Selloff In Bank Stocks To Weigh On Benchmark Indices, Say Analysts

With no signs of revival in banking stocks, the benchmark indices will see fluctuations in the near term, according to analysts.

The kind of developments we saw at banking counters last week do not bode well for the overall market, according to Sameet Chavan, head of research and derivatives at Angel Broking Ltd. "Overall, there is a massive underperformance in the banking space, with no clear signs of revival going ahead."

For Bank Nifty, 46,500 is a very strong resistance level, and it will not be surprising to see the index slide below 44,000 in the coming days, Chavan said. "Nifty has to bite the bullet and we would see it sliding below 21,000 in the coming session."

For Bank Nifty, 45,500 is poised to act as an immediate obstacle, while buying interest is expected to materialise around the 44,700 levels on the downside, according to Shrey Jain, founder and chief executive officer of SAS Online. "Given the current market volatility, it is crucial to be prepared for short-term fluctuations."

On Thursday, India's benchmark stock indices extended losses for the second week and ended lower in a truncated week as shares of HDFC Bank Ltd. and Axis Bank Ltd. weighed.

The benchmark indices logged a weekly loss for the second consecutive week. The benchmark S&P BSE Sensex declined 1.01%, and the NSE Nifty 50 declined 1.02%.

"We are not upbeat on the market for the short term," according to Chavan. "On the higher side for Nifty, 21,650–750 will act as a sturdy wall and soon will expect Nifty to enter sub-21,000 territory."

With the current market set-up, about 50% of equity assets must be in large caps, 15-20% in cash and gold ETFs, and the balance in small and mid-cap stocks, said G Chokkalingam, founder and managing director, Equinomics Research Pvt.

In the last couple of months, the markets have witnessed a massive rally, with the broader market outperforming the benchmark indices. Foreign investors have sold to the tune of Rs 26,000 crore in the cash market after huge inflows seen in November and December, Chavan said.

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