Budget Disappointment Weighs on Banks; Bank Nifty Breaks Consolidation, Bias Turns Cautious

Market Recap: Banks Lead Budget-Day Sell-Off

Banking stocks faced intense selling pressure on Budget Day, with Nifty Bank sliding 2% to close at 58,417.20, down 1,193 points. The index remained highly volatile throughout the session, touching an intraday high of 59,865.70 before slipping sharply to a low of 57,783.20.

The sharp reversal reflects investor disappointment over the absence of immediate sector-specific triggers for banks in the Union Budget, coupled with a broader risk-off sentiment across financial stocks. Selling pressure intensified in the second half, dragging the index decisively lower.

Technical View: Consolidation Breaks on the Downside

From a technical perspective, Bank Nifty’s daily structure has weakened materially. The index has confirmed a lower high–lower low formation, signalling a short-term trend reversal after an extended consolidation near record highs.

The recent sideways range has now resolved on the downside, with Bank Nifty breaking below its earlier support zone. This area has turned into immediate resistance in the 58,700–59,000 band. The breakdown also coincides with rejection from the upper boundary of the consolidation pattern, reinforcing the emerging bearish bias.

Currently, the index is hovering near its 100-day exponential moving average (DEMA), placed in the 58,000–58,230 zone, which now acts as a critical support area:

• A sustained hold above the 100-DEMA could trigger a short-covering-led pullback
  
  
• A decisive breach below this level may accelerate selling pressure toward 57,500
  
  

Momentum indicators remain under pressure. The RSI has formed a lower high and slipped below the neutral zone, following repeated rejections near the 60 mark—highlighting weakening buying strength and strengthening bearish momentum.

Derivatives Snapshot: Defensive Positioning Persists

Derivatives data reflects a defensive and cautious undertone. The overall Put–Call Ratio (PCR) stands near 0.85, indicating selective put positioning at lower levels but continued hesitation among market participants.

• Heavy call open interest around the 59,000 strike reinforces this zone as a stiff overhead resistance
  
  
• Put writers are active near 58,000, though the positioning remains tentative, suggesting supports could remain vulnerable if selling pressure persists
  
  
• The maximum pain level is placed near 59,600, signalling discomfort for bullish positions unless the index stages a swift recovery
  

Market Outlook: Rallies Likely to Face Supply

The near-term outlook for Bank Nifty remains cautious. As long as the index trades below the 59,000–59,200 resistance zone, recovery attempts are likely to attract selling pressure.

A sustained hold above the 100-DEMA could provide temporary relief; however, a breakdown below this level may deepen the corrective phase. Any recovery in the coming sessions is expected to be short-covering driven, with fresh long positions likely only after visible improvement in price structure, momentum indicators, and derivatives positioning.

Sectoral Impact & Budget Takeaway

On the sectoral front, PSU banks were the worst performers, plunging over 5.5%, amid concerns over the absence of fresh capital infusion announcements and muted policy support. Private banks also closed in the red, underperforming the broader market as investors reduced exposure to financials following the event-driven volatility.

Financial services stocks mirrored the weakness, dragging Bank Nifty lower and reinforcing the broader corrective tone. From a Budget perspective, while the government reiterated its commitment to fiscal discipline, credit flow stability, and long-term financial inclusion, the lack of immediate relief measures or growth catalysts for the banking and financial sector triggered a classic sell-on-news reaction.