Markets

What RIL did for market in May, HDFC Bank could do now

“Even if you concentrate on the largecap banking names, the more formidable and solid ones, there is still a lot of money which could be made. You do not need to take the undue risk of going into high beta pockets or the semi-large cap or the midcap ones just because they have underperformed,” says independent market expert Kunal Bothra.

We are above the 12,000 mark, and given the only expectations are of a further stimulus and a higher move from here, what are you tracking on the index? More importantly, is it the Nifty Bank that is catching your eye?
Absolutely. We have seen a stellar move in the last five days, almost a 10% recovery on the Bank Nifty; from 24,000 we have moved within touching distance of breaking 27,000 mark. It has been a stellar recovery for the banking index and that has been the show stopper for the market in last one week. At one point in time, the markets were worrying whether it was the Red Wave or the Blue Wave but the markets have just been taken by surprise by the Green Wave. So, it comes as a very good surprise for the markets.

From now on, there are many stocks to watch out for. Reliance Industries, for instance, was in its own free correction mode but when you see the entire market lifting off, it is just a matter of time that even Reliance Industries would end its correction and come back. A similar pattern could be seen in a lot of these other sectors and stocks that have been going through their own corrective phases. Sooner or later, those corrections will end and you will see a catch-up rally in these names. So, it is an all-round performance. Yes, of course, it has been led by the banking names and especially the large cap private sector banks but the fact that the banking index is looking extremely strong and could probably rally up significantly higher from current levels, given the kind of demand, I would expect the broader end of the market to also pick up pretty soon.

Do you think the banks will continue to be at the fore if we were to move up further from here?
So, look at it this way, which stocks in the banking index have performed and how has their performance been.

If you look at HDFC Bank, which is amongst the strongest bank, the stock is at a fresh 52-week high. Now, look at the banking index. The Bank Nifty is still down some 5,000 points from its lifetime high. So, a catch-up rally could be expected in the banking index overall. Now, look at the other banking peers such as ICICI Bank, Axis Bank or IndusInd Bank — many of them have recently managed to break above their 200-day moving averages. This means that the markets have clearly established that the banking index could probably be in charge. To give you a very simple example, what Reliance did for the entire market in the month of April and May, where it lifted off and then pulled the entire market higher, I think, HDFC Bank could probably play a very similar kind of a role.

So, for someone who is bullish on Bank Nifty and expects the banking index to move up higher, he has to be inadvertently bullish on HDFC Bank as well. And if HDFC Bank manages to rise up higher, you will have a lot of the catch-up performances from other peers. I believe that even ICICI Bank could probably try and challenge the Rs 480-500 zone over the next one or two months. You would probably have a stellar recovery and rally in Axis Bank and IndusInd Bank as well. So, even if you concentrate on the largecap banking names, the more formidable and solid ones, there is still a lot of money which could be made. You do not need to take the undue risk of going into high beta pockets or the semi-large cap or the midcap ones just because they have underperformed. If there is good enough money which is to be made on the largecap names, I think, traders, both on the medium-term side, as well as investors, can probably pay attention over there rather than looking at the high beta pockets in the Bank Nifty at this point in time.

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