Bank Nifty Future

Bank Nifty is constituted of all following banking stock mix of public and private banks.

#Axis Bank Ltd.
#Bank of Baroda
#Federal Bank Ltd.
#HDFC Bank Ltd.
#ICICI Bank Ltd.
#IDFC First Bank Ltd.
#IndusInd Bank Ltd.
#Kotak Mahindra Bank Ltd.
#Punjab National Bank
#RBL Bank Ltd.
#State Bank of India
#Yes Bank Ltd.

The NiftyBank Index was launched in year 2000 and trading in derivative products were introduced in year 2005 more specific June 13, 2005. Today in year 2019 Bank Nifty is most vibrating derivative product in India. Price of Bank Nifty on Oct. 24 2000 was 829 and it made recent high of 31783 on May 31 2019.From low to high its return of more than 21% per annum in last 19 years. If someone would have invested RS 1 Lac in October 2000 it would have been RS. 37 Laces by now.  I am not suggesting buying at this point. Valuation at its life time high point. Now question comes how to get the valuation and how many methods are used to value any Index or the stock. Intrinsic Valuation (method to calculate future discounted earning)   and Relative Analysis Methods are 2 most popular ways or methods. All beginners can use PE Analysis to understand expensive or cheap valuation. But I tell you it’s not that easy. You must have good experience to analyze the PE Ratios. It’s a tricky business.

Banking is the blood of Indian economy. Why I am advocating this because a lot has to be done in infrastructure and balance sheet of India is at fiscal deficit of 3.4%. get has allotted  2 Lac Crores for infrastructure development, but that not enough. Linking rivers, roads, flyovers, super flyovers, bridges, smart cities, reasonable housing, fast trains, restructuring and maintenance in railways, above all warehousing (most important). Need to pump in more than 10 Laces Crores bare minimum. This year government is planning to sell 5G spectrum. Almost it would fetch 6 Laces Crores. Now all operators will ask banks to lend them mentioned amount. What so ever for any kind of development or growth need to be execute the same; money is required and for that strong banking system need to be in place.

Back to stock market, NiftyBank is darling of all day traders and swing traders, because of its big swings. Average daily volatility is 1.16 whereas benchmark Nifty has 0.91. In high volatile markets gap is even widen and in range bound markets gap is squeezed. As Beta of Bank Nifty is greater than Nifty attract more and more traders. Higher standard deviation of Bank Nifty gives more opportunity to make money in trading if played safely with small stop loss and big profits.  Even in a day Bank Nifty move 100 to 300 points one side in normal days and 600 to 1000 points in high volatile days. For positional traders opportunity comes with annual volatility range of 9 to 25   extremes are 5 and 48. Look at the 5 years chart below:

Chart # 1 (year 2014-2019) #BankNifty

Private Banks Leader and Public Sector Leader

Out of the list HDFC Bank proved to be biggest gainer and stable bank, whereas State Bank of India (#SBIN) is maintaining its leadership in public sector banks. In last financial year 2018-2019 State Bank of India posted revenue of RS. 2.8 Laces Crores and HDFC Bank posted revenue of RS. 1.16 Laces Crores.  Although SBI posted higher revenue but issue is NPA (Non-Performing assets). Continuously for last many years SBI is adjusting its NPAs against its revenues. The bank which was in discussion in last one year is Yes Bank, This bank made high of 404 and dropped to 100 in a very short span. Most of the small investors are trading in Yes Bank. I don’t know why investors are attracted to the stock which starts downward journey. I will suggest all small investors at least learn concept of 50% or will like to suggest being with Index only because of risk management. One’s loss is profit to others is the concept on which market play. When public sector banks were suffering or struggling with NPAs, Private Banks managed to outperform, except one or two. When Public sector Banks will enjoy clean balance sheet without and lower nonperforming assets will be able to do much better and bigger business. Let’s hope if this can be done. Public sector banks have an advantage of backing of the government means lower risk.      

BankNifty Levels for next 6 months Trend Deciding Range 30460-30760 Resistance 32597 33819 37077 Support 29339 27303 24045

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