Nifty Bank Outlook Today: A close above this level could extend short covering moves

The Nifty Bank continues to remain the index to watch going into Monday's trading session on June 8. After a slew of reforms announced by the Reserve Bank of India during the policy announcement on Friday resulted in very volatile moves on the banking index, but by close, the index had outperformed the Nifty 50, kept its losses in check and also managed to sustain above the 20-DMA of 54,320.

Friday's advance was the fourth straight day of gains for the banking index, during which it has gained over 800 points. Even though the moves have seen sharp swings, lower levels have generally seen buying interest.

Federal Bank had emerged as the top gainer for the week on the Nifty Bank with gains of over 5%, while even as HDFC Bank and ICICI Bank did not contribute much to the gains, their lackluster moves ensured that the index did not fall either.

What Are The Key Levels For The Nifty Bank?

Analysts tracking the Nifty Bank maintain that although the index closing above its 20-DMA is a positive on a weekly basis, an important resistance is just a few hundred points away.

The 54,800 - 55,000 zone continues to remain a barrier for the Nifty Bank and therefore, last week's high of 54,865 will be the first hurdle to cross for the index on the upside.

On the downside, the index managed to defend levels of 53,000 all through last week and the bulls would hope that this sustains going into this week as well.

Is Nifty Bank a Buy Or Sell?

According to Vatsal Bhuva of LKP Securities, the Nifty Bank remains stuck in a consolidation and congestion phase keeping the broader outlook sideways and rangebound.

However, he said that a decisive close above levels of 55,200 can trigger stronger momentum and result in a directional breakout.

Similar levels were projected by Sudeep Shah of SBI Securities as well. He said that the 54,100 - 54,000 zone will act as an immediate support, while a big hurdle is seen between 55,000 - 55,100. A sustained move above that level could trigger short covering towards 55,400 levels, he added.

Amol Athawale of Kotak Securities said that the Nifty Bank has made a promising reversal formation and that 54,000 and 53,500 will emerge as key support levels. As long as the index remains above both these levels, it has the potential to rally towards 55,500 - 56,000 levels, while traders may prefer to exit their long positions if the index slips below the 53,500 mark.