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hi guys so this is a four part series on Bank nifty now I quite often get queries
about how to trade in Bank Nifty's which is why I have taken up this topic I've
divided this topic into you know four different parts in the first part that
is this part will be covering a very basics of Bank nifty now I'm well aware
that not everyone knows Bank nifty instrument in detail and you know that
is why a basic video was needed on Bank nifty and you know its various
constituents and sort of characteristics now in this video I have actually
highlighted a method which can be applied to any stock futures and
commodities and the basic theme of this video is to you know how to plan a trade
for any instrument you select so the part 1 of this video is focused on again
the basics of Bank nifty the part 2 will be focused on Bank Nifty and relative
strength analysis that is how to use Bank nifty you know how to trade Bank
nifty rather using relative strength analysis method the third part would
focus on trend analysis of Bank nifty and finally the fourth part would be you
know risk management position sizing and stop-loss entry/exit those sort of
things so I'll just get started with the part 1 here so the for the first part
what we'll be doing is I'll just take you through a brief of bank nifty then
I'll put up an introduction on the various segments in which trader can
trade in Bank nifty I want to focus on the high beta nature of Bank nifty and
how it you know impacts the overall market then I'll take up a you know
various constituents of Bank nifty and the weightage in broader market index and
how actually that impacts our overall market then I have a special section on
the importance of Bank nifty as in why it's extremely important for a trader
you know who's trading let's say nifty, nifty IT or let's say any other stock
futures as well to you know track Bank nifty and then these are two common
queries that I quite often get the first one is you know how to access Bank nifty
historical data and second one of course is about you know
accessing market profile chart for Bank nifty and the relative strength
indicator for again Bank nifty so I'll be taking these topics in detail so let
us get started so Bank Nifty is actually one of the many
indices we have in our national stock exchange it's available to trade in cash
futures and options segment under the cash segment you know a Bank Nifty spot
obviously you cannot trade it as any other stock but you can trade it in form
of ETFs there are there are many companies that offer a bank nifty ETFs
which are similar to Bank Nifty index under the future segment you would often
see that Bank Nifty is available available as Bank Nifty I, II &
III wherein one two and three actually
represent the current month, the near month and the far month so currently we
are in June so Bank nifty I would be the June contract bank nifty II would be
the July contract and Bank nifty III would be the August contract so expiry
for all these contracts actually happen on last Thursday of each
month right so under the option segment banK nifty is actually available in a
weekly expiration option and monthly expiration option now options is
something I'll be covering up in much detail in a separate video series so I
won't touch this topic in this video series I'll be focusing just on I mean
whatever we will cover in this video series you can apply that on the cash
segment and the future segment the Bank Nifty future lot size is 40 and it is
the same for Bank Nifty options as well so Bank Nifty Index is actually a
combination of private sector banks and public sector banks now as you know
index weightage actually actually keeps changing so over the years what we have
seen is that private sector banks actually now dominate bank nifty more
Bank nifty weightage is about 38% in Nifty 50 index which is why this is
actually one of the most important index that you should track it is by far the
you know highest this index has the highest weight as far as any other major
index is sector index is concerned so Bank nifty as I said is now dominated by
private sector banks if you see HDFC Bank has a weightage of about 36% ICICI
is about 15% and Kotak Mahindra about 14% so together about 61% weightage
in Bank Nifty is just from the top three private sector banks State Bank of
India which is SBI which is a public sector bank it has a weightage of about
8.2 percent and I think Bank of Baroda is another Bank which has a weightage
of about 3 to 4 percent I'm not sure about that so the top weightage of
banks in Bank Nifty is as follows after SBI you have IndusInd bank Axis bank
