Bulls roar on Dalal Street! Will the run continue?

It turned out to be a marvelous Monday for investors on Dalal Street as the BSE Sensex zoomed over 1,300 points 935.72 points to reclaim 60k mark, boosted by intense buying in banking and financial stocks after the announcement of merger between HDFC and HDFC Bank.

The 30-share BSE index closed 1,335.05 points or 2.25 per cent higher at 60,611.74. Likewise, the NSE Nifty jumped 382.95 points or 2.17 per cent to end at 18,053.40.

In the biggest merger in corporate history, India's largest housing finance company HDFC Ltd will merge with the country's largest private lender HDFC Bank to create a banking behemoth.

"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," said  Vinod Nair, Head of Research at Geojit Financial Services.

According to S Ranganathan, Head of Research at LKP securities, the mega-merger news of the HDFC Twins and the rare sight of a 15 per cent up-move in them today at a point in time propelled benchmark indices 2.5 per cent higher with good support from Metal stocks. The broader markets witnessed the continuation of the uptrend in Fertilizer stocks even as the Bank Nifty rose 4 per cent with private banks being sought after.

Technically, the Nifty index has confirmed the breakout of the Bullish Engulfing pattern and moved above the prior swing highs. Moreover, the index has sustained above 50-days Exponential Moving Averages and showed positive crossover in MACD & Stochastic that suggests a bullish move for the near term," said Sachin Gupta AVP, Research, Choice Broking.

"On the four hourly charts, the stock has also traded above the Horizontal Line that indicates a bullish strength for the coming day. At present, the index is having support at 17800 levels while resistance is placed at 18350 levels. On the other hand, Bank nifty has support at 38100 levels while resistance at 39200 levels," he added.

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities Ltd said, "Though the markets opened weak, key indices quickly rebounded and clung on to the key psychological levels of 60,000 and 18,000 respectively. The trigger was that the markets gave thumbs up to the HDFC merger announcement and the rally in both the stocks spread to other financial stocks and also had a rub off effect on other sectoral stocks. 

Also, recent key economic indicators such as core growth numbers and all-time high GST collections showed that the domestic economy has shrugged off geo-political tensions, he said.

"On daily charts, the Nifty is holding an uptrend formation but due to overbought texture, traders may prefer to book some profit at higher levels," he added.

"For the trend following traders, 17880 would act as a crucial support level, and above the same the index may touch the level of 18150-18200. On the flip side, a quick intraday correction is not ruled out if the index trades below 17880 and below the same it could retest the level of 17790-17750," Chouhan said.