Kotak Bank - December - More good news or Profit Booking
Kotak Bank was moving in an upward Wedge since April 2019 on the daily chart basis. Even though it has been able to plough back all of its covid beating, got back into the same wedge, however, now stands at the top of the wedge which is a strong resistance for Kotak Bank to cross in order to continue its upwards journey.
As is evident from last few days of November, Kotak Bank has tried to cross over the top of the wedge but couldn't close successfully above it. At the same time there was no severe selling at this level to suggest any imminent downward movement. The moot question is whether there has been consolidated at 1900 levels or there is distribution. In order to understand this lest first see the news flow which has been driving the prices for Kotak Bank.
Acquisition of Indusind Bank
The push Kotak Bank prices received from the levels of 1300 in October was first from the news of acquisition of Indusind Bank and let's be mindful of the fact that the rumours were immediately denied by both banks about any such developments. Then the results for second quarter of 2021 financial year fuleded the fire to 1500 levels. Even if the acquisition goes through or not, market has been all about
Act on Rumours and Exit on News
That said it is pretty safe to assume that the possibility of merger with Indusind Bank is very much factored into the price unless the actual development presents a too skewed numbers (either favourable or unfavourable) which market didn't expect.
SEBI - Promoter Shareholding Revision
Then came SEBI decision to increase maximum permissible shareholding for promoters to 26% from current threshold of 15%. This seems like the policy crafted specifically for Kotak Bank given their promoter shareholding was at the levels of 26.1%. So this means promoters of Kotak Bank need only to dilute 0.10% of their stake to comply with maximum shareholding limits, that too over next five years. This takes out a deterrent that market always factored in while pricing Kotak Bank as promoters were supposed to dilute 11.1% stake as per earstwhile rule which is always a negative impact for share prices of any company. So all in all there is no supply risk from promoters now.
MSCI Rebalancing
The rebalancing of Morgan Stanley Capital International Index meants redistribution of funds based on changes in the weightage of its components. Kotak Bank was the biggest beneficiary of this change in weightage which coupled with Promoter Shareholding Revision by SEBI pushed the prices from 1500 to 1900 in brink of an eye.
Let's first see the price movements during last half hour of trading on 27th November:
As you can see, there was crazy volumes of 70 million shares which pushed the prices up from 1850 levels to 1920. This volume was nothing but on account of MSCI Rebalancing. All the beneficiaries of this rebalancing saw this kind of price and volume action on that day.
However it's important to note the price couldn't sustain at higher band and the closing was 1% lower than the top made inspite of such high volumes.
So the big picture is that three positive news all had their impact in price action for Kotak Bank and now do the markets expect few more news in the making? The answer is No.
All that was to come out (rumours or actions) already have and now is the time when you will see profit booking induced correction in Kotak Bank. Here are the targets or supports we can expect to see in Kotak Bank for the month of December 2020.
- Go Long only on Closing above 1960
- Go Short on Closing Below 1860 for target of 1700
Will keep track of price movements of Kotak Bank Shares and shall keep updating next levels to watchout for in the December Series.
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