The ongoing correction in the Indian markets is no less than an intense selling spree. Investors’ panic regarding a potential global recession is clearly witnessed via the major crack in broader market indices. No sector seems to be giving relief to investors, not even the defensive FMCG one, but the banks are giving the real pain.
As strongly as the banking space had risen in the last couple of months, delivering a stellar return to investors, the speed on its way down is equally high. The index tanked around 3,100 points from the high of 41,677.65, marked on 20 September 2022 to the low of 38,493.4, marked today. Although, the index recovered a bit from the low and closed the session 2.35% down at 38,616.25.
Image Description: Daily chart of the Nifty Bank
Image Source: Investing.com
This massive one-way crash has jittered market participants as no one was expecting such a sharp selling in the banking space that had held investors’ confidence during a volatile market. But one thing that is looking to be favoring beaten-up bulls is that the next strong support level in the Bank Nifty is present just ~660 points below the CMP, at 38,000. This psychological level is a very strong demand zone for Bank Nifty and had been tested several times on its way up, during August 2022. But that also leaves a bit of more pain for long holders, as there is still a decent downside potential of around 660 points.
However, the fall from here could be gradual and might not be as sharp as we have seen in the last couple of days. The premise for this is, the highest-weighted bank in the index – HDFC Bank (NS:) which holds roughly 30.2% weightage has already come down to its major support level of INR 1,420. In fact, taking support from here, the stock also closed today’s session at a higher price than the opening, which is depicting investors’ participation from these levels.
This leaves us with the second highest-weighted ICICI Bank (NS:), holding roughly 28.44% weightage. Both these banks combined make up for more than half of the Bank Nifty movement. There is still some potential fall left in the case of ICICI Bank as the stock is still at quite high levels. Today, ICICI Bank shares closed at INR 861.05 and the immediate support is present at around INR 840.
Therefore, while HDFC Bank has reached its support level and ICICI Bank is yet to find its strong support, a fall in the Bank Nifty could still continue, but now at a lower pace.
