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Sensex (60612) / Nifty (18053)

Yesterday morning, the SGX Nifty was indicating a sluggish start owing to subdued global cues. However, during the pre-opening period, the news came out with respect to the merger of two giant companies, HDFC Ltd and HDFC Bank. This resulted in a complete gush in these two heavyweights and then rub off of this was seen across the broader market. In this process, the key indices, Nifty and Bank Nifty just took off right from the word go. Since the HDFC conglomerate is known for its reputation, this news flow provided the much needed impetus to the rally. As a result, Nifty zoomed towards 18000 and despite some small profit booking around the mid-session, maintained its sturdy posture throughout the day.

The Nifty is now back above the psychological mark of 18000 and the banking was the major charioteer of the move. Although, this announcement was a surprise for the participants, market had given some indication of positivity on Friday and that’s the reason we had stated in our previous commentary about the possibility of reaching the 18000 mark this week. This has come much faster than we had anticipated for and its certainly a pleasant development for the bulls. Now, January’s high of 18350 is not so far away and considering the ongoing momentum, we advise traders to use intra-week decline to add longs.

As far as supports are concerned, 17850 – 17800 is likely to provide immediate cushion; whereas on the flipside, 18200 – 18350 are the levels to watch out for. On expected lines, the banking proved its mettle and is back to the driver’s seat. This is certainly a healthy sign and hence, one should avoid taking contradictory bets at current juncture. Apart from this, the midcap universe did extremely well which is likely to continue for a while. Traders must try to identify potential movers who are likely to give some quick moves in coming days.

Exhibit 1: Nifty Daily Chart

Nifty Bank Outlook - (38635)

On Friday, Bank Nifty ended on a high note breaking above the key resistance level and a strong outperformance was definitely on cards. Yesterday morning the news about the merger of two giant companies HDFC LTD and HDFC bank turned out to be the catalyst for a strong gap-up opening. Post the gap up the positive momentum continued and the in-between intraday dip was been bought to eventually end at the high point with massive gains of four percent to end at 38635.

HDFC group did have a lion's share in yesterday's outperformance however one cannot overlook the performance of other heavyweights that participated in the rally hence indicating an overall healthy bull run. Technically, prices have now given a trend line breakout formed by joining an all-time high and the February month swing high. This breakout has come much faster than anticipated and thus indicates that the bulls are in fast and furious mode. We expect this move to continue with the next resistance seen at 39000 followed by 39400 levels. On the flip side, the trend line breakout levels around the 38000 mark should now act as strong support in case of any in-between dip in the near term.

Exhibit 2: Nifty Bank Daily Chart

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