Markets surge 2% in morning trade as HDFC twins declare merger

Stock market,share market

The Indian stock market surged in the morning session on April 4 with Sensex and Nifty jumping around two percent each. At 10:02 hours, Sensex was up 1,195.35 points or 2.02 percent at 60,472.04 and the Nifty jumped 323.80 points or 1.83 percent at 17,994.30.

The rally is largely aided by financial stocks as their index jumped over two percent followed by oil & gas, power and capital goods which gained over a percent each.

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Here is a detailed look at the factors propelling stock markets higher:

HDFC-HDFC Bank merger

The stocks rallied on announcement of a merger of HDFC Bank with Housing Development Finance Corporation (HDFC) and the lender posting better numbers for the quarter and year ended March. 

As part of the deal, shareholders of HDFC will receive 42 shares of the bank for 25 shares held. Existing shareholders of HDFC will own 41% of HDFC Bank. Shares held by the housing finance company in the lender will be extinguished, making HDFC Bank a full-fledged public company.

The bank’s advances aggregated to approximately Rs 13,69,000 crore as of March 31, a growth of 20.9% from a year ago and 8.6% from a quarter ago.

Deposits aggregated to approximately Rs 15,59,000 crore as of March 31, a growth of 16.8% from a year ago and around 7.8% from a quarter ago.

V K Vijayakumar, chief investment strategist at Geojit Financial Services, said, “Since the banking space has taken the charge again, the rally should be considered healthy and due to this we will not be surprised to see even the psychological mark of 18000 this week. On the flipside, 17500 followed by 17350 should now provide decent support.”

"Considering the ongoing momentum, any intra-week decline in the mentioned support zone should be used as a buying opportunity. We witnessed good participation across sectors, and especially on Friday, the broader end of the spectrum did extremely well along with the financial space. Hence, along with frontline movers, traders should focus more on ‘Cash’ segment stocks; which are all geared up to make a real move in the coming days," he added.

Global markets edge higher

Markets across Asia were trading largely in the green with Hang Seng up over a percent at 22,313.83 while Kospi added half a percent at 2,749.10. Nikkei was trading marginally in the green at 27,683.98.

US markets including S&P 500 rose modestly to kick off the second quarter on Friday, as the monthly jobs report indicated a strong labour market and is likely to keep the Federal Reserve on track to maintain its hawkish policy stance. The Dow Jones Industrial Average rose 139.92 points or 0.4 percent to 34,818.27, the S&P 500 gained 15.45 points or 0.34 percent to 4,545.86 and the Nasdaq Composite added 40.98 points or 0.29 percent to 14,261.50.

Vijayakumar is of the view that the US non-farm payrolls coming below estimates reinforces the coming slowdown in the US economy indicated by the inverted yield curve. This will weigh on global growth this year already impacted by the commodity price hike caused by the war in Ukraine, he said.

Oil falls most in 2 years

Oil settled lower as members of the International Energy Agency (IEA) agreed to join in the largest-ever US oil reserves release. Both Brent and US crude benchmarks settled down around 13% in their biggest weekly falls in two years after US President Joe Biden announced the release on Thursday. Brent crude futures were down 32 cents, or 0.3%, at $104.39 a barrel. US West Texas Intermediate (WTI) crude futures fell $1.01, or 1%, at $99.27.

India's exports rise to record high of $418 billion in FY22

India's merchandise exports spurt to a record high of $418 billion in the 2021-22 fiscal on higher shipments of petroleum products, engineering goods, gem and jewellery and chemicals, according to official data released on Sunday. India's goods trade (exports and imports) crossed $1 trillion during 2021-22 as the country's imports too touched an all-time high of $610 billion. Outbound shipments touched an all-time monthly high of $40.38 billion in March 2022, commerce and industry minister Piyush Goyal told reporters. Exports stood at $35.26 billion in March 2021.

Going ahead, India's GDP growth will be lower and inflation higher for FY23 than projected before the war, Vijayakumar. Segments not impacted by the slowdown and higher inflation like IT, telecom, oil and gas producers and attractively valued financials are likely to find favour with investors in the near term. The market will be keenly watching the Q4 results and guidance of IT companies starting next week. FMCG, cement and autos are likely to experience margin pressure from higher input costs, he added.

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