Trend of Nifty = Banking on Banks.

BankNifty has a total of 12 constituents

But its very concentrated in the top 2 names.

HDFC Bank at 29% and ICICI Bank at 24.5% = A Combined weight of 54%

SBI + Kotak + Axis = 28%.

Financial Services are 34-35% of the Nifty and these Top 5 banks are almost 30% of Nifty.

The charts for the top weights are very interestingly poised for a Trending Move in the Making.

HDFC BANK

10-12 attempts done at the 1750-1800 resistance.
Post the HDFC merger the low was 1300-1400.
Post MSCI downticks it was 1400-1500.
Now the base seems to have shifted to 1600-1650.
Given the range of 400 points. A breakout can have an upside target of 2200.
Stoploss comes a little deeper for a 3 year breakout at 1700.
A confirmation of trend on sustaining above 1800 for a few days or 1-2 weeks.
Got to remember its a 3 year breakout.
A Thumb rule I use is target to be done in 20-30% of that period. Implies 6-12 months for the breakout to playout.

ICICI Bank

ICICI Bank has been a consistent performer with higher tops and higher bottoms.
A lot of relative strength here as well in the current correction.
3-4% away from an all time high.
Now close to a short term breakout. Although a target of 1500-1600. Stoploss at 1240.

State Bank of India

A break below the last 1-2 months low can negate the breakout.

Those price points HDFC Bank 1670, ICICI 1240, SBI 770.

Conclusion

The largest weight BankNifty & Nifty50 is HDFC Bank. Its close to a 3-4 year breakout.
A breakout in HDFC Bank can take 6-12 months to play out.
Even ICICI and SBI have strong relative strength and near short term breakout.
Next 6-12 months trend will be decided by the Banking space.
The most interesting thing to note is that Banks generally underperforms when FIIs are seller. Remember 2020 and 2022 ! . This time they are showing Relative Strength. Implies any further uptrend needs Banks!
Its one of the reasons its not at a similar Risk-Reward like it was in June 2022. Can read our Note – Future of Nifty50 – Banking on Banks
Trend of Nifty = Banking on Banks !!

Our Research Products to Subscribe in this Correction

1) Technical Traders Club ( Short Term Positional Ideas & Long Term Investment Ideas )

2) The Idea Lab - An Idea Generation Platform!

You may also like