HDFC Bank-HDFC Merger: F&O Positions Ahead Of Key Dates

Housing Development Finance Corp. and HDFC Bank Ltd. ended with gains on Tuesday after the announcement that their merger will be effective from July 1.

HDFC ended 1.3% higher at Rs 2,756.60, while HDFC Bank closed with gains of 1.4% at Rs 1,658.25. The respective delivery volumes were at 52.17% and 62%, respectively.

HDFC and HDFC Bank had hit a 52-week high of Rs 2,867 and Rs 1,734.45, respectively, on May 4.

"HDFC Ltd. and HDFC Bank are witnessing a strong build-up on the long side in the futures market. Expect to see continued action in HDFC Bank, with addition of long positions," Aditya Agarwala, head of research and investments at Invest4edu, told BQ Prime.

"However, HDFC Bank could see resistance at Rs 1,700-1,720. Once it manages to cross the resistance levels and sustains above Rs 1,720, we will see a clean up-move towards Rs 2,100 levels over the next few months," he said.

Open interest in the futures market for HDFC rose 12.44% on Tuesday, while it jumped 30.31% for HDFC Bank.

Agarwala does not see any price arbitrage opportunity. Charts of both HDFC and HDFC Bank are mirroring each other, he said.

The merger will be effective July 1, Deepak Parekh, chairman at HDFC, told reporters.

The boards of the two companies will meet on June 30 after working hours to approve the combination, creating a banking giant in India's largest corporate deal.

HDFC shares will stop trading and de-list on July 13, Parekh said. The merged entity will start trading by July 17.

Once the merger is effective, a record (cut-off) date will be announced to determine HDFC shareholders eligible to receive HDFC Bank shares.

A shareholder will get 42 shares of HDFC Bank for every 25 held in HDFC. This means that existing shareholders of HDFC will own 41% of the private lender. HDFC Bank will be fully owned by public shareholders.

Once the merger concludes, HDFC Bank's share price will be adjusted to incorporate the value of HDFC.