Bank Nifty Prediction for Next Week 8-12 May 2023: The Nifty Bank, or Bank Nifty (42,661.20), one of the most actively traded indexes of the NSE, experienced massive selling pressure on May 5, 2023. The Bank Nifty declined very sharply by 1,024.25 points or 2.34 percent. HDFC Bank was the main culprit behind the sharp declines in shares of Bank Nifty. The news of the MSCI outflow from the HDFC twins created panic among buyers before the market opened.
When the risk of MSCI outflows gripped investors, financial shares were relentlessly sold, led by the HDFC Twins. On every upward movement since the opening of trading hours, traders have set themselves up to short. After the initial fall, the market made a smart rebound. However, Bank Nifty lost all of its gains in the second half and underwent a significant sell-off.
The low and high of the Nifty Bank were 42,582.20 and 43,588.00, respectively. On the final day of the week, this had a significant impact on the Indian benchmarks where the Nifty and Sensex declined by 1.02 and 1.13%, respectively. The index heavyweights, HDFC Bank, and HDFC fell sharply by 5.91% and 5.58%, respectively.
Why HDFC twins were falling big?
HDFC Bank and HDFC recently announced a merger to form a single company. MSCI announced a calculation known as an “adjustment factor” to determine how much weight to give the newly merged company in the index. According to a recent MSCI report, the combined entity was added to their index, but only with a “limited investability factor” of 50% as opposed to the market’s anticipation of 74%.
This has caused fears of foreign funds outflow, which is likely to keep the HDFC twins under pressure in the coming days. According to the experts, HDFC twins will face an outflow of $150-200 million. This led to nervousness and caused concern among the investors. So, we saw a bloodbath and slump in the share prices of the HDFC twins on Friday, 05 May.
How will HDFC Bank impact Bank Nifty?
As HDFC Bank holds the top position in the NSE’s Nifty Bank. So, any changes in the share prices of HDFC Bank can greatly affect the overall Bank Nifty price. HDFC Bank’s weightage in Nifty Bank is 27.04%. A 1% increase or decrease in its share prices can impact the 0.2704% movement in the Bank Nifty. If the current price of Bank Nifty is 42,661.20, this means that a 1% change in HDFC Bank’s share prices can impact around 115 points in Bank Nifty’s overall index.
So, the impact will be bigger and more catastrophic for Bank Nifty if we see more selling pressures in HDFC Bank in the coming week. Only, a rebound in the share prices of the HDFC twins will help Bank Nifty to shine again next week.
Bank Nifty Movement on 5 May 2023
Bank Nifty opened the gap down at 43,110.65 which was a fall of around 575 points or 1.3%. But after the initial fall, it recovered to the level around 43690 and made a high of 43,588.00. But as the day progressed, the selling pressures of HDFC twins continued to weigh other banks and financial stocks. As a result, Bank Nifty slid to the low of 42,582.20 a tremendous fall of around 1100 points from the previous closing. The index recovered around 80 points from the low and closed at 42,661.20. But the closing was very weak on a daily and weekly basis.
Bank Nifty Prediction for Next Week 8-12 May 2023
The Bank Nifty for next week will be a tricky one as the MSCI news of HDFC twins may continue to impact the overall sentiment of investors. Unless and until a clear picture of the news emerges, the selling pressure of Bank Nifty will remain there. Also, the global banking crisis will add additional pressure on the banking shares to recover fast.
The Bank Nifty chart was looking strong, with the potential to break its all-time high. But, a wrench was thrown in the works by the MSCI’s announcement regarding the HDFC twins, causing chaos among buyers. With the Bank Nifty being overbought and facing multiple resistances at the 43600 level, it was only a matter of time before profit booking took place and the market took a tumble.
As we head into next week, it’s imperative to keep a close eye on the Bank Nifty’s movement. It needs to either rebound from the 42500 level or drop down to the 42000-41800 range. Currently, the short-term chart indicates a slight weakness and the formation of a head and shoulders pattern, which could lead to a retest of the 42000-41500 level. However, if it manages to find support around the 42200-42000 level, we could see it climb back up to 43000.
Despite the recent fall, Bank Nifty’s primary trend is still strong and upward. A single day’s decline cannot alter the fundamental trend unless it breaks the crucial support at 42000. The optimal strategy would be to buy near the 42000 level and sell closer to 43000, as long as the range isn’t broken on either side.
Bank Nifty Levels for Next Week, May 8-12, 2023
Bank Nifty Target This Week: Upside 43400–44500 and Downside 42200–41000
| Nifty Bank Resistance Levels | ||
| 43450 | 44150 | 44500 |
| Nifty Bank Support Levels | ||
| 42200 | 41800 | 41180 |
Global Market Update News
The majority of the world markets traded down last week. Fear of a banking crisis and a rate hike by the FED contributed significantly to the decline in US stocks. Last week, the Dow Jones breached 33,000, and American regional banking stocks caused turmoil among buyers the majority of the time. However, on Friday, we witnessed a significant rebound in U.S. markets as a result of Apple Inc.’s strong Q4 results.
The Dow Jones, S&P 500, and Nasdaq all recorded a significant uptick, each rising by 1.65%, 1.85%, and 2.13%. On a weekly closing basis, the American markets at least avoided an ugly closing.
Except for U.S. markets the European and Asian markets closed the week mostly flat on a weekly closing basis. So, the coming week will be interesting as global markets will try to reestablish their trends.
Conclusion
Although there is still a considerable amount of Q4 data yet to be released by the key players, it is expected that the Indian stock market will follow the global market’s trend. Despite Friday’s turmoil caused by the HDFC Twins news, which impacted buyers, the primary trends of the Nifty and Bank Nifty remain strong and upward. Nevertheless, the market will aim to assimilate the HDFC Twins’ news and take guidance from the global equity markets, crude oil prices, the USD/INR rate, the dollar index, and U.S. 10-year bond yields.
Street analysts anticipate volatility in prices and buying activity in HDFC Twins the following week. Additionally, other significant banks, including ICICI, KOTAK, AXIS, and SBI, will attempt to mitigate the damage caused by the HDFC twins. Bank Nifty will attempt to recover unless some additional adverse news comes out.
Please note that all levels of Bank Nifty discussed above, are spot prices.
Chart Credit: Chartink
Disclaimer: To learn additional information about the disclaimer, please refer to the “Disclaimer Page.”
