Let us have a look on the new rules of RBI. It is generally asked whether the RBI’s revised rules will resolve bad loans or not and whether it will ramp up trading on the Bank Nifty or not. It is believed by the technical analysts that the new rules of RBI will be beneficial for the long-term but the impact will be alienated for the short-term.
However, there are some experts, who believe that the Bank Nifty will have no impact or might have some negative impact from the move. But large numbers of experts believe that there will be a positive impact. The EVP of IIFL group, Sanjeev Bhasin, is expecting that the Bank Nifty will correct 5% from its current level of 25,702 by March-end on concerns of higher provisions.
As a result, there will be lower profitability that will bring down bank margins soon. Usually, the bank margins remained squeezed amid escalating sticky assets.
The experts are of the view that the immediate short selling may well be followed by long positions after a month with more clarity coming in. with this devious move, bad loans may escalate but investors are likely to gain in the long run. One of the technical analysts believes that the Bank Nifty will rally up another 100 points to test the 25,800 shorts’ in the Bank Nifty futures and call options would be forced to cover their positions but he was unsure of the ‘short term’ impact. This will also enable the index to test 26,000 this month.
Experts have formed significant shorts in the Bank Nifty is evident from the recent discount of Bank Nifty futures to the underlying index. For example, on February 9, while near-month Bank Nifty futures contract traded at 25,356, the spot Bank Nifty closed at 25,463. It was noted that the put call ratio (PCR) of Bank Nifty options expires on February 15 stands at 0.78. This implies that for every 100 calls sold, traders will sell just 78 puts. Bearish sentiment is indicated from higher ratio of calls.
Some experts also believe that the move will be positive. However, there is some doubt that whether or not it could have ‘material’ impact, given that the markets were more ‘focused’ on global market cues and on macroeconomic impact from the FY19 Union Budget on inflation and fiscal deficit.