These bank stks may tank up to 18% as second Covid wave threatens recovery

The next support for the Nifty Bank index is at 30,000. Any breach of the same may result in a bearish trend towards 28,000-mark

Financial stocks came under heavy selling pressure at the bourses on Monday, falling up to 7 per cent in intra-day trade, on the National Stock Exchange (NSE) as concerns over near-term growth momentum and asset quality improvement destabilising due to the pandemic-induced local lockdowns weighed on sentiment. 

In the intra-day trade, the financials related indices - Nifty Bank, Nifty Financial Services, Nifty PSU Bank, Nifty Private Bank indices – were down in the range of 4 per cent to 6 per cent on the NSE. Individually, AU Small Finance Bank, IDFC First Bank, RBL Bank, ICICI Bank, Axis Bank, IndusInd Bank, State Bank of India, Bajaj Finance, Housing Development Finance Corporation (HDFC) slipped 5 per cent to 7 per cent in intra-day trade. READ MORE

From its record peak of 37,709, hit earlier this year, the Nifty Bank index has tumbled 19.3 per cent, including today's fall, to hit a low of 30,406 level on the NSE. In comparison, the Nifty50 index has corrected 8 per cent from its all-time high level. 

The 'Financial Services' segment command a weight of 38 per cent in the Nifty50 index with HDFC Bank (10.24 per cent), HDFC (7 per cent), ICICI Bank (6.34 per cent), Kotak Mahindra Bank (4 per cent), and Axis Bank (2.76 per cent) being 5 of the top 10 Nifty constituents. 

Against this backdrop, here's how bank stocks look on technical charts: 

NIFTYBANK

Likely target: 28,000 (after breaking 30,000 levels)

Downside potential: 6.67%

The index is witnessing selling pressure below the 100-days moving average (DMA), as per the daily chart. While the index tried to rebound, lack of strength and follow-up buying resulted in a breach of the recent low. Going forward, the next support is at sentimental levels of 30,000. Any breach of the same may result in a bearish trend towards 28,000-mark, which is its 200-DMA. CLICK HERE FOR THE CHART
 
State Bank of India (SBIN)

Likely target: Rs 300 and Rs 280 (a decisive break down below 100-DMA)

Downside potential: 6.25% - 12.50%

With a gap-down trade on April 19, 2021, the stock is hovering around 100-DMA placed at Rs 325.80 levels. Going ahead, if the stock shows a decisive breakdown of 100-DMA, the downside sentiment may trigger a decline towards Rs 300 and Rs 280 levels. The overall trend is bearish below the resistance of Rs 350 levels. CLICK HERE FOR THE CHART

HDFC Bank Limited (HDFCBANK)

Likely target: Rs 1,306

Downside potential: 6.11%

This stock needs to conquer the significant resistance range of Rs 1,450 to Rs 1,475 levels to regain the positive momentum. If this doesn't happen, the counter may see a decline towards Rs 1,306 levels which is its 200-DMA. Add to it, the major technical indicators like Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD), are not supportive of a positive bias. The mild support comes at Rs 1,350 levels. CLICK HERE FOR THE CHART

ICICI Bank Ltd (ICICIBANK)

Likely target: Rs 500 (after breaching Rs 530 mark)

Downside potential: 5.66%

After the reversal above 100-DMA, the stock of the private lender failed to show any follow-up buying resulting in a gap-down trade. Any breach below the Rs 530 support may drag the stock towards Rs 500 mark, as per the daily chart. The immediate resistance comes at Rs 560 levels. CLICK HERE FOR THE CHART

RBL Bank Ltd (RBLBANK)

Likely target: Rs 160

Downside potential: 8.57%

The counter has decisively broken 200-DMA, currently placed at Rs 207.30 levels. Moreover, the RSI has entered the overbought category of 30 value. If the stock price does not show reversal, then the downside strength may see aggravated selling pressure in the oversold region. This may lead to a weakness beyond Rs 160-mark. The closing basis resistance falls at Rs 187 mark. CLICK HERE FOR THE CHART
 
Punjab National Bank (PNB)

Likely target: Rs 30 and Rs 27

Downside potential:  8.54% - 17.68%

The stock has broken 200-DMA with a strong gap-down on April 19, 2021. This may see an aggravated downside bias towards Rs 30 and Rs 27 mark. The trend below 200-DMA indicates weakness and build-up of a negative sentiment, as per the daily chart. The 200-DMA is currently placed at Rs 32.75 levels. CLICK HERE FOR THE CHART