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Informist, Friday, Aug 23, 2024

MUMBAI – The Nifty Bank index is expected to be range-bound next week, but seen underperforming the broad market due to concerns over moderating growth and rising stress on unsecured retail loans of banks.

The Nifty Bank gained 0.8% this week to settle at 50933.40 points, while the Nifty 50 index rose 1.2% during the week.

"As long as the index holds above 50,790, a 'buy on dips' strategy is advisable," said Hrishikesh Yedve, a senior technical research analyst at Asit C. Mehta Investment Intermediates Ltd, in a note. "On the upside, trend line resistance near 51,200 levels remains a key barrier."

Several brokerages have turned cautious on the banking sector due to moderating loan growth and widening credit-deposit ratio.

Emkay Global Financial Services expects credit growth to moderate to 12-13% in the current financial year due to expected slowdown in unsecured retail loans following Reserve Bank of India's action and continued liquidity pressure. "The rising and persistent stress in unsecured loans for PVBs (private sector banks) and MFI (microfinance institution) lenders adds to our concern," the brokerage said in its note on Thursday.

In the latest Monetary Policy Committee meeting on Aug 8, Reserve Bank of India Governor Shaktikanta Das also emphasised the need for banks to focus on mobilising household financial savings through innovative products and services.

Most of the banks have raised their deposit rates amid rising competition, and they are still increasingly relying on bulk term deposits and certificates of deposit to fund their asset growth.

Earlier this week, Motilal Oswal Financial Services slashed growth estimates for many of the banks amid slower deposit growth and a higher credit-deposit ratio across several banks.

"Throughout the week, the Bank Nifty has made several attempts to rally above the 51000 mark, but these attempts have been short-lived," said Brijesh Ail, head of technical and derivatives at IDBI Capital Markets and Securities.

"From a technical perspective, the index has a strong demand zone at 50500, suggesting a support level. The overall bias for the week remains bullish, and we anticipate that short covering will be triggered once the index surpasses the 51000 mark," Ali said.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Richard Fargose

Edited by Ashish Shirke

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