroda could beef up in the coming week.
Nifty Bank November futures are trading at a premium of 158 points. The open interest (OI) distribution of the Nifty Bank put options suggests that the 41,000 strike has the highest concentration of OI, which may serve as support for the current expiry.
The Nifty Bank Call strike of 43,000 followed by 43,500 witnessed significant concentrations of OI and may act as resistance for the current expiry.
Nifty Bank broke above 42,000 for the first time as bulls raged on Dalal Street, fueled by a much-anticipated easing in US retail price inflation. The overall structure of Nifty Bank remains bullish for the days ahead.
After a sustained rise, the market could experience some consolidation as investors take profits at higher levels. The best course of action would therefore be to continue taking tiny profits while maintaining a trailing stop loss, as long as the index remains above the 40,300 level.
(The author is an executive director at Choice Broking)