bank stocks rally: Bank stocks rejoice RBI’s pause on rate hikes; should investors join the party?
The Nifty Bank outperformed Nifty50 and moved past the 41,200-mark. The banking sector gauge rose for the 7th straight session, and this is the longest winning streak it has seen since August 2022.
The Nifty Bank index was up 0.4% at 41172 points, and Nifty 50 up 0.3% at 17612.35 points.
“The market is in a good mood, and this policy provides us with further cause to rejoice,” said Santosh Meena, Head of Research, Swastika Investmart.
Rejuvenated by the RBI’s decision, traders bought out-of-the-money call options of Nifty Bank, as reflected in the rise in premiums of 41,200, 41,300, and 41,500 strike prices.
In the April futures contract of the Nifty Bank, open interest rose over 4% to 2.3 million, indicating a build-up of long positions.
“The crucial resistance levels for Nifty and Bank Nifty are 17,600 and 41,250, respectively. If they are successful in crossing over these levels, we can anticipate a move in the direction of the 17,770 and 41,650 levels,” Meena said, adding that the trade set-up now is that of “buy-on dip”.While Nifty Bank has outperformed Nifty50, the gains in the banking pack are not broad-based.
Bandhan Bank, Punjab National Bank, State Bank of India, and IndusInd Bank gained 1-2%, whereas Kotak Mahindra Bank, ICICI Bank, and Axis Bank were flat-to-down.
The policy outcome came out as a double positive for the equity market, and it would not be unreasonable to say that this could very well be the end of the rate hike cycle, according to Apurva Sheth, head of market perspective and research, SAMCO Securities.
“The RBI projects the headline inflation to come at 5.1% in Q1FY24, if the RBI is comfortable to take a pause when headline inflation is above 6% it would maintain this stance if inflation comes as per their projections,” Sheth said.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
