SBI, HDFC Bank: Trading strategies for bank stocks post RBI's GNPA warning

Nifty Bank index may hit record levels of 33,000 if it surpasses the resistance of 32,300

The Reserve Bank of India's (RBI's) Financial Stability Report (FSR) of December 2020, which stated that banks' gross non-performing assets (GNPAs) may rise sharply to 13.5 per cent by September 2021, weighed on stocks on Tuesday. Nifty Bank index slipped to a low of 31,726 in the early morning deals, down 0.8 per cent, dragged by State Bank of India, ICICI Bank, IndusInd Bank, and Bandhan Bank.

The index, however, pared losses marginally and was trading 0.3 per cent lower on the National Stock Exchange (NSE) at 10:10 am. Individually, SBI, HDFC Bank, IDFC First Bank, Punjab National Bank, and RBL Bank staged smart recovery from the day's low and were up between 0.2 per cent anb 2.5 per cent on the NSE. Nifty PSU Bank, on the other hand, was outperforming the benchmark Nifty, and was wuoting over 0.5 per cent higher with J&K Bank, Canara Bank, Bank of Baroda, and Indian Overseas Bank topping the charts. 

According to the FSR, the GNPAs even may escalate to 14.8 per cent, nearly double the 7.5 per cent in the same period of 2019-20, under the severe stress scenario. State-run banks are seen being the worst-affected among bank groups with their GNPA ratio expected to increase to 16.2 per cent by September 2021 under the baseline scenario from 9.7 per cent in September 2020. And to a high of 17.6 per cent in a severe stress scenario. READ MORE HERE

So, how do banking stocks look on charts?

NIFTYBANK: The index has seen selling pressure in the range 32,150 to 32,300 levels, as per the daily chart. However, a breakout above this resistenace may see a rally towards 33,000 levels. The support comes at Rs 31,700 and 31,500 levels. That said, the overall trend is highly bullish till the index defends 30,800 levels from a medium-term perspective. CLICK HERE FOR THE CHART
 
State Bank of India (SBIN): After conquering the 200-weekly moving average (WMA) around Rs 273 levels, the stock is re-testing the breakout support of the same. The overall trend is heading towards Rs 300 and Rs 320 mark. The support falls at Rs 275 on the closing basis with the medium-term outlook looking bullish above the support of Rs 270 levels. CLICK HERE FOR THE CHART
 
ICICI Bank Ltd (ICICIBANK): The monthly chart clearly indicates resistance above Rs 550 levels. Only a close above this level will lead to further upside, as per the weekly scale. To achieve this move, the support comes at Rs 520 levels. However, if the Relative Strength Index (RSI) breaches 58 value, the downside may see aggressive weakness. CLICK HERE FOR THE CHART
 
HDFC Bank Limited (HDFCBANK): The stock has been consolidating in the range of Rs 1,350 to Rs 1,450 for a while now. This base is preparing the stock for a breakout towards Rs 1,660 levels. However, this upside needs to sustain Rs 1,440 mark on the closing basis to witness volume-based support. The consolidation can also be seen on RSI, which may breakout above 64 value. If that happens, the strength of the stock may push price aggressively to higher levels. CLICK HERE FOR THE CHART

Canara Bank (CANBK): The "Golden Cross" pattern has already given a breakout around Rs 128 levels, as per the daily chart. The stock is currently witnessing mild follow-up buying due to which the upside is not showing an aggressive momentum. However, the overall trend is bullish and moving in the direction of Rs 150 to Rs 160 levels. The support comes at Rs 120 levels. CLICK HERE FOR THE CHART