PostMortem on BankNifty Today & Analysis of 02 NOV 2022
Glad yesterday’s short call worked on bank nifty — read here. The price action formed today is an extension of what was happening yesterday. Apart from the big opening red candle — the rest of the movement is in continuation.
Price action of bank nifty index in 5mts chart
Speaking of the first candle — it was a story by itself. Gap up opening at 41472 also intraday high & closing the candle at 41107 (low of 41244). 230 pts move in 5mts.
I have been pointing out the disparity in #SGXNifty & our indices price action. Lets take yesterday’s case. SGXNifty at 18314 vs 18175 spot. When such anomaly occurs — its the foreigners who always mint money. The only way these 2 indices can converge is with a gap up opening at 9.15 and sharp down move in the opening 15mts. And the average trader here loses out his capital to the arbitrage which he cannot position.
Coming back the bank nifty trade today, the opening 5mts would have given the signal that the trend is going to be downwards. But the move till 10.05 would have proved otherwise — BN had to rally all the way back to the first candle to create momentum to the downside. 41450 has proved again to be a reversal zone (i am inclined to add this level to my SR).
The move from 10.10 to close gave a clear trend and it took out the support decisively at 12.05. Final 40mts were kind of steady with good volumes showing the level of positioning for tomorrow’s trade.
Tomorrow is going to be crucial for 2 different reasons
FOMC meeting by US FED at 11.30 IST today & their interest rate decision
Special MPC meeting by RBI governor at 10.00 IST tomorrow as the inflation was above threshold (mostly for interest rate revision)
If the interest rates increase its good for the banks & they could rally, but its sentiment negative for all the borrowers. S&P500 and Nifty50 could react differently too as the US market has lower weightage on financials compared to India.
For us if the interest rate goes up very sharply — on first look it may appear good for the banks. What you dont see is the difficulty it creates to the borrowers as their EMI goes up (1st order derivative impact). The SME who is unable to pay the EMI will have to shut down or downsize his firm creating labor pressure (2nd order derivative impact). The person getting laid off will be unable to consume products & will depend on Govt. for rations (3rd order derivative impact). So i personally expect the RBI to keep interest rate changes very minimal but control the velocity of money — M2.
6 Major banks — opening 5mts move most prominent for ICICI, Kotak and Axis.
HDFC stayed flattish — can be seen as sentiment positive comparing the other banks
ICICI & Kotak also made flattish chart pattern with negative closing
SBI fell quite deep but recovered in last 90mts
AXIS kept continuing the negative bias from yesterday’s trade
IndusInd fell sharply and did not recover into closing
HDFC Bank, ICICI Bank, SBI, AXIS Bank, Kotak Bank & Indus Ind Bank respectively presented in the 5mts time frame
The best trade you could have done today was the Put ratio spread (1:2) combination. ie sell 1 lot of 40500 PE and buy 2 lots of 40400 PE by 11.15 (aggressive traders) or 12.05 (moderate risk traders) as the support level was breached.
40500 was trading at 33.3 & 40400 at 25.10 at 11.18. During close each traded at 49.75 & 37 respectively. (33.3–49.75) + (37–25.1)*2 = -16.45+23.8 = 7.35 pts per trade.
S&P500 & Bank nifty continues to diverge. Today’s FOMC meeting by US Fed will sharply impact the SPX and Dow Jones. Nasdaq i cannot comment as there are no financials in it.
Comparison of BankNifty vs SPX (S&P500 US index)
15mts not showing clear direction
1hr also not showing clear direction
Bank nifty support & resistance levels
s1: 40867, s2: 40691
r1: 41312, r2: 41455
PS: Read the standard disclaimer at: bit. ly/3Nm3RER
Price action of bank nifty index in 5mts chart
Speaking of the first candle — it was a story by itself. Gap up opening at 41472 also intraday high & closing the candle at 41107 (low of 41244). 230 pts move in 5mts.
I have been pointing out the disparity in #SGXNifty & our indices price action. Lets take yesterday’s case. SGXNifty at 18314 vs 18175 spot. When such anomaly occurs — its the foreigners who always mint money. The only way these 2 indices can converge is with a gap up opening at 9.15 and sharp down move in the opening 15mts. And the average trader here loses out his capital to the arbitrage which he cannot position.
Coming back the bank nifty trade today, the opening 5mts would have given the signal that the trend is going to be downwards. But the move till 10.05 would have proved otherwise — BN had to rally all the way back to the first candle to create momentum to the downside. 41450 has proved again to be a reversal zone (i am inclined to add this level to my SR).
The move from 10.10 to close gave a clear trend and it took out the support decisively at 12.05. Final 40mts were kind of steady with good volumes showing the level of positioning for tomorrow’s trade.
Tomorrow is going to be crucial for 2 different reasons
FOMC meeting by US FED at 11.30 IST today & their interest rate decision
Special MPC meeting by RBI governor at 10.00 IST tomorrow as the inflation was above threshold (mostly for interest rate revision)
If the interest rates increase its good for the banks & they could rally, but its sentiment negative for all the borrowers. S&P500 and Nifty50 could react differently too as the US market has lower weightage on financials compared to India.
For us if the interest rate goes up very sharply — on first look it may appear good for the banks. What you dont see is the difficulty it creates to the borrowers as their EMI goes up (1st order derivative impact). The SME who is unable to pay the EMI will have to shut down or downsize his firm creating labor pressure (2nd order derivative impact). The person getting laid off will be unable to consume products & will depend on Govt. for rations (3rd order derivative impact). So i personally expect the RBI to keep interest rate changes very minimal but control the velocity of money — M2.
6 Major banks — opening 5mts move most prominent for ICICI, Kotak and Axis.
HDFC stayed flattish — can be seen as sentiment positive comparing the other banks
ICICI & Kotak also made flattish chart pattern with negative closing
SBI fell quite deep but recovered in last 90mts
AXIS kept continuing the negative bias from yesterday’s trade
IndusInd fell sharply and did not recover into closing
HDFC Bank, ICICI Bank, SBI, AXIS Bank, Kotak Bank & Indus Ind Bank respectively presented in the 5mts time frame
The best trade you could have done today was the Put ratio spread (1:2) combination. ie sell 1 lot of 40500 PE and buy 2 lots of 40400 PE by 11.15 (aggressive traders) or 12.05 (moderate risk traders) as the support level was breached.
40500 was trading at 33.3 & 40400 at 25.10 at 11.18. During close each traded at 49.75 & 37 respectively. (33.3–49.75) + (37–25.1)*2 = -16.45+23.8 = 7.35 pts per trade.
S&P500 & Bank nifty continues to diverge. Today’s FOMC meeting by US Fed will sharply impact the SPX and Dow Jones. Nasdaq i cannot comment as there are no financials in it.
Comparison of BankNifty vs SPX (S&P500 US index)
15mts not showing clear direction
1hr also not showing clear direction
Bank nifty support & resistance levels
s1: 40867, s2: 40691
r1: 41312, r2: 41455
PS: Read the standard disclaimer at: bit. ly/3Nm3RER
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