What is Bank Nifty Index & How to Analyze?

What is Bank Nifty Index & How to analyze _ (1)

Bank Nifty Index:

Bank nifty is one of the important indexes which comprises the most liquid and large Indian Banking stocks. Lagging and leading the behaviour of Bank Nifty can help us gauge the strength or weakness of the ongoing trend in Nifty. Bank Nifty Index positively influences almost all the sectoral indices of NSE in both bull and bear phase market movements.

Hence, before making any investments in the equity market, the investing and trading community must look into the behavioural pattern of banking sector stocks as they influence the behaviour of other sector stocks too and accordingly make trade investments. 

The judgment of the Bank Nifty index movement depends on fundamental and technical factors.

Fundamental Factors:

  1. Bond Yield Movement: When a country’s macro-economic condition (CPI, GDP, trade balance, and fiscal deficit) deteriorates, bond prices fall and bond yields rise. From a stock market investment point of view, rising bond yields erode bank treasury income and vise-Versa.
  2. Quarterly result update of top six banks (HDFC Bank, ICICI Bank, KOTAK Bank, SBI, Axis Bank and IndusInd Bank): Quarterly, the parameters like Net interest income, core income from operation, Net interest margin, Asset quality improvement, Capital adequacy ratio and CASA ratio should be considered for these banks to understand the overall trend of the market.

Technical Factors: Derivative Indicator :

  1. High Call and Put option OI (Open Interest) of the index: Positional and short term.
  2. High Call and Put option OI of HDFC Bank, ICICI Bank, KOTAK Bank, SBI and Axis Bank.
  3. Index Future OI and Price movement on weekly and monthly data: Long Buildup, Short Buildup, and Short Covering.
  4. Option activity (weekly and monthly): Short build-up or short-covering strike with relation to their price and IV movement.
  5. Cost-of-carry (COC) movement: Premium or discount, high premium means range-bound expectation.
  6. Index IV percentile: above 90 or below 30.
  7. PCR (Put-call Ratio) OI trend: Increasing trend shows bullishness and vice-a-versa.
  8. VWAP (Volume weighted average price) level: Weekly, monthly and quarterly. 
  9. Options Activity in HDFC Bank, ICICI Bank, KOTAK Bank, SBI and Axis Bank.
  10. Index Ratio trend: Bank Nifty/Nifty. 
  11. EMA (Exponential moving average) Levels: 10,20,50,100 and 200.
  12. Trend Reversal date calculation through “Gann degree”.
  13. Elliott wave for Positional trend only. 
  14. Mean +1, 2 and 3 levels with help of Fibonacci Extension: Weekly and monthly.
  15. Index HV (Historical volatility) movement. 

We give bullish or bearish strategy recommendations with the divided format on the index by screening the above factors, which is why our success ratio (87 per cent in the last 1 year) of the FNO strategy is high. To be successful in trading, it is very important to have discipline and adequate understanding. Trading benefits are high, but that depends on the choices. Trading needs a lot of time and attention to comprehend market trends, technical indicators, and domestic and global capital market news.

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