Bank Nifty soars past 48,000 for first time as HDFC Bank jumps on FTSE rejig

HDFC Bank is the biggest beneficiary of the FTSE rebalance as the stock’s weightage increased in the index. This will bring flows from passive funds

Bank Nifty hit an all-time high of 48,000 on December 15 after HDFC Bank stock gained in the last hour of the trading session due to the FTSE rejig. Even the Nifty 50 index was up 1.42 percent on the same day.

The stock settled at Rs 1656.55 up Rs 6.40 or 0.39 percent at the closing on December 15.

HDFC Bank contributes 11 percent to the Nifty 50 index and 30 percent to the Bank Nifty index. Hence, a sudden surge in the stock reflects on the Nifty 50 and Nifty Bank indices as well.

HDFC Bank is the biggest beneficiary of the FTSE rebalance as the stock’s weightage increased in the index. This will bring flows from passive funds. When rebalancing happens, passive index mutual funds have to add the new stock which is included in the index, thereby bringing flows in the stock.

According to Nuvama Research’s estimates, HDFC Bank was expected to see inflows worth $547 million. IIFL expects inflows in HDFC Bank to be around $451 million.

“The upside potential for the Nifty Bank index is projected to reach 50,000, indicating continued optimism among market participants,” said Kunal Shah, senior technical and derivative analyst at LKP Securities. He further said that the Bank Nifty bulls maintain their robust momentum, pushing the index beyond the 48,000 level and any retracements towards this support level are seen as buying opportunities.

Also read: A day of rejigs: FTSE, BSE100 rebalancing today, HDFC Bank likely to get $500-mn inflow

“Much on the expected lines, banking and IT majors are among the top contributors in the present leg of up move and we believe their outperformance could continue. Participants should align their trades accordingly and avoid contrarian positions,” said Ajit Mishra, senior vice president of technical research at Religare Broking.

“Bank Nifty formed a bullish candle on the daily frame with a longer lower shadow indicating support-based buying. It formed a Bullish candle on the weekly frame and has been making higher highs from the last three weeks. Now it has to hold above 48,000 zones, for a fresh up move towards 48,500 then 49,000 levels while on the downside support is seen at 47,750 then 47,500 zones,” said Chandan Taparia, analyst-derivatives at Motilal Oswal Financial Services Limited.

Earlier in November, banking stocks were under pressure after the central bank increased risk weightage on consumer loans. The Reserve Bank of India increased the risk weights on unsecured credit of banks and loans to NBFCs. This includes personal loans, consumer durable loans and credit cards. However, the index gained momentum to reach an all-time high this week.

Nifty 50 closed 1.25 percent up at 21,465 while Nifty Bank closed 0.86 percent up at 48,143.

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