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With the highly anticipated merger of HDFC Bank and HDFC nearing completion next month, market participants are optimistic about the potential for both Nifty stocks to reach new all-time highs once the merger date is announced.

Investors eagerly await the announcement of the merger date, which is expected to stimulate further buying interest in both stocks. The overall sentiment for HDFC Bank and HDFC remains bullish, indicating a favorable “buy-on-dip” strategy. Upon the announcement of the merger date, there is significant potential for both stocks to experience positive price movements.

Over the past month and three months, HDFC twins have exhibited underperformance compared to the Nifty index. Currently, both stocks are trading approximately 5% below their respective 52-week high levels, with modest gains of 5-6% each in the past three months.

In recent weeks, HDFC Bank and HDFC witnessed substantial buying pressure from lower levels, successfully maintaining support above the 200-day exponential moving average (EMA). Notably, HDFC Bank experienced unusually high trading volumes on Friday, reaching its highest level in over a month.

Both heavyweight counters, HDFC Bank and HDFC, display similar chart patterns and appear promising. HDFC Bank recently surpassed its 20-day EMA on the weekly chart and has tested its immediate resistance level of Rs 1730 thrice. The repeated testing of this resistance level indicates its weakening and suggests a potential breakthrough. Additionally, the stock has broken out of its downward sloping channel, further supporting a bullish outlook in the short term. Analysts, such as Rahul K Ghose, Founder & CEO of Hedged, expect the stock to reach around Rs 1850 in the short to medium term.

Vaishali Parekh from Prabhudas Lilladher sets an initial target near Rs 1,700-1,720 levels, highlighting a strong resistance barrier that would require a decisive breakthrough.

Meanwhile, HDFC is also ascending from a demand zone and starting to move along the bands on the daily chart. The momentum indicator on the weekly chart is emerging from oversold territory. Although the stock may experience some sideways movement in the interim, Ghose anticipates a medium-term target of Rs 2,950.

The merger, announced in April 2022, will involve the incorporation of mortgage lender HDFC into the bank. It has been reported that the merged entity is likely to trade under the HDFC Bank ticker before July 20, as per Bloomberg.

As part of the merger, eligible shareholders will receive 42 shares of HDFC Bank for every 25 HDFC shares held.

(Disclaimer: The recommendations, suggestions, views, and opinions expressed by the experts are their own and do not reflect the views of The Economic Times.)

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