Bank Nifty gained 1.1 per cent yesterday which led to the breakout of a range within which it had been trading over the past week. After closing at 44,479 yesterday, the index, consisting of major bank stocks, opened today’s session with a gap-up at 44,704. It rallied post open and is now hovering around 44,860, up 0.9 per cent after the initial hour of trade.

Supporting the bullish inclination, all the stocks in the index are in the green. IndusInd Bank and AU Small Finance Bank are the top gainers by advancing 1.9 and 1.8 per cent, respectively.

Nifty Private Bank index has gained nearly 1 per cent whereas Nifty PSU Bank index is up 0.7 per cent.

Bank Nifty futures

Following the underlying Bank Nifty, the August futures of the index began the session higher at 44,705 compared with Wednesday’s close of 44,519. It rallied after opening and the contract is now trading around 44,970, up by 1 per cent.

From the current level, there are resistance at 45,000 and 45,200. So, bulls should be cautious at this juncture as there are barriers nearby. Also, today being expiry day, there might be heightened volatility. 

So, there is a possibility that Bank Nifty futures might see a corrective decline after reaching the price band of 45,000-45,200. In such a case, the price might dip to 44,750.

But if the contract breaks out of 45,200 from here, we can see another leg of rally, possibly towards 45,500 or even to 46,000. Nevertheless, this might not happen intraday and could take a few more sessions for the contract to hit these levels.

Trading strategy

Bank Nifty futures has broken out and rallied. However, at the current levels, the risk-reward is not favourable for long positions. Being an expiry day, expect a volatile session today.

Therefore, we suggest staying on the side-lines for now and initiate longs if the contract dips to 44,800 so that you will achieve a reasonable risk-reward ratio. Target and stop-loss for this trade can be at 45,200 and 44,640 respectively.

Supports: 44,750 and 44,500

Resistance: 45,200 and 45,500