Can SBI save the Sensex?
The only two indices to have fallen less than 30% among the Indian Indices are BSFMCG and BSEHC (Health Care). Readers of WAVES.INDIA would know that these are our top sectoral picks from THE LATE ECONOMIC sector cycle, we have been mentioning from the start of the year. However, it’s the third Index performer, which might surprise most of you. Amid all the global and local credit crisis, it’s the NSE BANK (Banking Sector) that has made it to the top three performers. YTD the Index has outperformed most of the Indices, with a fall at minus 36%. And if this still does not read well, the fact that NSE BANK is the only Index in the country to have given a positive performance for the quarter should be some screen alert.ORPHEUS RESEARCH AT REUTERS – UNITED KINGDOM
We dug into our analytic screens a bit more and found that the NSE BANK components screen is a lot polarized. One side we have a positive Bank of Baroda with a positive 2% YTD performance and on the second extreme we have ICICI bank, down minus 65%. It was the Sensex component and banking major at SBI (State Bank of India) with minus 17%, which seemed to still hold ground and validate NSE BANK’s last quarters positive performance.
SBI’s PRIMARY CHANNEL (RIGHT) has held on despite selling pressure. And now momentum (SLIDE2) also suggests that the JULY low might still have a chance to hold. This is why we feel SBI’s 1,350 – 1,400 levels can decide how low SENSEX is going to go. Till the time respective levels at SBI hold, keeping NSE BANK’s psychological 5,000 alive, we can have some MINOR bottom expectations here. However, please be clear that we are still looking for a price confirmation before reviewing our negative call continuation. We mentioned about UP BUT TOPPING (18 AUG 2008) first and then published THE OCT LOW perspective on 06 Oct 2008.
The idea of SBI saving the Sensex is indeed strange. But we are looking at it from the sentiment aspect. If Banks start non confirming the broad market declines, by failing to fall below JULY lows, we see this non confirmation as a building positivity and not otherwise.
In conclusion, till we have no price confirmation the trend across the market remains negative. And a break at NSEBANK 5,000 will only confirm the market negativity and push prices on Sensex and Nifty at least 12-15% more down from here.