Axis Bank, PNB, Karnataka Bank, AU Small Finance Bank and City Union Bank emerge as technical picks as Bank Nifty rebounds after RBI’s 25-bps rate hike

Banking stocks remained in focus on Wednesday after the Reserve Bank of India (RBI) raised the policy repo rate by 25 basis points to 5.50 per cent and shifted its monetary policy stance from neutral to calibrated tightening.

Despite initial volatility, the Nifty Bank index recovered strongly from the day's low and climbed to 55,341, gaining around 705 points, or 1.3 per cent, from the intraday trough. The rebound came even as the broader Nifty 50 remained under pressure.

Against this backdrop, technical analysts Ajit Mishra of Religare Broking and Hitesh Rathi of Angel One have identified five banking stocks that they believe have constructive chart structures: Axis Bank, Punjab National Bank, Karnataka Bank, AU Small Finance Bank and City Union Bank.

The analysts' views are based on technical chart patterns and should not be considered investment recommendations.

Why the RBI Rate Hike Could Support Banks in the Near Term

The RBI’s 25-basis-point increase has changed the immediate interest-rate environment, but the impact on individual banks will depend on the composition of their loan and deposit books.

A significant portion of bank loans are linked to floating interest rates, allowing lending rates to reprice relatively quickly. Deposit rates, on the other hand, can adjust with a lag depending on competitive conditions.

This could provide temporary support to net interest margins (NIMs), particularly for banks with a favourable asset-liability repricing profile.

At the same time, a sustained tightening cycle could eventually increase funding costs and affect credit demand. Consequently, the duration and extent of the rate cycle will remain important for banking-sector earnings.

Axis Bank: Support Zone Holds the Key

Axis Bank is among the large private-sector banks highlighted by Angel One’s Hitesh Rathi.

According to the technical assessment, the stock has remained in a medium-term bullish structure despite its recent consolidation. Buyers have defended the ₹1,180 region, which is viewed as an important support area.

The stock also witnessed a weak breakdown on the candlestick charts followed by an exhaustion gap. From a technical perspective, such a combination can indicate that selling pressure is losing momentum.

Rathi believes the presence of strong support, along with sellers potentially being trapped on the downside, could create conditions for the stock to resume its earlier upward trend.

The key technical factor for investors will therefore be whether Axis Bank continues to hold its important support zone and subsequently breaks out of its consolidation range.

Punjab National Bank: Breakout Setup Gains Attention

Punjab National Bank (PNB) has emerged as another PSU banking stock with a constructive technical structure.

Rathi highlighted the ₹100–98 zone as an important support area for the stock. PNB has repeatedly established a bullish pattern around this region, according to the technical analysis.

More recently, the stock has been attempting to break out of a consolidation or W-shaped formation above the ₹110–112 region.

The stock has also formed a bullish anchor column from the support zone following signs of selling exhaustion. A bullish column reversal on the point-and-figure chart adds to the positive technical setup.

A sustained move above the breakout zone could strengthen the bullish structure, although failure to hold key support levels could weaken the setup.

Karnataka Bank: Uptrend Remains Intact

Karnataka Bank has been identified by Religare Broking’s Ajit Mishra as a stock maintaining a strong uptrend across daily, weekly and monthly timeframes.

The stock has shown resilience despite the broader market undergoing a corrective phase.

Rather than experiencing a significant breakdown, Karnataka Bank has been consolidating at relatively elevated levels while remaining above key short-term moving averages.

From a technical perspective, holding above these moving averages suggests that the underlying trend remains positive.

Mishra expects the stock to resume its prevailing upward movement once the current consolidation phase ends. A decisive breakout accompanied by stronger volumes could therefore become an important signal for the next leg of the trend.

AU Small Finance Bank: 200-Day EMA Provides Support

AU Small Finance Bank is another stock highlighted by Mishra.

The stock had previously climbed to a record high near ₹1,144 before witnessing profit booking. The subsequent correction brought the stock towards its long-term 200-day exponential moving average (EMA), which coincided with an important support area.

The stock then rebounded from the ₹950–970 region, forming what the analyst describes as a buying pivot.

This recovery suggests that buyers have shown interest around the support zone. The broader technical trend could remain constructive if the stock continues to sustain above this region.

For traders tracking the setup, the ability to hold the ₹950–970 support band could be particularly important for maintaining the medium-term bullish structure.

City Union Bank: Consolidation Could Precede Next Upmove

City Union Bank (CUB) has also retained a structurally positive technical setup, according to Mishra.

The stock has been trading above its rising trend-line support while forming a broader consolidation pattern. Such a structure can indicate a pause within an ongoing uptrend rather than an immediate reversal.

Trading volumes during the consolidation phase have remained relatively stable, which the technical assessment interprets as a sign of continued accumulation at higher levels.

The stock's medium-term outlook would remain favourable as long as it holds its dynamic trend-line support. A breakout from the ongoing consolidation could then provide a signal for the next phase of the upward move.

Five Stocks, Five Different Technical Set-ups

Although all five stocks have been identified for their constructive charts, their technical structures are not identical.

Axis Bank is being watched for a potential recovery from a major support zone after consolidation.

PNB is attempting to establish a breakout above a key ₹110–112 resistance area after forming a broader bullish pattern.

Karnataka Bank continues to exhibit strength across multiple timeframes and is consolidating near elevated levels.

AU Small Finance Bank has rebounded from an important long-term moving-average support zone.

City Union Bank remains above a rising trend line and could potentially resume its uptrend following the current consolidation.

This distinction is important because technical strength can translate into different trading opportunities depending on support, resistance, volume and breakout confirmation.

Banking Stocks Face a Mixed Rate Environment

The RBI’s decision to raise the repo rate to 5.50 per cent creates both opportunities and risks for banks.

In the immediate term, floating-rate loan repricing could support lending yields while deposit costs may adjust more gradually. This could provide some support to margins.

However, if interest rates remain elevated for an extended period, deposit competition could intensify and funding costs may eventually rise. Higher borrowing costs could also affect loan demand and asset quality in rate-sensitive segments.

The banking sector’s performance will therefore depend on the balance between loan growth, margins, deposit mobilisation and credit quality.

What Investors Should Watch Next

For the five stocks identified by the brokerages, technical levels will remain the immediate focus. However, investors will also need to track fundamental developments.

Key factors include:

• RBI’s future policy stance and interest-rate trajectory

• Deposit growth and funding costs

• Loan growth and credit demand

• Net interest margin trends

• Asset quality and credit costs

• Bank-specific earnings performance

• Breakouts accompanied by sustainable volumes

Technical breakouts without volume confirmation can sometimes prove short-lived, particularly in a volatile market. Similarly, strong technical charts can weaken if earnings or macroeconomic conditions deteriorate.

Market Outlook

The banking sector’s sharp recovery after the RBI policy announcement indicates that investors are assessing the rate hike through the lens of bank earnings and asset-liability repricing rather than viewing it purely as a negative event.

The five stocks highlighted by Religare Broking and Angel One offer different technical setups, with Axis Bank and PNB being watched around important breakout/support zones, while Karnataka Bank, AU Small Finance Bank and City Union Bank continue to display broader constructive structures.

For the broader banking index, the ability to sustain the recovery after the policy announcement will be crucial. Bank Nifty’s behaviour around its recent support and resistance zones, along with bond yields, deposit costs and upcoming earnings, could determine whether the sector’s rebound develops into a more sustained trend.

Investors should treat the cited technical views as analyst opinions and independently assess valuation, fundamentals, risk and suitability before taking any investment decision.