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Sensex closes 1300 points up at 60611, Nifty settles below 18100, support at 17800; overall trend bullish

Indian equity markets higher as the surprise merger announcement of HDFC and HDFC Bank catapulted the benchmark indices over 2 per cent on Monday. The S&P BSE Sensex and the NSE Nifty 50 surged over 2.5 per cent intra-day and hit highs of 60,845 and 18,114, respectively before settling at 60,612 and 18,053, respectively. Meanwhile, Nifty Bank index zoomed 4 per cent. Markets witnessed the continuation of the positive momentum as Nifty attempted to hold above the levels of 18,000. Sustaining above 18,000 will be an important level for the market to stay positive in the short term. If the market sustains above the support levels, the market rally is expected to continue, said analysts. On the flip side, a quick intraday correction is not ruled out if the index trades below 17,880.

Mohit Nigam, Head – PMS, Hem Securities
“For the first time since January 19, the Sensex surpassed the 60,000 milestone, while the Nifty50 surpassed the 18,000 mark. Traders have been oblivious to the fact that gasoline costs have risen further, with petrol and diesel rates each increasing by 40 paise per litre on April 4. There has been a net increase of Rs 8.40 per litre in 14 days with this new round of hikes. On the international front, Asian markets were generally in the green, as a strong U.S. jobs report allayed fears of slowing global growth. After Ukraine accused Russia of war crimes, European markets were generally in the red, with investors keeping an eye out for future Western penalties. On the technical front, immediate support and resistance in the Nifty are 17,800 and 18,200. For the Bank Nifty, immediate support and resistance are at 38,000 and 39,200.”

Sachin Gupta, AVP, Research, Choice Broking
“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 (EMA) and showed positive crossover in MACD & Stochastic that suggests a bullish move for the near term. 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 17,800 levels while resistance is placed at 18,350 levels. On the other hand, Bank nifty has support at 38,100 levels while resistance at 39,200 levels.”

Shrikant Chouhan, Head of Equity Research (Retail), Kotak Securities
“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.”

“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. For the trend following traders, 17,880 would act as a crucial support level, and above the same the index may touch the level of 18,150-18,200. 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 17,790-17,750.”

Parth Nyati, Founder, Tradingo
“It was a stellar day for the Indian equity market on the back of the out of syllabus announcement of a merger between HDFC Ltd and HDFC Bank. More than 70% of contribution to the gain of Nifty50 because of HDFC twins also led to short covering in the market. Global cues are stable whereas prices are cooling off and FIIs are showing buying interest that is leading to outperformance in the Indian equity market.”

“Technically, the Nifty has strong bullish momentum however it is trading near a downsloping trendline resistance placed around the 17,125 level; above this, there is a high probability of new highs in the market this month itself. On the downside, 17,800 will act as immediate support while 17,500-17,400 has become a strong base. Bank Nifty is outperforming and it has a strong structure where 39,200-39,500 will be the next resistance area. On the downside, 38,000 is an immediate support level while 37,200-36,800 has become a strong demand zone.”

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Nifty heading to 18100 after base formation, Bank Nifty aiming for 38000; Metals, IT stocks to outperform

Domestic benchmark indices BSE Sensex and NSE Nifty 50 have recovered strongly in the last few trading sessions. Nifty 50 bounced back from the key support of 16800 and now could be heading towards 18100, said technical analysts at ICICI Direct. “Benchmarks reclaimed half the ground lost over the past six months as the cluster of support in the vicinity of 52 week’s EMA generated buying demand after markets moved to an oversold trajectory,” analysts said in a report. The banking index is also expected to surge higher in the coming weeks and test 38000 levels as volatility cools down on Dalal Street.

Nifty heading up as volatility cools down
Chartists at ICICI Direct said that their buy on dip strategy has worked so far for investors as the index climbed the wall of worries after digesting a host of concerns owing to the geopolitical issues, Fed rate hike, rise in VIX and crude oil prices. Now, they believe, the Nifty has formed a strong base above 52 week’s EMA that has set the stage to retest the upper band of the falling channel at the 18100 mark. The 18100 target is the confluence of 80% retracement of the entire corrective phase since October 2021 (18604-15671). Key support is placed at 16800.

Additionally, the cooling-off of the India VIX gauge is also seen as a positive for equities. India VIX is just above 20 levels on Thursday down from 28 levels a month ago. “Historically, a cool off in VIX after a spike above 30 levels signifies an intermediate bottom is in place for equities that leads to decent rally in the near term,” the report said.

Buy Bank Nifty on dips, target 38000
“Dips should be used as a buying opportunity. We expect the index to resolve above last two week’s highs (36800) and gradually head towards 38000 in the coming month,” said analysts at ICICI Direct. They added that the recent breather of the last two weeks should not be seen as negative, instead, it should be capitalised on as a buying opportunity in quality banking stocks. “We expect the index to resolve above last two week’s highs (36800) and gradually head towards 38000 in the coming month as it is the 80% retracement of the February-March decline (39424-32155).”

