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Benchmark indices closed over 2 per cent higher on Monday with Sensex and Nifty 50 breaching the 60,000 and 18,000 marks, respectively.
Market opened on a positive note amid mixed global cues. Indices rose sharply, led by gains in heavyweights HDFC twins. HDFC shares gained focus after HDFC announced its plans to merge with HDFC Bank;
The BSE Sensex closed at 60,611.74, up 1,335.05 points or 2.25 per cent. It recorded an intraday high of 60,845.10 and a low of 59,760.22. The Nifty 50 closed at 18,053.40, up 382.95 points or 2.17 per cent. It recorded an intraday high of 18,114.65 and a low of 17,791.40.
Breadth remains positive
The market breadth remained positive with 2,681 stocks advancing on the BSE as against 848 that declined while 143 remained unchanged. Furthermore, 20 stocks hit the upper circuit as compared to the 8 stocks that were locked in the lower circuit. Besides, 179 stocks touched a 52-week high level and 15 touched a 52-week low.
The volatility index softened 2.86 per cent to close at 17.91 .
Vinod Nair, Head of Research at Geojit Financial Services said, “Domestic market was lifted by the announcement of HDFC bank and HDFC merger, improving sentiments of the stock market and financial sector. The upcoming focus of the market will be on earnings reports and RBI meeting this week. Q4 results will have a decent start supported by IT sector while RBI is expected to hold the rates with an accommodative policy.”
Parth Nyati, Founder, Tradingo said, “It was a stellar day for the Indian equity market on the back of the out of syllabus announcement of a merger between HDFC Ltd and HDFC Bank. More than 70 per cent of contribution to the gain of Nifty 50 because of HDFC twins also led to short covering in the market. Global cues are stable whereas prices are cooling off and FIIs are showing buying interest that is leading to outperformance in the Indian equity market.”
HDFC Bank closed nearly 10 per cent higher on the NSE while HDFC was up over 9 per cent. Adani Ports, HDFC Life and Kotak Bank were the other top gainers on the Nifty 50. Only four stocks- Infosys, Tata Consumer, Titan and JSW Steel closed in the red.
HDFC merger
The board of directors of the Housing Development Finance Corporation Ltd at its meeting held on Monday has approved the amalgamation of HDFC Investments Ltd and HDFC Holdings Ltd with HDFC Ltd, and HDFC Ltd with HDFC Bank.
This will lead to the merger of India’s largest housing finance company, HDFC Ltd with the largest private sector bank in the country, HDFC Bank. Once the deal is effective, HDFC Bank will be 100 per cent owned by public shareholders, and existing shareholders of HDFC will own 41 per cent of the bank, according to stock exchange filings by the firms. Every HDFC shareholder will get 42 shares of HDFC Bank for 25 shares held.
Naveen Kulkarni, Chief Investment Officer, Axis Securities said, “The mega-merger between HDFC ltd into the HDFC bank will enable value unlocking for HDFC bank to build a solid housing loan portfolio and play the housing cycle by enhancing the existing customer base. The merged entity could become the highest weightage single company in the Nifty 50 basket.”
“Further, this merger enables confidence in the Indian economy and looks for a brighter long-term picture beyond the ongoing Russia-Ukraine conflict and the rising inflationary concerns. We believe the next leg of the rally in the benchmark index will be driven by the BFSI space, as banking companies are likely to post solid Q4FY22 earnings, driven by sequential improvement in loan growth. Moreover, the improving asset quality trend will continue for the quarter, bringing further confidence to the space,” Kulkarni said.
Separately, India’s Purchasing Managers’ Index (PMI) for Manufacturing dropped to a six-month low of 54.0 in March from 54.9 in February. However, job cuts were not reported during the reporting period, a positive sign for the sector.
All in green
On the sectoral front, all indices closed in the green with financials leading the rally.
Financials gained focus post the HDFC merger announcement. Nifty Financial Services was up nearly 5 per cent while Nifty Bank was up 4 per cent. Nifty Private Bank was up nearly 4 per cent.
Nifty Metal closed nearly 2 per cent higher. Nifty Healthcare Index was up nearly 2 per cent while Nifty Pharma was up 1.5 per cent.
Broader indices
Broader indices were also in the green.
Nifty Midcap 50 was up 1.39 per cent while Nifty Smallcap 50 was up 1.80 per cent. The S&P BSE Midcap was up 1.27 per cent while the S&P BSE Smallcap was up 1.68 per cent.
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