The Indian markets have witnessed a robust week, with the Nifty surpassing the significant 24,000 mark and the Nifty Bank index hitting fresh all-time highs. Amidst this positive momentum, this private-banking major, a heavyweight in both indices with weightages of 11.95% in Nifty and 29.42% in Nifty Bank, has relatively underperformed both these benchmarks on a year-to-date basis. While the broader indices have posted gains of 10.43% (Nifty) and 8.52% (Nifty Bank), this has shown a negative return of (-0.84%) on a YTD basis.

Despite its recent struggles, there are strong technical indications suggesting that HDFCBANK may be poised for a significant uptrend in the coming weeks, making it a valued addition to portfolios.

Since reaching its peak of Rs. 1725 in October 2021, HDFCBANK has traded sideways within a broad range, repeatedly testing this level while forming higher bottoms. This price action has resulted in the formation of an Ascending Triangle pattern, widely regarded as bullish regardless of the place of its occurance. Given its occurrence following a prior uptrend, there is heightened potential for this pattern to act as a continuation pattern, with an anticipated breakout leading to upward movement in the stock price.

A particularly encouraging technical signal is the On-Balance Volume (OBV), which has surged to new highs, indicating strong accumulation despite the stock’s recent price stagnation. The OBV has hit fresh highs ahead of the price breakout; this bullish divergence in OBV suggests robust investor interest, laying a solid foundation for a potential uptrend initiation.

Furthermore, the Relative Strength Index (RSI) has broken out from resistance to establish a new 14-period high well ahead of the price breakout. This bullish RSI movement, coupled with the price closing above the upper Bollinger Band, enhances the probability of a sustained uptrend even if temporary pullbacks occur within the band.

From a technical perspective, a breakout from the current Ascending Triangle pattern suggests a potential upside target in the range of Rs. 1950-2000 over the coming months. It’s crucial to monitor for a close below Rs. 1450, as it would invalidate this bullish setup.

In conclusion, while HDFCBANK has lagged behind its peers in recent performance metrics, the confluence of bullish technical patterns and indicators suggests a promising outlook ahead. Investors and traders alike may find HDFCBANK compelling as it potentially embarks on a path towards higher price levels, driven by strong technical underpinnings.

Foram Chheda, CMT,
Technical Research Analyst