16th Nov ’23 BankNifty Postmortem RBI's news about CAR triggers
BankNifty Analysis
Banknifty did not have the fuel to rally today, unlike Nifty50. The major reason was because NiftyIT was doing all the powerlifting today (closed 2.69% higher). Between 11.00 to 11.15, I almost thought BankNifty may participate in the rally and take out the swing high of yesterday.
We had the first cooling off between 11.15 to 12.30 - something that said BN is not interested in going up. Then there was a broader rally between 13.50 to 14.45 where BN also participated and this time we took out the swing high. 99% of traders would not have predicted what would happen next.
We fell 358pts ~ 0.81% between 14.45 to 15.10, at that moment I had no idea what could be the related news that triggered it. Later found out about the RBI’s risk flag regarding new loans especially unsecured, credit-cards & loans from banks to NBFC - source. What we understand is that RBI has hiked the Capital Adequacy Ratio by 25% for a few types of loans. CAR is a measure of the strength of the bank if a majority of its loans default. This could just be a warning shot & I would like to dig into this information as time permits. A few starting points would be the bank’s recent loan growth, the percentage of unsecured loans, and the real impact of the recent rate hike that got progressed to the end user.
On the 1hr TF, BankNifty retests the 44063 support today but its well within the ascending channel envelope. I wish to change my stance from bullish to neutral and would like to go bearish if 44063 gives away in the forenoon session. To go bullish, I would wait till 44542 is broken on the hourly candle.
Banknifty did not have the fuel to rally today, unlike Nifty50. The major reason was because NiftyIT was doing all the powerlifting today (closed 2.69% higher). Between 11.00 to 11.15, I almost thought BankNifty may participate in the rally and take out the swing high of yesterday.
We had the first cooling off between 11.15 to 12.30 - something that said BN is not interested in going up. Then there was a broader rally between 13.50 to 14.45 where BN also participated and this time we took out the swing high. 99% of traders would not have predicted what would happen next.
We fell 358pts ~ 0.81% between 14.45 to 15.10, at that moment I had no idea what could be the related news that triggered it. Later found out about the RBI’s risk flag regarding new loans especially unsecured, credit-cards & loans from banks to NBFC - source. What we understand is that RBI has hiked the Capital Adequacy Ratio by 25% for a few types of loans. CAR is a measure of the strength of the bank if a majority of its loans default. This could just be a warning shot & I would like to dig into this information as time permits. A few starting points would be the bank’s recent loan growth, the percentage of unsecured loans, and the real impact of the recent rate hike that got progressed to the end user.
On the 1hr TF, BankNifty retests the 44063 support today but its well within the ascending channel envelope. I wish to change my stance from bullish to neutral and would like to go bearish if 44063 gives away in the forenoon session. To go bullish, I would wait till 44542 is broken on the hourly candle.
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