Technical Report August 19, 2010

Banking – End of road soon

Bank Nifty has rallied staggering 226% from its bottom of 3,330 touched in March 2009. The
outperformance to Nifty has been substantial at 113%. Improvement in market sentiment followed by
robust earnings has driven a sharp upswing in banking stocks both PSU and private.

In the past one month, (from July 16th), CNX Bank Nifty index has delivered returns of ~9% with
majority of PSU banks scaling to all-time peak. Nifty appears to be stalling around resistance levels of
5,450-5,550 and the Bank Nifty, which has ~22% weightage, could see some profit booking.

We have conducted a study of 15 banking stocks (large and medium size banks) and Bank Nifty to
arrive at our medium-term outlook.

Ideally, as per Technical analysis, whenever, a stock trades at its all time high, it is considered to a
bullish signal. However, taking into consideration advanced technical parameters like fibonacci
extension, fibonacci retracement and RSI, our study found that 8 out of 15 stocks covered in this
report have entered into an overbought zone. Any unwinding pressure at these levels could
lead to sharp corrections in them. All chart studies have been carried on a weekly and monthly
basis to get a better perspective of the medium-term outlook.

We have categorized banks covered into three buckets based on technical indicators as follows
Category Action advised Banks
I Little headroom; start booking profits BOB, PNB, CanBk, SyndBk, CBOI, UBI, OBC, Yes
II Last lap remaining; hold on SBI, Axis, HDFC Bank
III Still some steam left; accumulate ICICI Bank, IDBI, SIB, BOI

On the upside, Bank Nifty (currently at 10,890) has a very strong resistance at current level
(as shown in the chart). Investors should use any rally to 11,000 as an opportunity to exit.

Bank Nifty

Source: IRIS, India Infoline Research

Banking
Banking – – End
End of road
of road soon soon

YTD sectoral performance* 3-Months sectoral performance*

BSE Metal -13.4% BSE Metal -6.9%
BSE Realty -5.0% BSE Oil & Gas 0.7%
BSE Oil & Gas -3.0% BSE Pow er 2.4%
BSE Pow er -2.6% BSE Pharma 2.9%

BSE Cap Goods 3.3% BSE IT 3.9%

BSE IT 5.6%
BSE-200 6.0%
BSE-200 5.7% BSE Small-Cap 8.7%

BSE Pharma 9.8% BSE Realty 8.9%

BSE Small-Cap 14.3% BSE Cap Goods 9.1%

BSE Auto 15.8% BSE Bank 10.4%

BSE FMCG 16.2% BSE Auto 11.3%

20.7% BSE FMCG 13.8%

BSE Bank

-20% -15% -10% -5% 0% 5% 10% 15% 20% 25% -10% -5% 0% 5% 10% 15% 20%

Source: Bloomberg, India Infoline Research Source: Bloomberg, India Infoline Research

Bank stocks YTD return (%)* Bank stocks 3-month return (%)*
IDBI-0.4% Axis Bank 5.4%
ICICI Bank 9.0% ICICI Bank 6.4%
Bank of India 18.7% HDFC Bank 10.0%
Central Bank 19.5% IDBI 10.8%
YES Bank 22.1% Punjab Nat. Bank 18.7%
State Bank of 23.0% Union Bank 19.3%
HDFC Bank 24.4% YES Bank 20.1%
Syndicate Bank 26.1% Canara Bank 21.7%
Punjab Nat. Bank 28.4% Bank of Baroda 23.1%
Canara Bank 29.8% State Bank of 25.2%
Union Bank 31.6% Oriental Bank 29.3%
Axis Bank 34.1% Syndicate Bank 32.2%
South Indian Bank 37.8% Central Bank 34.5%
Bank of Baroda 61.4% Bank of India 41.6%
Oriental Bank 67.7% South Indian Bank 41.8%

-5% 15% 35% 55% 75% 0% 10% 20% 30% 40% 50%

Source: Bloomberg, India Infoline Research Source: Bloomberg, India Infoline Research

