Shares of private sector lender HDFC Bank and mortgage lender Housing Development Finance Corporation (HDFC) dipped up to 3 percent in morning trade on Tuesday, following a 9 percent surge the previous day, according to analysts.

On the BSE, HDFC Bank declined 3.07 percent to Rs 1,605.55 a share, while HDFC Ltd fell 2.41 percent to Rs 2,614.40 a share in early trade on Tuesday morning.

On Monday, the NSE saw both equities rise by 19.64 percent in intraday trading following the merger announcement with HDFC. It ended the day at Rs 2678.90, up 9.30 percent on the BSE, and at Rs 2,676.00, up 9.12 percent on the NSE, before closing at those prices.

On the NSE, HDFC Bank’s share price gained 14.35 percent in intraday trading on Monday, following the same trend. (The lender’s share finished at Rs 1656.45 on the BSE and Rs 1,654.10 on the NSE, both up 9.97 percent).

Nifty pauses, 14600-14700 seen strong hurdle

“HDFC stock surged approximately 19 percent yesterday and HDFC Bank climbed around 14 percent,” Share India Securities Vice President and Head of Research Ravi Singh told over the phone. There is almost likely going to be some profit-taking after such a rise in demand.”

HDFC Bank is “bullish trending on primary momentum indicators such as RSI, MACD, Williams and 200 DMA,” he noted. The counter’s bullish form has been bolstered by a rise in volume and a break over Rs 1,525. With this push, HDFC Bank could reach Rs 1,850 in the near future.”

Following their recent gains, Vinod Nair, head of research at Geojit Financial Research, concurred that the two stocks were correcting. Nair told that the merger would take 12-18 months to complete. It would be interesting to see how things progress once all of the necessary approvals have been secured.

Both companies must look into cross-ownership in their subsidiaries, such as HDFC Life, where the merger may extend the holdings of the entity above the IRDAI guidelines, he added. A 5-year investment in the group would be worthwhile in his opinion, but he stressed how undervalued it is right now.

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