Banknifty Outlook

For Banknifty, I would expect a retest of 10660 levels next week but shorts should be opened in tranches as close to 11250-11400 zone as possible; with short via futures, one need not worry about the stop loss but I would caution against shorting all at once. If one has margin for shorting 2 lots (and some buffer margin for MTM), one should only open 1 short around 11250 and see if Banknifty goes up; the 2nd short should be opened closer to 11400 (if it indeed goes up) or below 11050 with a trailing Stop Loss at 10950

Unless there is something drastically wrong, Banknifty should finish the last leg of correction at 10400-10600 zone and start marching higher until Diwali. The RBI rate hike expectation was 100 bps for 2011 and all of it is now discounted. Credit growth is increasing and the monsoons are expected to usher some cheer for inflation figures at WPI levels if not at CPI levels. Most top notch banks are now going at almost 1 times Price to Book and the last pending rally on Nifty for 2011 will be led by Banks, LnT and RIL in the same order

Banknifty has a pending target of 13500 for 2011....