Markets Next Week: Bank Stocks May Exhibit Greater Volatility

It was an extremely volatile week for the markets, particularly on Thursday the expiry for the Sept series of the F&O. Banking stocks have been all over the place in the last week and stocks like ICICI Bank and State Bank of India closed the week significantly lower.

"Bank Nifty closed the September series with the loss of 13.31 per cent as it corrected from August settlement of 23600 to 20456 levels" Motilal's Chandan Taparia, Derivative & Technical Analyst, Motilal Oswal Financial Services Ltd said.

During the month the Bank Nifty has seen huge short addition as inched up to 25,000 zones at the beginning of month and then corrected sharply mainly in the last week of the series towards 20,500 zones.

"Bank Nifty continued its lower top - lower bottom formation from last six trading sessions and continuing its weakness for fourth consecutive weeks. It formed a Bearish candle on daily scale and resistances are gradually shifting lower. It started the day below a key support of 21,000 zones and corrected by around 700 points on closing basis. Now till it hold below 21000 zones, weakness could continue towards psychological 20000 then 19250-19000 zones points while medium term hurdles exist at 21500 zones. Positive rollover in selective Pharma and IT counter while major negative rolls is PSU and Private Banks banking stocks."

Clearly, the markets are seeing some fresh short positions in banks and this could be the case in the coming week as well.

The Supreme Court hearing on Monday as regards interest on interest on Moratorium may add to the volatility. Any adverse decision could have an impact on these stocks. IT stocks and pharma may continue to see buying interest, however, stocks from the sector are now clearly over priced.

It's likely that volatility in the markets may continue. The markets are still a tad bit over priced at these levels and investors may want to stay on the sidelines.