Bank Nifty 8th Feb 2016
Bank Nifty has had a tough time over the past few months. Regular readers and clients of this website may clearly recall that since the past 12 months we have been saying / recommending that Banking stocks must not be in your portfolio and that recommendation was true for both private sector banking stocks and public sector banking stocks. As we have said on many occasions that Bank Nifty Chart / Bank Nifty Futures were and still continue to make consistent lower tops and lower bottoms and whenever any stock or index is making such structures then we must not remain long in them. Fundamental analysis will only guide upto a certain point but if the charts start breaking major supports then always without any exception that stock or sector has performed very badly. Anyways lets see now what the Banking sector is showing us. We do know there are many traders / brokers and investors who want Banking stocks to go up but let us analyze the longer term cycle in a careful manner.
Banking Sector broadly has some major time cycle supports as most of my clients know that we consider time cycles also extremely important as they guide us and caution us in advance. So Banking stocks have good time cycle supports around 10-22nd Feb 2016 so in the near term we can expect some bottom (a short term bottom for Banking sector) and also we have price supports around 14100-14500 on spot Bank Nifty chart so if traders are short in Banking sector then they must look to cover their short positions. The overall sector is extremely weak and looking at the Bank Nifty Charts and Bank Nifty time cycles we do not see Banking stocks outperforming the Nifty 50 in this bullish move so we do not see any logic in buying Banking sector stocks between 14100-14500 but if you are currently stuck in Banking sector stocks like Axis Bank, Icici Bank or any banking stock then it will be wise to average these positions around 14100-14500 and then wait for your price to come back. Since people who are stuck in these stocks have held them for so long it will be better now to average lower and then get out on bounce back. We do know that a lot of the fund managers and asset managers are highly recommending Axis Bank Kotak Bank and Yes Bank but as per our analysis we do not see any major bullishness in them. Yes they will move up along with Nifty Futures but we do not see out performance from them so it will be wise to stay away from them. Some people have argued that valuations in Banking stocks have reached rock bottom but we still don’t feel so. A smart fund manager did a simple comparison of all front line Indian Banks with ICBC (Industrial and Commercial Bank of China) and DBS (The Development Bank of Singapore Limited) now ICBC is giving a dividend yield of 8 percent, P/E of 7 and trading below book value. In the case of DBS is trading below book value and has dividend yield of almost 5 percent so Indian Banks still are not cheap with respect to global front line banks. Both ICBC and DBS are front line banks.
In a nut shell it will be prudent to avoid fresh longs in the Indian Banking sector. If stuck in trading long positions average at 14100-14500 and then get out on pullback.
Good Trading To You!