Amidst weak closing on Friday, how will Bank Nifty perform next week?

The index is undoubtedly going to be hugely volatile next week, owing to the US Federal meeting scheduled on May 4. Thus, US-induced volatility is likely to persist while stock-specific action will continue due to corporate results.

Bank Nifty traded higher on Friday for most of the day. However, the reluctance of the market participants to hold weekend positions has triggered a huge sell-off in the banking stocks in the last hour of the trading session. Bank Nifty fell about over 600 points towards the end to close just above 36000-level. In the end, the index closed about 0.92% lower and formed a strong bearish candle on the technical chart. With the index closing the week on a negative note, it is important to analyze how the index is likely to perform next week.

The index is undoubtedly going to be hugely volatile next week, owing to the US Federal meeting scheduled on May 4. Thus, US-induced volatility is likely to persist while stock-specific action will continue due to corporate results. IndusInd Bank is set to declare results during the aftermarket hours on Friday, while Kotak Mahindra Bank is going to declare the quarterly numbers on May 4. Thus, the next is going to be an action-packed week! 

On analyzing the technical chart, this week’s low of 35500 shall act as the first line of support, following which the index can test the level of 35000. If this level is breached, the index is likely to fall towards the level of 34000 beyond at a rapid pace. On the upside, the level of 37000 shall act as immediate resistance. Good corporate results can trigger fresh buying interest and index can further test the level of 37500 and beyond. However, looking at the recent hammering of Axis Bank, HDFC Bank and ICICI Bank, such a scenario is less likely. 

The next week’s futures and options data shows strong addition of open interest at 36500 and 37000-strike on the call side. The PCR is at 0.57 and indicates strong bearishness. It would be a wise decision to keep light position sizing during such volatile times and look for a favourable risk-reward ratio.