Bank Nifty slumps 1,500 points in 2 sessions; here is what is troubling the banking pack

Bank Nifty in a matter of 2 days has slumped 1500 points and this is going into the Budget 2024 and then following it. The index-reflective of the banking sector's performance headed lower even as the Union Budget took to reducing the fiscal deficit target.

All of the 12 constituents of the index traded in the red, with the most drag to the tune of over 4 per cent seen in Bandhan Bank, followed by Axis Bank which is due to report its Q1 numbers later today. Zee Business research expects the company to report a 9 per cent growth in standalone net profit.

HDFC Bank, SBI, ICICI Bank, Axis Bank and Kotak Mahindra Bank continued to pull the index lower.

Zee Business Managing Editor Anil Singhvi said Nifty Bank is expected to stay neutral to negative till ICICI Bank & Axis Bank announce their results.

Mr Atul Parakh, CEO of Bigul is of the view that the a sell-off has been triggered in the pack as Budget 2024 failed to announce any major reforms for the sector. Investors had hoped for announcements regarding the consolidation of government-owned banks, divestment measures, or recapitalization efforts in pre-budget discussions, but these measures were not addressed. However, the budget document did outline an integrated technology platform to enhance the outcomes under the Insolvency and Bankruptcy Code (IBC), aiming for consistency, transparency, timely processing, and improved oversight for all stakeholders.

"It is believed that the formation of an integrated technology platform as well as the strengthening of the Insolvency and Bankruptcy Code (IBC) framework coupled with increased number of tribunals will expedite recoveries from Non-Performing Loans (NPLs) and improve overall credit discipline," said Chandan Churiwal, CEO Designate, ACRE. So, these move did not lifted the sentiment instead a selling action is taking place.

What technicals hint at for Bank Nifty?

Jigar S. Patel, Sr. Manager - Equity Research- Anand Rathi is of the view that the Bank Nifty has been trading within a distribution zone between 52,800 and 52,000, indicating a period of sideways movement where buying and selling pressures are relatively balanced. In the previous trading session, Bank Nifty broke through the crucial support level of 52,000, which is a significant bearish signal, and it is now positioned near the 51,000 mark. Moving forward, the next support level is expected around the 50,000 mark, which could act as a floor for any further declines, he adds.

 Resistance, on the other hand, is anticipated near the 52,000 level, suggesting that this is a critical point for any upward movement. A fresh buying opportunity will only be triggered if Bank Nifty can break above the 52,000 resistance level. Until then, the index remains in a "sell on rise" mode, meaning that traders are more likely to sell during short-term rallies rather than buy. On the technical indicator front, the daily Relative Strength Index (RSI) is at 40, which indicates that the index is currently experiencing weakness and may face further downward pressure after a brief rebound up to around 51,500.