Do FII’s decide the fate of Nifty Bank? Let’s deep dive and understand!

NIFTY Bank Index comprises the twelve most liquid and large capitalized Indian Banking stocks. The rescheduling of index constituents happens bi-annually every year.

The stocks of Bank Nifty include Axis Bank, AU Small Finance Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, IndusInd Bank, Kotak Mahindra Bank, Punjab National Bank, RBL Bank, and State Bank of India. It provides investors and market intermediaries with a benchmark that captures the capital market performance of Indian Banks. The index heavyweights include HDFC Bank and ICICI Bank weighing 32.97% and 25.54% respectively.

Nifty Bank has delivered decent returns of 21.91% YTD as against 27.80% of Nifty 50 in the same period. The three-month performance of Nifty Bank stands at 7.20%, while MTD performance stands dismal at -2.6%.

On the charts, we observe that after recording its all-time high on October 25 at 41,800, the Banking index has since then corrected by about 9%. It is trading below its 20 and 50-DMA which are key moving averages for the short term.

Currently, Nifty Bank hovers around 38,000 crucial levels and it is trading above its 100-DMA by just 1000 points. The RSI is dropping and currently stands at 39 indicating bearishness. The Directional movement indicator (+) has slipped below the -DMI and shows no signs of reversal. The technical parameters suggests that the sluggishness is likely to continue as no signs of reversal at the moment are seen on the charts. Meanwhile, the derivatives data stands aligned with the technical perspective as the change in open interest in today’s session is about 3% when the index is trading negative. The highest open interest is seen at the strike price 38500 call option on the monthly expiry with the PCR of 0.66.

The probable reason for such poor performance of the index is the relentless selling by the FIIs. The FIIs hold a maximum stake in the banking stocks and any selling of the FII hampers the performance of Bank Nifty. Should the FII change their mood, we can expect some bullishness in the Bank Nifty index.