Nifty PSU Bank Index is currently trading around 3424 broken the low made on Bank Recapitalization announcement. Finance minister Arun Jaitley had in October announced an unprecedented Rs2.11 trillion PSU bank recapitalisation plan. On that day Nifty PSU Bank index soared 24% intraday led by gains in State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda, Bank of India and Union Bank.
The PSU Bank Index made a top on very next day (4335) post the bigger gains showing significant trend exhaustion on the charts. Gap up post Bank Recapitalization announcement is a scene of crime zone – The price zone from which a news-based impulsive move was initiated. Due to the nature of the move, the area between the Scene of the Crime and where it is before it retraces remains unauctioned and is therefore susceptible to a retest. Just like a criminal might return to the scene of the crime out of curiosity, the market often does the same.
Nifty PSU Bank index is in the process of closing the gap. In the short term trading sentiment holds negative and higher odds of closing the gap 3117 levels. Resistance is expected around 3540 – 3600 band.
