Bank Nifty falls 0.5%, Axis, HDFC Bank among top losers; PSU banks cap losses: What lies ahead?

Net interest margins dropped at both. On the other hand, public sector banks rose 2.2%, led by Punjab National Bank's 5.4% surge after it reported expansion in net interest margin. "Investors clearly seem to be preferring PSU bank stocks after quarterly results as strong FCNR deposits are weighing on net interest margins of private banks," said Anita Gandhi, head of institutional business at Arihant Capital Markets.

At 10:45 am on October 19, Bank Nifty was trading 0.5% lower at 55,571.3. The Nifty PSU Bank index, on the other hand, rose 2.5% to be the top gainer. Shares of Punjab National Bank, Canara Bank, and Union Bank of India gained 3–6%. PNB was up 6%, the best performer in the Nifty 200. Managing Director and Chief Executive Officer Ashok Chandra said in a post-earnings press conference Friday that the bank's net interest margin is expected to improve by 6–7 basis points in the December quarter.

PNB had reported a domestic net interest margin of 2.74% for the September quarter, up 10 basis points sequentially. "A decisive breakout and sustained move above Thursday’s high of 56,065, could extend the upside towards 56,500 and 56,900 levels being the 50% and 61.8% retracement of the entire decline 58,706 to 53785 . However, failure to sustain above this level may lead to consolidation in the 54,500–56,000 range.

"On the weekly chart, Bank Nifty is negating its lower high and lower low structure and is trading above the previous week’s high, keeping the broader recovery intact. A sustained breakout above the crucial resistance zone of 56,000–56,065 would strengthen the bullish bias and open the door for further upside. Index has key short-term support at 54,000-54,500 being the confluence of the recent low and the key retracement of the previous up move," said Pabitro Mukherjee, Deputy Vice President-Research, Bajaj Broking.

"A decisive move above the important 200 period MA at 56900 level is necessary to establish conviction and thereafter, to anticipate for further rise in the coming days, whereas on the downside, the 54000 zone shall be positioned as the important support which needs to be sustained to maintain the overall bias intact," said Vaishali Parekh of Prabhudas Lilladher.