Sectors to watch out
On the charts, the metal Index has witnessed a breakout above the last five month’s range. “It has seen an improvement in both relative and movement terms and is currently at the out-performer quadrant. We expect metal stocks to continue their outperformance,” ICICI Direct said. Further IT stocks are also in the out-perform quadrant. Analysts noted that banking and realty stocks are now seen to be resuming up-move after the recent profit booking, thus providing a bargain buy opportunity along with auto stocks.

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Tata Coffee rallies nearly 13 pc; Tata Consumer jumps over 5 pc

Shares of Tata Coffee rallied nearly 13 per cent on Wednesday after Tata Consumer Products announced the merger of all businesses of the company with itself as part of a reorganisation plan. Tata Coffee shares jumped 12.91 per cent to Rs 221.60 on the BSE.

The stock of Tata Consumer Products also rallied 5.28 per cent to Rs 782.50. Tata Consumer Products Ltd (TCPL) on Tuesday announced the merger of all businesses of Tata Coffee Ltd with itself as part of a reorganisation plan in line with its strategic priority of unlocking synergies and efficiencies.While the plantation business of Tata Coffee Ltd (TCL) will be demerged into TCPL’s wholly-owned arm TCPL Beverages & Foods Ltd (TBFL), the remaining business of TCL, consisting of its extraction and branded coffee business, will be merged with TCPL, the company said in a statement.

The demerger to happen as the first step and the merger to happen as the immediate second step, both being proposed through a composite scheme of arrangement.Under the scheme, shareholders of TCL (other than TCPL) will receive an aggregate of 3 equity shares of TCPL for every 10 equity shares held by them in TCL.This will be carried out through the issuance of 1 equity share of TCPL for every 22 equity shares of TCL in consideration for the demerger.

For the merger, 14 equity shares of TCPL will be issued for every 55 equity shares of TCL, it added.”This will enable the consolidation and 100 per cent ownership of the branded, extractions & plantations business of TCL into TCPL and its wholly-owned subsidiary,” it said.

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PVR-INOX merger: Shares soar upto 20%, hit record 52-week highs; brokerage sees upside on PVR, INOX stock

Shares of PVR and INOX Leisure opened at a record 52-week high on Monday, after the two cinema operators announced their merger. The combined entity is expected to become the largest film exhibition company in India, with over 1500 screens. Shares of PVR jumped 10% at Rs 2010.35 per share on the Bombay Stock Exchange, while shares of INOX Leisure soared nearly 20% to Rs 563.60 per share on the benchmark stock index. Brokerage firm JM Financial sees an upside of 47% on Inox stock and an upside of 28% on PVR’s stock from Friday’s close.

Share swap agreement favours INOX

INOX will merge with PVR in a share swap ratio of 3 shares of PVR for every 10 shares of INOX, the companies announced in separate stock exchange filings on Sunday. The combined entity will be rebranded PVR INOX Ltd and will have a network of 1546 theatres.

In the deal, however, the swap ratio favours Inox shareholders slightly, using current market caps as the benchmark, JM Financial said Monday. “A 15x target multiple on the combined EBITDA would yield a Mar’23 TP (target price) of INR 2,300 per share for the post-merger PVR stock and INR 690 for Inox. In such a scenario, we see 47% upside on Inox and 28% upside on PVR vs Friday’s close,” the brokerage added.

Game changing event

Investec said the announcement of a merged entity translates into a game changing event in the film exhibition industry. “We believe there will be revenue and cost synergies across several line items and will result in the merged entity to be more profitable and more valuable as compared to sum of its parts,” it said in a note. The combined company will constitute total nearly half of total multiplex screens and about 28% of total domestic theatrical revenue, it added.

JM Financial also said the merged entity would offer complementarity in geographies, provides some scope for ‘premiumisation’ especially w.r.t Inox’s metrics, and will likely offer cost synergies.

OTT platforms: A challenge

Brokerage Motilal Oswal said Monday it maintains a Neutral rating on PVR stock at target price of Rs 1600 apiece, adding that it sees digital platforms pose a risk to cinema operators. “The rich valuation it commanded historically was led by strong growth. The screen addition opportunity does provide an ability to continue its strong growth. However, OTT platforms pose a risk of shrinking the exclusive period, softening occupancies, and lower screen economics,” Motilal Oswal said.

Cinemas, like other service sectors, were among the worst affected following the COVID-19 pandemic. OTT (over the top) or the digital space has since emerged as a strong contender to cinema operators. In the merger announcement, the companies acknowledge the challenge posed by OTT. “The film exhibition sector has been one of the worst impacted sectors on account of the pandemic and creating scale to achieve efficiencies is critical for the long term survival of the business and fight the onslaught of digital OTT platforms,” Ajay Bijli, Chairman and Managing Director of PVR said.

Motilal Oswal said domestic theatricals contribute the highest source of film revenue, but the share of Digital/OTT is rising. Share of domestic theatres to film’s revenue has fallen marginally to 60% in 2019 to 62% in 2017, while the share of OTT platforms to the revenue of a film has risen to 10% in 2019 from 5% in 2017, the brokerage added.

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