Understanding Ratio of Bank Nifty with Nifty with technical tools like Channels and looking at the charts of both Nifty and Bank Nifty to identify lead lag behaviour.

Bank Nifty is one of the important indices. Lagging and leading behaviour of Bank Nifty can help us to gauge the strength or weakness of the on-going trend.

For this below we have shown ratio chart taken from “The Financial Waves Monthly Update” of Bank Nifty relative comparison with Nifty. It is not only on prices but we can apply technical analysis on ratio also to understand the maturity of trend.

Bank Nifty / Nifty ratio chart:


We are seeing extreme underperformance of Bank Nifty to Nifty. The ratio chart clearly shows how Bank Nifty broke below the decade long support trendline and is now at the cusp of previous important low and Time cycle of …. Weeks.

Bank Nifty has failed to retrace even 50% of the entire fall in the year 2020 when Nifty is marching towards 80% retracement mark. The math is very simple as this time the market leader is Reliance Industries that has dwarfed the entire banking sector. It seems that Bank Nifty might have lost the luxury of outperformance by breaking the important channel. However, over short term there is possibility that this index might try to catch with Nifty on the upside or Nifty should relatively move lower given that the ratio is at important juncture. Next one to two weeks is most crucial for Bank Nifty and this index will decide the fate of the broader markets. A sharp decline below … on Bank Nifty will result into a catastrophic reversal to downside whereas a very strong momentum above …. will result into the mania spreading across to this portion of the market which has been insulated from it so far. Weekly close above …. can result into near vertical rise on Bank Nifty which will then catch up with Nifty as it is rare to see such huge divergence between the two indices without mean reversion for such a long time. The ratio is also lying at important time cycle and we will know over next few days or weeks if this index can start asserting its importance back again!

P.S – Levels and certain information are purposely hidden. Kindly use this research only for Knowledge purpose. To get the full detailed research get the monthly copy.

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