Bank Nifty sheds 700 points from day's high, staring at March lows

The Bank Nifty has been under pressure over fears for asset quality following the three-month moratorium on repayment of loans, which, some reports suggest, can be extended by another three months.

Experts warn of defaults, as some industries will struggle with repayments due to lack of money and some borrowers may be hit by layoffs, etc.

The suspension of fresh Insolvency and Bankruptcy Code proceedings for a year also added to pressure on the banking & financial space, experts say.

The Bank Nifty crashed 45 percent in three months to hit a new low in March. It recovered 27 percent by April-end but in May, it has been under selling pressure and has consistently underperformed the Nifty.

On May 19, it fell nearly 700 points from the day's high and finally settled at 17,486.25, down 86.95 points. It is around 569 points away from March’s closing lows.

The Bank Nifty formed a bearish candle for the fifth consecutive session on May 19 while in the previous session, it made a Bearish Belt Hold pattern.

Given the pessimism, the index is expected to break its March intraday as well as closing lows soon, say experts.

"The Bank Nifty is looking much weaker as compared to the Nifty. The Nifty witnessed nearly 40 percent fall from the all-time high to the March low, whereas the Bank Nifty saw nearly 50 percent decline during the same period. Also, in the case of the recent pullback, the Bank Nifty underperformed significantly," Gaurav Ratnaparkhi, Senior Technical Analyst, Sharekhan by BNP Paribas told Moneycontrol.

shows that the banking space has an inherent weakness and is likely to witness much deeper cut going ahead, he added.

Structurally, the Bank Nifty has resumed the medium term downtrend; is expected to test the March low of 16,116 in the short term, while the medium term target on the downside is as low as 14,500, Ratnaparkhi said.

As the Bank Nifty is trading below 19,000 levels, decline towards 16,100 can be expected, said Ashish Chaturmohta, Head of Technical and Derivatives, Sanctum Wealth Management.

"Below 16,100, support level is seen at 13,400. On the upside, 22,000 levels needs to be crossed and sustained for any uptrend to emerge," he said.

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