Bank Nifty (Aug): 19300-19500 May Be A Good Hurdle Amid Deterioration Of Stressed Assets

Trading Idea: BNF (Aug)

LTP: 18862

Sell around 19250-19350 OR on rise around 19500-19600;

TGT: 18550*-18350-18100-17950*-17550-17400*-17250-17050*-16650-16200 (5-30 days)

TSL> 19400 OR > 19650

Note: Sustaining above 19400, BNF may rally towards 19500-19600, which is again a strong selling zone and only consecutive closing (3 days) above 19650 for any reason, BNF may further rally up to 20050-20150* and 20600-20950* & 21550-21700* in the near to short term (alternative bullish case scenario).

Any one holding long position in BNF and wishing to do so, may also watch 18550-18100-17950* area as nearest positional support zone.

Some of the reasoning may be:

1. Recent Q1FY17 results of the banks may be indicating that NPL woes are far from over even for some of the leading private banks (Axis/ICICI/Kotak). On the other side, some of the new generation banks like Indusund, Yes has stable/negligible NPA profile so far.

2. Below expected Q1 results for most of the banks.

3. Virtually no hope for any rate cut in the forthcoming RBI policy meet on 9-th Aug; rate cut @0.25% may come in the Oct meet as "Diwali gift" to the nation by the new RBI Gov.

4. Too much expectation of further monetary stimulus from the new RBI team may not materialize in reality after "Rexit".

5. Competition may heat up after new banking entrants as a result of yesterday's new guidelines about universal banking licenses. India is not a big market for so many private banks and banking is a costly business.

6. Present "Indradhanush" plan to recapitalize the PSBS may be too little & too late. Some structural steps and overall economic recovery is necessary to avoid the NPA menace. India's real rate of interest may be too high for viability of any business in today's world of low cost bank funding (as in the the other DM/OECED/EM).

Analytical Charts:

Article Courtesy: Frontiza.com