Bank Nifty Hits Lifetime High, 60,000 Next? What’s Fueling The Rally?

Bank Nifty index has hit a lifetme high in trade on Monday, June 9, surpassing the 57,000  level for the first time on the backs of sharp rally witnessed in banking sector stocks ,which buoyed after  Reserve Bank of India’s (RBI’s) slashed down the Cash Reserve Ratio (CRR). The index hit a life-time high of 57,049.50.

Kotak Mahindra Bank, AU Small Finance Bank, Canara Bank, Axis Bank, Punjab National Bank, were the top gainers under Bank Nifty index, gaining over 2 per cent, whilst only ICICI Bank shares was trading in the red.

Sudeep Shah of SBI securities, said, “On Friday, the Banking benchmark index, Bank Nifty has given a stage-2 cup pattern breakout on the daily scale. However, on Monday, the index has traded in a narrow range of 256 points, which was lowest daily range since May 16.”

“As the index is trading at all-time high level, all the moving averages and momentum-based indicators are showing strong bullish momentum in the index. As per the major rule of cup pattern, the upside target is placed at 58700 level. While, on the downside, the zone of 56300-56200 is likely to provide the cushion in case of any immediate decline,” he said.

The surge in the banking stocks came after the central bank reduced the CRR by 100 (basis points) bps to 3 per cent of net demand and time liabilities (NDTL), which is estimated to infuse primary liquidity of Rs 2.5 lakh crore into the banking system, helping reduce cost of funding for banks and resulting in faster policy transmission.

Adding to the ongoing easing measures, the RBI has also infused over Rs 7 lakh crore into the banking system through OMO purchases in the last five months.

After consolidating for over a month, the Bank Nifty index has resumed its primary uptrend with a decisive range breakout. The interim resistance is seen near 57,500. On Friday, Bank Nifty index came out of its sideways zone, giving an upward breakout of its rounding pattern.