Technical Analysis of Banking Sector in India

Banking Sector in India is one of the growing sectors with great dynamics. There are various factors which affect the share prices of Banking Companies. It is very difficult quantify the impact of various factors on these companies. Technical analysis is the study of the market action, primarily through the use of charts, for the purpose of forecasting future price trends. It assumes that the market is efficient and the price has already taken into consideration along with the factors related to the company and the industry.

The study made to know the trends and trend reversal pattern and identify the buying and selling points based on banking sector market price movements. The study is based on secondary data from 2008 to 2010. The statistical tools like Simple moving average, Moving Average Convergence and Divergence, Relative strength Index and Rate of change method are used.

It is found that share prices of the entire banks shown decreasing trend in the year 2008 and later there is an Increasing trend in the share prices. The Moving average convergence and divergence clearly indicated the buy and sell signals at various levels. When Relative strength index values are decreasing or increasing to peak level it generates buy and sell signals. The resulted ROC value indicates Oversold and Overbought regions it generates Buy and Sell signals. It concluded that technical analysis is an effective tool for the investors to invest in short term.