Yes Bank RBL and Federal Bank alright so I'll just show you the index weight
chart now if you see this is nifty 50 sector weight within the nifty 50 index
the banking sector has about 38 percent weightage after that the next sector
that comes in is energy it it is at about 13 percent followed by I.T., Consumer
Goods and Automobile now why bank nifty is so important is because if you see
the weightage of Bank Nifty as of now as of today it's about 38% this
does keep changing quite often so I mean the re-balancing of nifty 50 index
happens you can just check this weightage about once in three months that
should be okay so if you combine all these index weightages it would still not
match with Bank Nifty weight you have to combine Energy, I.T., Consumer Goods and
Automobile together to reach the weight of bank nifty so which is why bank nifty
is so influential when it comes to you know nifty movement I want to focus on
one more aspect of Bank nifty which is its high beta nature that is it's a
highly volatile index now why we need to you know focus on any stock or index in
terms of volatility is because the trade planning the risk management position
sizing all depends on volatility so which is why I have actually dedicated
one complete video part for volatility wherein I'm going to show how
volatility actually leads to better position sizing and better risk
management that is you have to incorporate volatility in risk
management and position sizing a common mistake which traders do is actually
look at the volatility here it's about 14% whereas in 2011 to 2013 it was about
5 to 6% 2015 to 2018 that is current the the average volatility is about 3.5%
which is actually the lowest for bank nifty in over you know period of 10
years now why this is important is because in such a high volatile
environment let's say what we had in 2007 to 2009
June July you cannot be trading with the same position size which you can in this
volatile with this volatility environment and this one all right
so position sizing stop losses all have to be different for each different
volatility cycle now this this is an extremely important point that is why
you know I've taken up in a separate video but for now keep in mind that
whether it is Bank nifty or another any other instrument that you want to trade
or you want to you know research in always keep in mind the volatility cycle
of the instrument because that will eventually determine your you know
strategies in risk management. So the next important point that I want to
highlight in Bank Nifty is that of correlation. So Bank nifty correlation
with nifty is extremely high. This is a correlation graph of about 12 years
and you can see that you know Bank nifty correlation had dipped somewhere in 2014,
but still the correlation was as high as 0.87. So currently I'm doing this
recording on 12th June so as of as of 8 June I can see that the correlation
between nifty and Bank Nifty is high as 0.99. So which is why this index
naturally because it is so high in you know nifty it has such high weight in
nifty which is where Bank Nifty mostly decides the trend for overall overall
market. In case you've been in the market for let's say about two years or three
years, you would know that whenever Bank nifty tends to move with momentum, nifty
and most of the index indices sector indices actually follow Bank nifty. So
this is a sort of trendsetter if I'm if I may use the word
for at least this decade. For those of you who were trading back in 2005-2006
actually it was the Capital Goods sector Infra sctor those were the kind of
sectors real estate sector which were actually you know taking the Nifty high
at that time. The sentiment - those three index could be related to you know what
Bank nifty is to market today. So which is why if you see my market
analysis video that I release every week, I never forget to mention Bank nifty in
fact in in my opinion bank Nifty is actually more important than nifty when
it comes to overall market analysis. Another important aspect that I want to
highlight is the overall sentiment impact. Now I've briefly covered this
topic in the previous slide but what I have here is a return of Bank nifty and
nifty from 2010 onwards. So if you see in 2010, Bank nifty gave about 30 percent
returns nifty was about 17 percent. 2011 Nifty was minus twenty four percent
whereas Bank nifty was minus 32. In 2012 Bank nifty was about sixty and nifty was
about thirty. In 2013 Bank Nifty was minus ten whereas nifty was positive five. In
2014 Bank Nifty was sixty four whereas nifty was thirty one. So what I'm trying
to show here is that whatever nifty does Bank nifty actually amplifies it.
