Repo Rate Hike: Banking stocks may see sell-off if index stays under 42K

Descending Triangle breakdown on Nifty Bank index may see up to 5% decline

Reserve Bank of India (RBI) hiked repo rate by 25 basis points to 6.50 per cent on Wednesday, in a process to tame high inflation. It also projected a GDP growth to 6.40 per cent for the next fiscal. Earlier, RBI has raised repo rate by 35 basis points in December last year. 

Meanwhile, the banking index, Nifty Bank index has tumbled 3 per cent since December of last year, and barring HDFC Bank and IDFC First Bank, its other constituents have declined between 5 per cent to 8 per cent.

On Wednesday, Bandhan Bank became the top contender rising over a per cent, while Bank of Baroda, Axis Bank traded with declines. Shares of ICICI Bank, State Bank of India, HDFC Bank, Punjab National Bank were all seen trading with modest gains. 

Here’s the technical outlook of banking stocks amid hike in the repo rate:-

NIFTYBANK

Outlook: if fails to overhaul 42,000-mark, index may slip 5 per cent

There is a breakdown of “Descending Triangle” pattern on the daily chart of the Nifty Bank index.  This clearly reveals weakness, and if the index fails to rebound over 42,000-mark, a broad base sell-off in the banking sector may emerge. The bearish sentiment may pull index down towards 38,885-mark, which is its 200-day moving average (DMA).  CLICK HERE FOR THE CHART

State Bank of India (SBIN) 

Outlook:  Trend is fragile, support is at 200-DMA

The broad trend of State Bank of India stock signals a negative bias, as the breakdown of the key neckline; set at Rs 570 has fuelled selling pressure. The stock is presently hovering near the 200-day moving average (DMA) placed at Rs 536 and unless a conclusive breach beneath this support average occurs, the trend could make attempts to conquer the hurdle of Rs 570. CLICK HERE FOR THE CHART

Punjab National Bank (PNB)

Outlook: Below 49, stock may severely dwindle 

Shares of Punjab National Bank are holding the support of last reversal seen near Rs 50-mark. The trend looks stable over this support, however if the stock falls beneath this reversal mark, the short-term trend may see aggravated selling pressure, resulting in price slipping towards Rs 43, its next support mark. On the upside, the stock needs to surpass Rs 56 to Rs 54 range to attract bullish attention. CLICK HERE FOR THE CHART

Axis Bank Ltd (AXISBANK)

Outlook: Head and Shoulder breakdown

A breakdown of “Head and Shoulder” pattern reflects a negative bias for the stock. While the current price are holding the last reversal mark of Rs 840, the probability of breaking this support becomes higher for the stock fails to quickly cross Rs 910, its breakdown mark. The next crucial support for the stock is at Rs 787 level, which is its 200-DMA. CLICK HERE FOR THE CHART

HDFC Bank Ltd (HDFCBANK)

Likely target: Rs 1,850

Upside potential: 10%

Shares of HDFC Bank are trading at the upper range of the bullish trend. The stock has immensely received accumulation in the range of Rs 1,570 to Rs 1,550 levels. Thus, until this support continues to bolster the positive bias, the trend is likely to higher upside.  The stock may hit a new all-time, as the current trend portrays bullish candlestick formations. The rally may lead to Rs 1,850 levels. CLICK HERE FOR THE CHART