I have been saying this for quite a while and continue to believe it. I believe that the banking index is one such index that has given the utmost support to our markets. If at all those levels of 5200 were held this time, it was solely because of the private banks that were not willing to fall further. With banks unwilling to fall and most of the key large stocks already trading at all time lows, a bounce back was pretty much expected like I said and it did happen. I expected the bounce if banks wouldn’t fall, however this kind of fast bounce? No.

The biggest risk to the downside is if the private banks fail to deliver in Q1 FY12. I can guarantee you that if banks don’t give decent set of results for the first quarter and surprise us on the downside, then no support levels will sustain and we’re in for a downtrend. If you notice, many key large stocks are still trading at lows and a lot of this recent bounce back was supported by Banks. Many of us believe that the banking stocks are going to perform okay and the rate hikes won’t affect them so much, and so we’re still holding the banks which lend support to the market and does not let it fall below 5150 – 5200. See this recent bounce from 5200 or the once in February or last year rally, it was always the banking index that lent support to the markets. And if the market has to crash big time, it will be the banks only. Banks will lead the markets further downwards only if they deliver bad results.

Private sector banks are the major focus area for Q1 FY12 results, any kind of problems from ICICI or HDFC kind of stocks and we’re gone. Remember that Reliance is already down and there is no positive sign on that front, so RIL is totally willing to fall further and give a helping hand to the downside. Inflation figures are already dirty, so everything is set up for crashes and it is all upto the results banking stocks deliver. If they’re good, we’re fine holding onto the support zones.

I personally think that banks should deliver okay and inflation should peak out in a couple of months as well. So I’d assume a 5150 – 5200 as a base for bottom picking and expecting a bull run late in the year to next year. Lets hope for the best.

Related posts:

1. Adopt Wait and Watch Approach Now
2. My Views On The Market
3. Positive on Banks
4. Hold Banking and Financial Stocks
5. What’s Happening In The Market Now?