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While the banking sector is witnessing increased selling pressure, with the tumbling 1.13% to 43,900, by 12:03 PM IST, surprisingly, the highest-weighted index constituent is going against the grain.
HDFC Bank (NS:), which holds a weightage of 40.8% in Nifty Bank is the only index stock that is trading in the green zone, currently up 1.02% to INR 1,523, and is contributing a 0.39% gain in the index.
Image Description: Daily chart of HDFC Bank with volume bars at the bottom
Image Source: Investing.com
Investors seem to be taking a special interest in this bank for a couple of reasons. Firstly, the bank has dropped to around an 11-month low in today’s session which makes the CMP a good one for value seekers. Although the stock’s performance hasn’t been good for the last 2 years and 7 months with a return of 0 (excluding dividends), long-term investors are still accumulating the shares at these beaten-down levels.
Secondly, the stock has formed a piercing candlestick pattern on the daily time frame. This is a bullish reversal pattern and indicates a probable end of the ongoing downtrend towards an uptrend. The implications of this pattern increase when it forms at the very low and in the case of HDFC Bank, it is the lowest level of 2023.
The oversold status of this counter, with the RSI (daily, 14) showing a reading of 29.8 yesterday, coupled with the bullish reversal pattern is making investors take a contra bet at these lower levels. In case a good reversal comes, the stock can easily retrace to INR 1,560, which is where it might face strong resistance.
Disclosure: I have a position in HDFC Bank options.
X (formerly, Twitter) – aayushxkhanna
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