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What is the story about?
The Nifty Bank will be the index to watch ahead of the policy decision from the Reserve Bank of India (RBI) on Friday, June 5, at 10 AM. The banking index is coming on the back of a three-day gaining streak, but has not managed to reverse the losses seen during the previous four days of losses.
During the course of the week, the Nifty Bank has traded in a 1,500-point range, seeing very sharp moves during the second half of the trading session on Tuesday and Wednesday.
The Nifty Bank will be the key index to watch today as the RBI announces its policy decision. More so, it may also announce other steps with regards to the currency or the bond markets, though nothing is on paper about the Governor's remarks.
Banking stocks had staged a recovery on Thursday after CNBC-TV18 reported, along with multiple other outlets, that the government is looking at tax exemptions for Foreign Investors into certain G-Secs, citing sources with knowledge of the matter.
Any decision in this regard will also have an impact on banking stocks.
Any reform that improves the liquidity, transparency, or efficiency of the bond market directly impacts the balance sheets and profitability of banks.
Indian banks are required to hold a significant portion of their assets in G-Secs to meet the Statutory Liquidity Ratio (SLR).
When bond yields are less volatile, banks face smaller Mark-To-Market (MTM) losses on their investment portfolios, which stabilizes their quarterly earnings and reduces the need for large provisions.
According to Om Mehra of SAMCO Securities, the options data continues to indicate a well-defined trading range for the Nifty Bank, with significant put writing at 54,000 and 53,500 levels. On the upside, there is significant call writing at 54,500 and 55,000 levels.
"As long as the index remains above the 54,000 - 53,500 support levels, the recovery can extend to 54,900 - 55,000 levels. A decisive breakout above 55,000 could further strengthen the bullish momentum. However, failure to sustain above the 20-DEMA, which is at 54,320, could keep the index rangebound," he added.
Sudeep Shah of SBI Securities said that 54,700 - 54,800 zone could be an immediate hurdle for the Nifty Bank. A decisive push above 54,800 could take the index towards 55,400. On the downside, 53,900 - 53,800 zone is likely to provide a strong support to the index.
Also Read: Trade Setup for June 5: Nifty sets sights on RBI policy for next directional move; 23,500 remains key
During the course of the week, the Nifty Bank has traded in a 1,500-point range, seeing very sharp moves during the second half of the trading session on Tuesday and Wednesday.
Why Is The Nifty Bank Important Today?
The Nifty Bank will be the key index to watch today as the RBI announces its policy decision. More so, it may also announce other steps with regards to the currency or the bond markets, though nothing is on paper about the Governor's remarks.
Banking stocks had staged a recovery on Thursday after CNBC-TV18 reported, along with multiple other outlets, that the government is looking at tax exemptions for Foreign Investors into certain G-Secs, citing sources with knowledge of the matter.
Any decision in this regard will also have an impact on banking stocks.
How Do Banks Benefit From Bond Market Reforms?
Any reform that improves the liquidity, transparency, or efficiency of the bond market directly impacts the balance sheets and profitability of banks.
Indian banks are required to hold a significant portion of their assets in G-Secs to meet the Statutory Liquidity Ratio (SLR).
When bond yields are less volatile, banks face smaller Mark-To-Market (MTM) losses on their investment portfolios, which stabilizes their quarterly earnings and reduces the need for large provisions.
What Are The Key Levels For The Nifty Bank?
According to Om Mehra of SAMCO Securities, the options data continues to indicate a well-defined trading range for the Nifty Bank, with significant put writing at 54,000 and 53,500 levels. On the upside, there is significant call writing at 54,500 and 55,000 levels.
"As long as the index remains above the 54,000 - 53,500 support levels, the recovery can extend to 54,900 - 55,000 levels. A decisive breakout above 55,000 could further strengthen the bullish momentum. However, failure to sustain above the 20-DEMA, which is at 54,320, could keep the index rangebound," he added.
Sudeep Shah of SBI Securities said that 54,700 - 54,800 zone could be an immediate hurdle for the Nifty Bank. A decisive push above 54,800 could take the index towards 55,400. On the downside, 53,900 - 53,800 zone is likely to provide a strong support to the index.
Also Read: Trade Setup for June 5: Nifty sets sights on RBI policy for next directional move; 23,500 remains key
