Nifty Bank outlook: Large swings ahead; breach of 46,310 level a must for upside

There was a lot of reshuffling in the banking sector last week as US’ Federal Reserve approved a much-anticipated interest rate hike to their highest level in more than 22 years. The market witnessed volatility amid mixed quarterly results, and additionally Foreign Institutional Investors (FIIs) turned net sellers.

On the weekly chart, Nifty Bank made a time high of 46,310.10 and closed the session at 45,468.10. The banking index has lost 1.32 per cent as compared to last week. At present, the Index has moved below the 20 EMA, indicating a short-term weakness.

Four stocks advanced while eight declined in the Nifty Bank constituent. One of the top gainers in the Nifty Bank during the week was Bank of Baroda,  which gained 2.29 per cent.  while AU Small Finance Bank slipped 5.49 per cent. Since there is a lack of optimism or pessimism, indicators like the RSI and MACD are currently neutral.

On the F&O side, Nifty Bank August futures traded with a 207-point premium. Nifty Bank Put options open interest (OI) distribution shows that the 45,000 strike followed by 44,000,  have the highest OI concentration, which may act as support for current expiry. The Nifty Bank Call strike of 46,000, followed by 46,500, witnessed significant OI concentrations and may act as resistance for the current weekly expiry.

Since there are significant gaps between call and put writers and India VIX has stabilised at the end of the previous week, we can anticipate large swings in Nifty Bank. Going forward, we believe a close above 46,310 levels would be important for further extended rally.

Views are personal. The author is Executive Director, Choice Broking