Extending rally for the second straight session, Indian benchmark indices closed higher on Monday, led by strong gains in banking space as sentiments were boosted by HDFC-HDFC Bank merger news. The S&P BSE Sensex surged 1,335 points, or 2.25%, to settle at 60,612, and the NSE Nifty rallied 383 points, or 2.17%, to end at 18,053. In line with benchmark indices, the broader market also ended higher with midcap and smallcap indices gaining 1.27% and 1.68%, respectively.
The overall market breadth on the BSE was positive, with 2,802 shares advancing out of a total of 3,947 traded stocks. As many as 972 shares declined and 173 were unchanged.
“Domestic market was lifted by the announcement of the 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,” says Vinod Nair, head of research at Geojit Financial Services.
“Q4 results will have a decent start supported by the IT sector while RBI is expected to hold the rates with an accommodative policy,” he added.
Here are five key factors that fuelled rally in the Indian share market today:
HDFC-HDFC Bank merger
The market sentiment was boosted by the merger of Housing Development Finance Corp (HDFC) and HDFC Bank, which caught everyone by surprise. Shares of HDFC jumped as much as 13% and HDFC Bank rose 10% intraday after receiving the board's nod to merge the mortgage lender with the bank. Paring some of the early gains, HDFC shares closed 9.3% higher at ₹2,678.90, while HDFC Bank added 9.97% to ₹1,656.45 on the BSE.
The board of HDFC in a meeting today approved the merger of HDFC with HDFC Bank, subject to requisite regulatory approvals. The share exchange ratio for the amalgamation of HDFC with and into HDFC Bank will be 42 equity shares of face value of ₹1. This means, shareholders of HDFC as on record date will receive 42 shares of HDFC Bank (₹1 each) for 25 shares of HDFC Limited (₹2 each). Post the amalgamation, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.
Broad-based gain
The market witnessed broad-based buying with all sectors ending in green, while bank and power indices rising more than 3%.
On the top 30-shares on the BSE Sensex pack, barring Infosys and Titan Company, all stocks closed in positive terrain. The top five gainers on the BSE Sensex pack were HDFC, HDFC Bank, Kotak Mahindra Bank, Hindustan Unilever Ltd. (HUL), Larsen & Toubro.
"Nifty has moved up above 18,000 smartly following a sustained trade above the previous consolidation on the daily chart. Besides, the price has moved above 200DEMA on the daily timeframe. The near-term trend looks positive from here. On the higher end, the index may move towards the falling trend line on the daily chart,” says Rupak De, Senior Technical Analyst at LKP Securities.
“The immediate resistance is visible near 18,150. On the lower end, support is visible at 17,800" De added.
Fall in crude oil prices
The gains in Indian equities were also supported by a correction in crude oil prices which eased inflationary concerns ahead of the Reserve Bank’s policy meeting this week. The prices of Brent and U.S. crude oil declined 13% last week, registering their highest weekly declines in two years, after the International Energy Agency (IEA) agreed to support President Joe Biden’s decision to release the largest-ever U.S. oil reserves to ease international crude prices. Last week, the U.S. government announced the release of 1 million barrels per day of oil for six months from May, which is being seen as the largest ever release from the U.S. Strategic Petroleum Reserve.
Currently, the U.S. WTI crude futures were down 0.11% at $99.38 per barrel, while the Brent oil futures traded flat at $104.32 per barrel.
Renewed buying by FIIs
The renewed buying interest from foreign institutional investors (FIIs) and continued purchasing by domestic institutional investors (DIIs) also supported the Indian equity market. As per the exchange data, FIIs purchased shares worth ₹5,590 crore last week, while DIIs net brought shares worth ₹5,052.5 crore.
Ease in Russia-Ukraine concerns
Investors also cheered the ease in the Ukraine-Russia conflict after Moscow announced it would pull out troops from Kyiv, the capital and most populous city of Ukraine. The commodity prices dropped amid easing concerns about potential risks associated with the Russia-Ukraine crisis.
Meanwhile, talks of fresh sanctions on Russia after Ukraine accused Russian forces of killing civilians in Bucha kept investors on edge.
