The Indian stock market has been on a remarkable rally, continuing for two consecutive weeks after the election outcome. Despite the benchmark indices Nifty 50 and BSE Sensex reaching fresh record highs, Bank Nifty has struggled to break previous highs.
The main laggards in the banking sector have been private sector banks such as ICICI and Axis. However, investors have enjoyed a broad-based rally across small and mid-cap stocks, which shows no signs of stopping.
Will Bank Nifty participate in the rally?
The big question is whether Bank Nifty will join the rally this week. Despite a positive environment, banking stocks did not perform as expected last week. The upcoming week promises to be action-packed for the overall market.
Bank Nifty is in a no-trade zone, stuck between resistance and support. A breakout in either direction will be key for the coming week.
As per the daily time frame of Bank Nifty, it is stuck in a range of 300–400 points on the downside and upside. Only a range breakout of 500–600 points from the current level will make a clear path for this week. Otherwise, traders will face another week of sluggishness and premium erosion.
Also read: Banknifty Index: How to Use it to Earn Money
To get a rally in the Bank Nifty, frontline PVT banking stocks like ICICI, AXIS, Kotak, and HDFC Bank need to break their key resistance levels this week.
These stocks could break the resistance levels unless big institutions make fresh shorts before June’s expiry week.
The only comfort is that the private mid-sized banks have already shown signs of a fresh rally for the coming week.
Given the robust performance of sectors like cement, NBFC, capital goods, and power, the Bank Nifty might finally start a rally towards fresh all-time highs.
Will Option Buyers Lose Premiums Again?
Option traders suffered significant losses last week due to the lack of movement in the main indices. Their patience will be tested again this week.
The India VIX has crashed significantly from its highs. Despite VIX making the Indian market stable, indices were directionless throughout the week.
Trading volumes for most stocks remained very low. Only a breakout could boost sentiment, causing option writers to lose control and the market to move decisively with strong momentum.
Also read: Futures and Options Trading: Learn To Make Unlimited Gain
Unless the Bank Nifty breaks its current range, option buyers might face another week of sluggish and range-bound sessions. Positive developments, domestically or globally, could provide the momentum needed for an option buyer.
Bank Nifty Options Chain Data
According to the options chain data, the Bank Nifty shows slightly bullish sentiment. We see higher writing activity across various PUT strike prices.
The strike price 50000 has the highest open interest for both calls and puts.
Also read: 10 Golden Rules of Trading Options: Dos and Don’ts
The covering is in the range of 49600–49300, suggesting a strong support zone, and on the upside, near 50400–50500, there will also be a strong resistance level.
The overall PCR of 0.9391 indicates moderately balanced sentiment with a slight tilt toward a range-bound market.
Key Points to Watch This Week
Though the Indian market has shown no sign of weakness or profit booking, other cues from the domestic and global markets may impact this week.
Monsoon Progress
The progress of the monsoon season is critical for India, as it affects the agricultural sector and, by extension, the overall economy.
A good monsoon season can boost rural incomes, increase consumer spending, and support economic growth. Investors will closely monitor the patterns, density, and distribution of rainfall data from IMD.
Commodity Prices and Global Market
Crude oil prices and the dollar index have been stable, though crude oil rallied nearly 4% from its low last week. Any pullback in crude and DXY could fuel a rally in the global equity markets.
Global markets are currently a mixed bag. The Dow Jones is struggling to maintain its highs, while the DAX is trading at a critical support level.
So, Dow Jones and European markets will decide the fate of global markets this week.
Key Economic Data
Street will also look at key economic data, including China’s industrial production, US industrial production, the UK inflation rate, US initial jobless claims, the Bank of England’s (BoE) interest rate decision, and US manufacturing PMI.
Geopolitical Tensions
The tension between Russia and the USA, with both countries showing aggression by positioning nuclear submarines in the Cuban region, adds another layer of complexity. Traders and investors will closely monitor these developments.
FIIs and DIIs Activities
Weekly Activity Summary (10-Jun-2024 to 14-Jun-2024)
- DIIs: consistently net buyers, total net inflow of ₹6,293.38 crores.
- FIIs: mixed activity with inflows and outflows, total net inflow of ₹2,030.83 crores.
Overall, the combined buying by FIIs and DIIs supported the market’s strength throughout the week.
Their continued activity will be closely monitored.
Conclusion
The underlying strength of the Indian stock market is expected to remain strong this week. Experts believe Bank Nifty may join the bull rally and help benchmarks reach new record highs this week.
However, geopolitical issues, activities in small and midcaps, and institutional flows will determine the undertone of the market.
Disclaimer: As a blogger, I share only personal views and opinions on the market. I am not a SEBI-certified research analyst. So, you should conduct your own research and consult with a certified financial advisor before making any trading or investment decisions.
