Will Nifty Bank’s underperformance to Nifty 50 continue? Here’s what experts say

economictimes.indiatimes.com:

The Nifty Bank clocked 3% gains in the July derivative series, but the selling in the recent sessions and the positioning in the derivatives segment indicates some pain in the near term. On Friday, Nifty Bank ended 0.5% down at 45468.10 points, whereas Nifty 50 ended 0.1% down at 19646.05 points.

“The bears dominated the market, and the index faced consistent selling pressure from higher levels, indicating a bearish sentiment prevailing in the market,” said Kunal Shah, senior technical and derivative analyst, LKP Securities. The index managed to close just above its 20-day moving average of 45350, which will act as a crucial support level, as a break below this level could lead to further selling pressure and potentially extend the downtrend, Shah said.

Any pullback could be seen as a short-term relief rally in the prevailing bearish trend, he added. In the derivatives segment, the banking sector saw high rollovers to the August series, but there are mixed long and short positions.

Only a directional move on either side can provide a clarity on the trajectory of the banking index. Abhilash Pagaria of Nuvama Institutional Equities believes that banks will likely be laggards in the current derivative series, as there aren’t any significant triggers for a sharp rally.Jatin Gadia of Sharekhan said that the overall structure of the Nifty Bank points towards a short-term consolidation.

The Nifty Bank has traded within the range 44700-46370, and a breach of this range on either side will lead to a move in that direction, he said. While the short-term trajectory for the banking remains weak, the long-term story remains positive and money managers recommend staying invested in this sector as they bet on the India growth story.