Bank Nifty outperforms Nifty* Bank Nifty absolute returns (%)*

160 Bank Nifty Nifty

160 Bank Nifty

140 140

120 120

100 100

80 80
Aug-09 Dec-09 Apr-10 Aug-10 Aug-09 Dec-09 Apr-10 Aug-10

Source: Bloomberg, India Infoline Research Source: Bloomberg, India Infoline Research

* Prices as on 17th August, 2010

Technical Report 2
Banking
Banking – – End
End of road
of road soon soon

Category I - Little headroom; start booking profits

Bank of Baroda CMP Rs842

– According to the fibonacci

price projection, the stock
faces resistance at Rs878 as
shown in the chart.
– The RSI is close to its all-
time highs at 81-82 levels
– Such high RSI on monthly
charts are not sustainable.
Therefore, we advise
investors to exit long
position on Bank of Baroda
immediately.

Source: Iris, India Infoline Research

Punjab National Bank CMP Rs1,183

– PNB has rallied 65% from its
previous 2008 peak of Rs720
and 313% from its low of
Rs286 recorded in Mar’ 09.
– Monthly RSI is trading close
to 78 level mark (10 year
peak of 85).
– We expect the stock to face
resistance at Rs1,200 in
near term and Rs1,285 in
the medium term.

Source: Iris, India Infoline Research

Technical Report 3
Banking
Banking – – End
End of road
of road soon soon

Canara Bank CMP Rs527

– The stock has rallied from

the lows of Rs386 in May’10
to the current levels.
– However, reading on the
momentum oscillators (RSI
and MACD) suggest that the
recent momentum is likely to
fizzle out at current juncture.

Source: Iris, India Infoline Research

Syndicate Bank CMP Rs120

– After a decent run-up from
low of Rs78 in February
2010, we expect the stock to
face some resistance at its
previous highs of Rs125-
126.
– The upside seems to be
capped as RSI, the
momentum indicator, is
facing resistance and
signaling a reversal in
current trend.

Source: Iris, India Infoline Research

Technical Report 4
Banking
Banking – – End
End of road
of road soon soon

Central Bank CMP Rs190

– According to Fibonacci
retracement, the next
immediate resistance for the
stock is placed at Rs195
level.
– The stock is moving in rising
channel pattern on the
weekly chart where the
stock has faced resistance at
its upper trend line on
multiple occasion
– RSI appears to be in over-
bought zone (on weekly
basis), which suggests
further rally in the stock may
not last long.
– Traders should use this rally
to exit their long position.
Source: Iris, India Infoline Research

Union Bank CMP Rs350

– The stock has hit its all-time
high on Tuesday (17th Aug’
10).
– According to Fibonacci
projection, the next
resistance for the stock is
placed at Rs374 level.
– RSI (momentum indicators)
is above over-bought zone,
which suggests further rally
in the stock should be used
to trim long positions.

Source: Iris, India Infoline Research

Technical Report 5
Banking
Banking – – End
End of road
of road soon soon

Oriental Bank CMP Rs427

– The stock has been an
outperformer in the banking
space for the last one year
with return of 26% in the
last three months.
– However, upside seems to
be capped looking at the
oscillators movements.
– RSI has faced resistance at
75 levels on three occasions.
We expect stock to face
resistance at this juncture.

Source: Iris, India Infoline Research

Yes Bank CMP Rs328

– The stock is moving in a
rising channel pattern on the
weekly chart where it has
faced resistance consistently
at its upper trend line.
– On monthly chart, the stock
faces resistance at Rs334-
335 levels
– RSI appears to be in over-
bought zone and facing
resistance, which is a cause
for concern.
– Traders should use this rally
to exit long positions in the
counter.

