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Sensex rallies 1335 pts, Nifty ends above 18,000; HDFC twins soar on merger update

Published on Apr 04, 2022 17:25

Benchmark indices surged on Monday, supported by a rally in HDFC twins post merger announcement. All the sectoral indices on the NSE ended in the green. Banks, financials and healthcare stocks were in demand. The Nifty closed above the 18,000 mark after a hitting a day`s high of 18,114.65 in morning trade.

The S&P BSE Sensex added 1,335.05 points or 2.25% at 60,611.74. The Nifty 50 index gained 382.95 points or 2.17% at 18,053.40. Both the indices have risen about 3.5% in two consecutive sessions.

The broader indices lagged the barometers. The BSE Mid-Cap index rose 1.27% and the BSE Small-Cap index gained 1.68%.

Buyers outpaced sellers. On the BSE, 2647 shares rose and 877 shares fell. A total of 148 shares were unchanged.

HDFC, HDFC Bank Merger:

Shares of Housing Development Finance Corporation (HDFC) jumped 9.30% HDFC Bank rallied 9.97% after both the companies announced merger.

The board of HDFC on Monday (4th April) approved a composite scheme of amalgamation of HDFC into HDFC Bank, and their respective shareholders and creditors. The subsidiaries and associates of HDFC will shift to HDFC Bank.

Shareholders of HDFC as on the record date will receive 42 shares of HDFC Bank (each of face value of Re 1), for 25 shares held in HDFC (each of face value of Rs 2), and the equity share(s) held by HDFC in HDFC Bank will be extinguished as per the Scheme.

As a result of this, upon the Scheme becoming effective, HDFC Bank will be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank.

"The proposed transaction is to create a large balance sheet and net-worth that would allow greater flow of credit into the economy. It will also enable underwriting of larger ticket loans, including infrastructure loans -- an urgent need of the country," HDFC said in a statement.

As of 31 December 2021, HDFC Bank`s total advances stood at Rs 12,68,863 crore and HDFC`s total advances stood at Rs 5,25,806 crore. Post merger, pro forma total advances of the combined entity is expected to be Rs 17,86,669 crore.

The proposed transaction will result in reducing HDFC Bank`s proportion of exposure to unsecured loans. The merger is expected to result in bolstering the capital base and bringing in resiliency in the balance sheet of HDFC Bank.

Post the combination, HDFC Bank`s customers will be offered mortgages as a core product in a seamless manner. The merger is expected to close within 18 months (Q2 / Q3 FY24), subject to completion of regulatory approvals and other customary closing conditions.

Economy:

The seasonally adjusted S&P Global India Manufacturing Purchasing Managers` Index (PMI) stood at 54 in March, falling from 54.9 in February. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease.

"Business conditions in India improved in March, but the latest results showed slower expansions in factory orders and production as well as a renewed decline in new export orders. At the same time, price indices increased since February to signal mounting price pressures. Inflation concerns meanwhile dampened business confidence, which fell to its lowest level in two years," said S&P Global on 4 April.

On the macro front, India`s merchandise exports hit 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 annual median GDP growth forecast stood at 7.4% for 2022-23, according to a survey by the Federation of Indian Chambers of Commerce and Industry (FICCI) released on April 3. The Economic Outlook Survey estimates a minimum and maximum growth of 6% and 7.8%, respectively.

Numbers to Watch:

The yield on 10-year benchmark federal paper rose to 6.899% as compared with 6.834% at close in the previous trading session.

In the foreign exchange market, the rupee was higher against the dollar. The partially convertible rupee was hovering at 75.55, compared with its close of 75.7450 during the previous trading session.

MCX Gold futures for 5 April 2022 settlement fell 0.28% to Rs 51,200.

The US Dollar index (DXY), which tracks the greenback`s value against a basket of currencies, rose 0.23% to 98.86.

In the commodities market, Brent crude for June 2022 settlement rose 11 cents at $104.50 a barrel. The contract fell 32 cents or 0.31% to settle at $104.39 a barrel during the previous trading session.

Foreign Markets:

Most shares in Europe and Asia advanced on Monday. Chinese tech stocks climbed after a recent signal by Chinese authorities of progress toward resolving an audit dispute, which had threatened U.S.-listed Chinese firms with delisting.

Meanwhile, investors were cautious as the European Union plans to introduce fresh sanctions against Moscow in the wake of the new reported atrocities.

Ukraine`s top prosecutor reportedly said 410 bodies had been found in towns recaptured from retreating Russian forces around Kyiv as part of an investigation into possible war crimes, while Ukrainian President Volodymyr Zelenskyy accused Russia of genocide. Russia has denied allegations that its forces killed civilians in Bucha, 23 miles northwest of Kyiv.

Stocks in Spotlight:

SML Isuzu hit an upper circuit limit of 20% at Rs 707.20. The company on 3 April 2022 announced that it has decided to increase prices of its products (across all models - trucks & buses) in the range of 3% to 4%, effective 4th April 2022. The company said that the upward revision has been necessitated to partially offset the impact of increased costs.

IDFC First Bank rose 4.56%. The bank reported a 12% growth in CASA deposits at Rs 51,407 crore as of 31 March 2022 as against Rs 45,896 crore as of 31 March 2021 and 7.4% increase from Rs 47,859 crore compared with 31 December 2021. CASA ratio stood at 48.7% as of 31 March 2022 as compared to 51.7% as of 31 March 2021. The bank added that overall asset quality trends remained strong. Collections efficiencies have further improved during Q4 FY22 and have become better than pre COVID levels.

Bajaj Auto rose 0.69%. The two wheeler maker`s total sales fell 20% to 297,188 units in March 2022 as compared to 369,448 units sold in March 2021. Total exports slightly fell marginally to 170,436 units in March 2022 as against 170,897 units in March 2021.

Mahindra & Mahindra Financial Services rose 1.66%. The company said that in March 2022, the business continued its momentum with a disbursement of approximately Rs 3,832 crore, delivering a 66% YoY growth. The disbursement for FY2022 stood at approximately Rs 27,466 crore, registered a YoY growth of 45%. This has led to marginal growth in business assets over previous year.

The collection efficiency (CE) was at 109% for March 2022, similar as March 2021. The buoyancy in collections has led to significant sequential improvement in asset quality resulting in Stage 3 assets as of March 2022 being lower than as of March 2021. Similarly, Stage 2 assets have also seen meaningful improvement over 31 December 2021 level.

Vodafone Idea climbed 1.88%. On Thursday (31 March 2022), Vodafone Idea`s board approved the allotment of 338.34 crore equity shares at Rs 13.30 per scrip to three promoter group entities - Euro Pacific Securities, Prime Metals and Oriana Investments - for about Rs 4,500 crore.

This includes allotment of 1,96,66,35,338 equity shares to Euro Pacific Securities (promoter), 57,09,58,646 equity shares to Prime Metals (promoter), and 84,58,64,661 equity shares to Oriana Investments (promoter group).

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