Sharp rally in HDFC Bank lifts markets

Sensex, Nifty post biggest gain in two months

Asharp rally in shares of HDFC Bank propelled markets on Thursday, with the benchmark indices Sensex and Nifty gaining 1.2 per cent each, most in nearly two months. The private sector lender gained 4.4 per cent, its most in four years, on buzz that global funds will scramble to buy shares when fresh purchase window opens on Friday.

HDFC Bank's shares closed at a new all-time high of ~2,136.2. The Sensex ended at 35,322.4, up 416.3 points, or 1.2 per cent, most since April 5. HDFC Bank alone contributed 185 points to the gains. The Nifty 50 index gained 122 points, or 1.2 per cent to 10,736. HDFC Bank has the highest weightage in Sensex and Nifty, 11.5 and 9.5 per cent respectively. As a result, HDFC Bank's share price movement has a significant bearing on the market performance.

The sharp spurt in shares of the country's most valuable bank was on the back of a report by foreign brokerage Macquarie that said foreign institutional investors (FIIs) buying could exceed $1 billion on June 1. The buying is expected to be particularly high as market regulator Securities and Exchange Board of India (Sebi) has ordered exchanges to discontinue the FII to-FII trading window, which was used by foreign funds to trade in stocks, such as HDFC Bank, where fresh buying is restricted. The HDFC Bank counter witnessed volumes of ~21 billion in the cash segment.

“The stock will open for FII trading on June 1. The headroom will be 1.43 per cent. Now that this will be the last opportunity for FIIs to buy HDFC Bank, we think scrapping of FII window will increase the quantum of buying that will come on June 1,” said a note by Macquarie.

Besides HDFC Bank, the overall market performance was positive ahead of the release of economic growth data. A rebound in global markets, following easing of political concerns in Italy, helped investor sentiment. Thursday's gains helped the Sensex end May with gains of 0.5 per cent. Following 6 per cent gains in April, the index of 30 blue-chip companies was down as much as 4 per cent, amid weakening of the rupee and surge in crude oil prices. Nifty ended the month with little change, while the midcap and small-cap indices posted huge losses.

FIIs sold shares worth ~153 million, while domestic institutions were net sellers to the tune of ~2,660 million, provisional data showed. Gross buying by FIIs on Thursday stood at ~231 billion, most since May 2015.

Besides HDFC Bank, other stocks such as HDFC, Kotak Mahindra Bank and IndusInd Bank gained more than 2 per cent each. These four stocks made a 317 point contribution to Sensex's 417 point gain.

The major Sensex gainers were Adani Ports and Mahindra & Mahindra, which gained 4.7 per cent and 3.1 per cent respectively. Among the losers were Sun Pharma and Tata Motors, which declined over 2 per cent each.

“Indications are positive and Nifty will test 10,800 shortly. Global cues, movement in crude oil price and progression of monsoon will dictate the market trend,” said Jayant Manglik, president, Religare Broking.

The spurt in shares of the HDFC Bank was on the back of a report by Macquarie that said FII buying could exceed $1 billion on June 1