PNB could slide another 20% if crucial support level breaks

Mumbai: Heavy selling could continue in the Punjab National Bank (PNB) stock with the company’ s bonds being put under ratings watch by rating agencies and weakness in the PSU bank index, resulting from the unearthing of the Rs 11,300-crore fraud at the bank.

Analysts said the odds of the PNB share testing the lower end of its Rs 100-140 trading range fairly soon were high given the negative news overhang. A dip to Rs 100 implies a 20 per cent correction in the spot price from Friday’s close of Rs 126.

Bears increased their open interest (OI), outstanding sell positions, from 4 crore shares (4,000 shares equal one contract) on Monday to 5.2 crore shares Friday, during which time the near month futures contract tanked 22 per cent. Additionally, the put- call ratio (PCR) of PNB options expiring on Feb 22 shows huge bearish build up. The PCR Friday was around 0.62, implying that for every 100 calls shorted, traders sold only 62 puts. Puts on PNB have the highest OI at the 100 strike (63.72 lakh shares), indicating strongest support there, though the stock will have to decisively break below the 120 mark, which also offers good support. The highest call OI is at the 140 strike (88.5 lakh shares ), implying the immediate hurdle.