HDFC Q3 results trigger 1,500-point drop in bank nifty; Traders keep a close eye on 46,500 support

In a surprising turn of events, Bank Nifty experienced a sharp decline of 1,500 points, triggered by the disappointing financial results of HDFC Bank for the December quarter. The Nifty also faced challenges, dropping 300 points from the previous session. The derivatives market saw notable activity, with call writers dominating the scene. Bank Nifty's 47,500 Call Option witnessed a substantial increase in open interest, recording 1.7 lakh contracts in just 10 minutes, resulting in a total open interest of 2.14 lakh contracts.

Soni Patnaik, Assistant Vice President-Derivatives Research at JM Financial, highlighted the mixed positions within the market, emphasizing the aggressive open interest additions in Bank Nifty 47,500 Call Option. Additionally, a significant short position buildup was observed at 47,400, 47,800, and 48,000 levels.

The 12-pack Bank Nifty faced a critical test as it breached the crucial support level of 46,800, only to recover slightly above 46,900. Analysts, such as Avdhut Bagkar from StoxBox, emphasized the importance of observing whether the index could close above 47,500. Failure to do so might lead to a further slide towards 46,000, with the immediate support noted at 46,500.

The gap-down opening marked a departure from the positive bias observed at the beginning of the year. Avdhut Bagkar stressed that as long as the support of 46,282 (the 50-simple moving average) remains intact, the index may recover its losing sentiment. On the upside, crossing the 48,000 level is crucial for an uptrend, while a breakdown below the 50-SMA may lead to a bearish bias, potentially reaching levels of 45,000.

Derivatives trader Rajesh Sriwastava expressed optimism about a recovery in Nifty and a 50 percent recovery in Bank Nifty and HDFC Bank. Conversely, Shijumon Antony anticipated a range-bound day for Bank Nifty, with strong immediate support at around 46,370. Antony suggested that the range could be wider than usual, considering the magnitude of the gap down experienced.

HDFC Bank's share price witnessed a notable decline of over 5 percent in morning trade following its December quarter results, which, despite meeting expectations on headline numbers, disappointed investors. The bank reported a 33 percent YoY increase in net profit to Rs 16,372 crore, including a one-time tax rate gain. However, its net interest income of Rs 28,470 crore fell below street estimates, and provisions rose by 50 percent to Rs 4,216 crore.

Traders and analysts are closely monitoring the situation, with diverse views on the market's direction. Some anticipate a recovery, while others remain cautious about the potential for further downside. It is suggested to seek advice from certified experts before making any investment decisions in light of the current market volatility.