So which is why the sentiment impact of Bank nifty on overall market is much
higher than you know any other index. Also given the nature of banks this
sector is always in news even if you take you know ever since this government
has changed, the central government is changed and 2014 we got a new government,
even prior to that banking sector used to dominate. Even with this government
banking sector actually dominates most of the news flow. So that is why I said
that Bank nifty is sort of index you know like capital goods and IT and infra
were back in 2006-2007. So which is why whenever you start analyzing the broader
market or you want to make investments, just make sure you
check out Bank nifty because this sector along with financial services actually
you know sets the overall tone of the market. So I'll just move to how to
procure Bank nifty historical data. Now this is a this is a question I get quite
often on email. Bank nifty historical data can actually easily be procured
through NSE website. If you check the description box below I have already put
out the link for it you can download the entire historical data of Bank nifty.
Bank nifty future data is a little difficult to get that is with open
interest so in case you want this data just leave a comment below and I'll
upload the data for you. Bank nifty chart is actually available
at Trading View Dot Com. Again the link of the same I have posted in the description
box. Bank nifty future data is actually not available that is Bank Nifty
futures chart is actually not available on trading view but I think it's
available at Investing.com. Again the link for the same is posted below. And
now one part that I wanted to cover before we move on to part 2-3-4 of
this Bank nifty trading series is whether to you know choose website
related technical analysis software or a proper software like Amibroker, MetaStock,
Ninja trader. See this depends on trader 2 trader but somehow I
feel that a proper software for chart analysis is always better than you know
whatever platforms you get on websites. Whether it is trading view dot-com or
investing dot com, somehow you know some advanced indicators are actually not
available on web related softwares which is why I would you know strongly
encourage you guys to go and invest some money in some good technical softwares
so that you know you can import these data have your own analysis and take
notes of that. I belong to the camp where you know I don't like using
web-based charting platforms which is why I personally use various softwares for
either that is broader market analysis, relative strength analysis or let's say
market profile. So the last segment that I want to focus
on in this part is you know how to get market profile charts and relative
strength charts for Bank nifty. Now market profile will be covered in the
trend analysis segment as an independent topic, but in case you you want market
profile charts, these are the sources from where you can get it. This is market
Delta software, it's actually quite pricey it will cost you about 175
dollars so just go through it you can pause the video here. I feel that for
Indian markets I think Amibroker is a cheapest option available because you do
get some market profile afl's rightly available on readily available on google.
There are some wonderful users of Amibroker who have actually uploaded the
market profile AFL for free. So this I think is the cheapest option available. Ninja
trader of course is a free platform but the market profile plug-in will cost you
about $100 or round about that. Sierra chart is one more software that i use
but real-time data option is not available in that softwares only end of
day analysis can be done. So I personally feel you can explore this Amibroker
option in case you already have Amibroker and again just Google about
market profile AFL and you should you know get it readily available. As far as
one more query that I get is about relative strength charts. You can also
get Bank nifty chart on Google Finance it's I think futures is also available
in case you don't want to invest in a proper software and you still want to
track charts through websites. So relative strength charts that is RS
analysis that I do the indicator for it is available in again a proper software
that is Amibroker, Metastock, Ninjatrader, Multicharts, Sierra charts and
it's also available on a online trading website that is trading view dot-com
There's a particular script I think for relative strength you can use that but
again I would strongly recommend that based on your personal preference just
invest in some good software so that you can get your hand on these particular
tools. Relative strength as I said is not available on most web platforms
which is why I leave it up to you to decide whether you want to still stick
with the web platform or sort of invest in some proper softwares. So this RS topic
I'll be covering in depth in the part 2. Part 3 I would be again taking up
trend analysis and the fourth part would be about risk management. So this was
just a basic video on Bank nifty that I wanted to do because we have to
recognize the fact that not everyone who watches these videos are proficient in
trading. There are some beginners out there who are just starting from the
scratch and such basic videos are also needed so that you know they can become
proficient in joining us in trading bank nifty successfully. So this is all for
you know this video, the part 2 is also uploaded by now so in case you know you
want to learn more about Bank nifty and you can move to part 2 and watch that
particular video. So thanks a lot for watching this video I'll see you guys
next time. Click on the subscribe button and bell icon to get instantly notified
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