Source: Iris, India Infoline Research

Technical Report 6
Banking
Banking – – End
End of road
of road soon soon

Category II – Last lap remaining; hold on

State Bank of India CMP Rs2,815

– The stock has outperformed
benchmark index by 3% ytd.
– The stock RSI, on monthly
charts, is nearing the
overbought zone. However,
historically it has traded at
higher overbought zone
levels.
– Investors should use rallies
up to levels of Rs3,000 to
exit.
– The stock has strong support
at Rs2,450-2,500 levels.

Source: Iris, India Infoline Research

Axis Bank CMP Rs1,353

– Axis Bank has rallied above
its 2008 peak of Rs1,295.
– However, the stock has
faced strong resistance at
Rs1,400 levels.
– The momentum indicator,
RSI, on weekly chart has
been range bound between
71 on the higher side and 53
on the lower side since May’
09
– We expect the stock to trade
sideways with a negative
bias.
– Strong support at Rs1,200

Source: Iris, India Infoline Research

Technical Report 7
Banking
Banking – – End
End of road
of road soon soon

HDFC Bank CMP Rs2,192

– On monthly charts, the stock
has been able to hold on to
its long-term trendline since
March 2009.
– The upswing would be
violated once the stock
closes below Rs2,050.
However, the stock has
upside potential target to
touch Rs2,325

Source: Iris, India Infoline Research

Technical Report 8
Banking
Banking – – End
End of road
of road soon soon

Category III – Still some steam left; accumulate

ICICI Bank CMP Rs968

– ICICI Bank has created triple
top formation on the weekly
charts.
– The resistance for the stock
is at Rs1,005.
– Traders and investors are
advised to take long
positions only above
Rs1,005.

Source: Iris, India Infoline Research

IDBI CMP Rs132

– IDBI has broken out from
inverted head and shoulders
pattern, with neckline placed
at Rs128.
– The stock has been a
laggard since January 2010.
– Stock has made multiple
tops around Rs134-136
level, a move above this
critical resistance level with
higher volume could see the
stock attempting Rs150.

Source: Iris, India Infoline Research

Technical Report 9
Banking
Banking – – End
End of road
of road soon soon

South Indian Bank CMP Rs206

– Recently, the bank has given
a strong breakout above its
critical resistance of Rs195.
– We expect the stock to
continue its near-term rally
and attempt its previous
peak of Rs229.

Source: Iris, India Infoline Research

Bank of India CMP Rs462

– The stock saw a crossover
above its all-time high of
Rs474 on Tuesday (17th Aug
2010). However, the stock
was not able to sustain at
higher levels and corrected
to Rs467 levels.
– In the past 3 years, the
stock has attempted to cross
over Rs465-480 on three
occasions but has failed
during the past two
attempts.
– RSI is still below the over-
bought zone, which suggests
further rally in the stock is
possible if the sector
continues to shine.
– Any move past the above
Source: Iris, India Infoline Research mentioned resistance zone
with heavy volumes could
see the stock attempting
levels of Rs510-520.

Technical Report 10
Banking
Banking – – End
End of road
of road soon soon

Annexure

Fibonacci Retracement: A term used in technical analysis that refers to the likelihood that a stock
price will retrace a large portion of an original move and find support or resistance at the key Fibonacci
levels before it continues in the original direction.

Fibonacci projection: This runs from three data points and compares swings in the same direction.
They are run from a prior low to high swing and then projected from another low for possible
resistance or they are run from prior high to low swing and projected from another high for possible
support.

RSI - A momentum indicator that compares the magnitude of recent gains to recent losses to
determine overbought and oversold conditions of a stock. The RSI ranges from 0 to 100. A stock is
deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting
overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an
indication that the asset may be getting oversold and therefore likely to become undervalued. A
crossover of 9-dma RSI (in daily/weekly/monthly charts) over the 14-dma RSI suggests building up of
buying movement. Similarly, a crossover of 9-dma RSI below its 14-dma suggest negative build-up.

Technical Report 11
Recommendation parameters for fundamental reports:

Buy – Absolute return of over +10%

Market Performer – Absolute return between -10% to +10%
Sell – Absolute return below -10%

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