Nifty Bank rose 1,000 points. HDFC Bank, IndusInd, Yes Bank and other stocks rose up to 3 per cent. What lies ahead?
The Nifty Bank index surged around 2% to breach the 57,800-mark on Monday, while shares of heavyweight HDFC Bank rose around 3% to Rs 1,793.50. The stock is currently up about 7% over the last two trading sessions.
IndusInd Bank stock also surged nearly 3% on Monday. Shares of Bank of Baroda and Yes Bank rose about 2% each, while IDFC First Bank, Punjab National Bank, Canara Bank, Union Bank of India, AU Small Finance Bank, Kotak Mahindra Bank, Shares of State Bank of India (SBI), Axis Bank and ICICI Bank rose about 1% each. The Bundesbank was the only counter in the index to fall into the red with a small loss.
Iran and the United States have reached a peace agreement framework.
US President Donald Trump announced on Sunday that a long-awaited peace deal had been finalized. “The deal with the Islamic Republic of Iran is now complete,” Trump wrote on his Truth Social platform. He also said the Strait of Hormuz, a vital route for global oil shipments that Iran has effectively closed for months, would reopen on Friday and the United States would lift its blockade of Iranian ports. “Ships of the world, start your engines, let the oil flow!” Trump wrote.
Meanwhile, Iran said its newly announced deal with the United States would bring an “immediate end” to the war between the two countries. Iran’s Deputy Foreign Minister Kazem Gharibabadi said in a TV commentary this morning, “We have declared a permanent and immediate end to the war on all fronts, including Lebanon.”
Also read: Rs 8L cr richer! Sensex crossed 1,100 points and Nifty crossed 24K. U.S.-Iran ceasefire among five drivers driving the uptrend
What does the future hold for bank stocks?
VK Vijayakumar, chief investment strategist at Geojit Investments, today highlighted that banks are likely to lead the rally. “Large short positions by major private sector banks will continue to trigger further selling in the sector. Their valuations are attractive in a fairly valued market,” he said.
In its latest report on HDFC Bank, Nomura noted that RBI’s recent policy announcement introduced FCNR(B) swap window for new NRI deposits with maturity of 3-5 years from June 8 to September 30, with the RBI absorbing the entire cross-currency hedging cost. Deposits are exempt from CRR and SLR for lifetime. 100% distributable.
“This is positive for the sector: it brings in deposits at a time of slow deposit growth, reduces reliance on short-term wholesale funding and improves ALM across the system,” the international brokerage firm stressed.
The risk reward for HDFC Bank stock is favorable.
Nomura also pointed out that most large banks are offering nearly 6% on FCNR deposits, while midsize banks are offering up to 7%. Differences in returns are meaningful when applying leverage. 10x leverage at 6% generates a return of about 15% per year for depositors at large banks, while the same leverage at 7% (mid-tier) generates a return of about 25%. “However, we expect large banks to account for a disproportionate share of the flow. Foreign institutions promoting leverage will likely prefer large bank counterparties over mid-level ones given their safety and credit quality,” he added, reiterating his ‘buy’ call for HDFC Bank shares, finding the risk reward favorable.
Also read: Bulls return to the bank under RBI’s FCNR(B) initiative
Technical level of Nifty Bank
Vatsal Bhuva, technical analyst at LKP Securities, said Bank Nifty witnessed a strong break above the important resistance level of 56,400 and the downtrend line resistance in the last session. He highlighted that the index has reclaimed the 100-DMA on the daily chart and the RSI still maintains a bullish crossover, supporting a bullish bias.
“During the week, the index recovered both the 20-SMA and 50-SMA, highlighting improving technical strength. The overall setup suggests continued positivity with the index likely to initially test the 57,000 level and potentially extend towards 57,500. Immediate support is placed at 56,000 and positional support is seen at 55,500,” the analyst said.
“Bank Nifty witnessed a decisive breakout of the symmetrical triangle pattern on the daily chart this week. The index also crossed all major short-term moving averages and closed just below the 200-DMA located at 56,990. A sustained break above this level could trigger further upside towards the 57,500-58,000 area. Momentum indicators still hold support, with MACD producing a bullish crossover and RSI hovering above the 56,990 area. With a move upwards of 65, the broader technical structure remains positive and a buying strategy is advisable as long as the index remains above the 56,000 level,” said Nilesh Jain, Vice President, Technical and Derivatives Research, Centrum Finverse.
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(Disclaimer: Recommendations, suggestions, views and opinions provided by experts are their own. They do not represent the views of The Economic Times.)
