[Premium India] Best Bank Stocks To Buy In NIFTY50

JC Parets
January 6, 2018

While we always incorporate a top/down approach to markets, we ultimately end up with individual stocks ideas with favorable risk vs reward propositions skewed in our favor. That's the point of all this. As you can see here, we first start with the major Indexes, then work our way down to individual sectors and industry groups, and finally to the strongest stocks within the strongest sectors to find buying opportunities.

Today we are looking specifically at the Bank stocks within the NIFTY50 Index. Not all of them are good buying opportunities but there are a handful of them that I think we need to be buying on weakness.

The first chart is $HDFCBANK which has been consolidating above 1780 which represents the 423.6% extension of the 2015 correction. The risk vs reward here is clear. If we are above that key 1780 level, then we want to be long $HDFCBANK with a target above 2300. If we are below 1780, then a more neutral approach is best:

HDFCBANK

Next is the $HDFC which has been consolidating since last summer above the 161.8% extension of the 2015-2016 correction. If we are above that 1650 level, we want to be long with a target above 2040. If we are below 1650, then neutral is best:

HDFC

Here is a longer-term chart of $AXISBANK where you can see a 3-year base about to finish being completed. We want to be buyers of a breakout here and be long if we're above 590 with a target above 915. If we are below that 590 level then neutral is still best. We may need some patience here because we have yet to break out, but the weight of the evidence is suggesting this is coming very soon:

AXISBANK

This next chart is a closer look at $ICICIBANK. I think the highs in Q2 near 310-320 are going to be trouble for a while. But once we are above 320, we want to be long with a target above 390. The next target is back towards those late 2014 highs and we only want to be long this name if we're above 320:

ICICIBANK

Finally, here is $INDUSINDBK consolidated above 1600 which is a key level representing the 261.8% extension of the correction in the second half of 2016. We want to be long only if we're above 1600 with a target above 1960. That risk vs reward is very much skewed in favor of the bulls:

INDUSINDBK

The weight of the evidence is suggesting that we want to be long stocks, and Bank stocks in particular. These are 5 examples on various timeframes that I think present favorable risk vs reward propositions within the context of the primary bullish thesis.

From a risk management standpoint, I would also argue that if you start to see these stocks falling below the support levels outlined here, then in all likelihood there is more selling going on elsewhere and a reevaluation of this bullish thesis is warranted.

Cheers,

JC

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