Is Bank Nifty getting ready for a new Bull run?

The bulls are back in action on Dalal Street; this time, they have found their favourite playground - the banking sector. With the Reserve Bank of India (RBI) delivering a surprise 50 basis points (bps) cut in the repo rate, banking stocks saw a sharp uptick, pushing the Bank Nifty to a fresh all-time high of 56,695.

While the mood remains upbeat, the million-dollar question on every investor’s mind is - Is this the beginning of a new bullish wave for Bank Nifty?

Before jumping to conclusions, let us analyse the weekly chart of Bank Nifty to understand the underlying price action and whether the momentum has the legs to carry forward.

On a closer look at the weekly chart, Bank Nifty appears to be at a crucial inflexion point. The index made a new high recently, but the first attempt proved deceptive - a classic bull trap. However, instead of collapsing, the index held its higher high–higher low structure, a key signal in Dow Theory suggesting an ongoing bullish trend.

After a healthy retracement, the second breakout attempt (marked in blue on the chart) has taken shape, suggesting that bulls have regrouped and may be ready to take the index higher. Historically, such second-attempt breakouts after a successful retest often precede a strong upside rally.

With this bullish price structure, the probability of a sustained upward move looks high. If history repeats itself, Bank Nifty could be poised for another powerful leg up in June.

But a rally without its key leaders? Here are two banking stocks that investors should keep an eye on:

HDFC Bank

HDFC Bank is India's largest private sector lender by market capitalisation and one of the most significant constituents of the Bank Nifty. Known for its consistent financial performance, strong asset quality, and extensive pan-India presence, HDFC Bank has been a bellwether for the Indian banking sector.

On the weekly chart, HDFC Bank has broken above its previous swing high and entered into a consolidation zone. This consolidation has taken the shape of a symmetrical triangle, a classic continuation pattern in technical analysis.

The recent breakout from this triangle confirms a Bullish Pennant formation, often seen before a sharp rally. Given HDFC Bank’s significant weightage in Bank Nifty, it is potentially positioned to lead the index higher and add momentum to the ongoing rally.

IDFC First Bank

IDFC First Bank, a relatively new entrant compared to legacy private banks, has rapidly carved out a niche with its strong retail-focused lending strategy and improving asset quality. The bank has consistently worked towards strengthening its balance sheet and expanding its footprint in India’s competitive banking space.

On the weekly timeframe, IDFC First Bank has recently broken out of a falling channel pattern that signals a reversal from its previous downtrend. After the breakout, the stock successfully retested the upper trendline of the channel, a positive confirmation of strength.

Now resuming its northward journey, the price action is in complete sync with the Bank Nifty’s broader trend. This alignment with the benchmark suggests that IDFC First Bank could be a potential outperformer among banking stocks in the upcoming weeks.

New Rally or a Fakeout?

While technicals are tilting in favour of the bulls, investors must remain cautious of global macro cues, crude oil volatility, and any surprises in domestic inflation data, which could play spoilsport. Nevertheless, the combination of RBI’s rate cut, strong technical breakouts, and sector leadership puts banking stocks, particularly HDFC Bank and IDFC First Bank, in a sweet spot.

If the price structure holds and momentum continues, we might just be witnessing the beginning of a new bullish wave in Bank Nifty.

Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.