Ever since the announcement of HDFC Bank-TimesBank merger, punters andinvestors have rushed into a host of private bank stocks, especially thenewly listed ones. But on Thursday, market players ventured into anythingthat was remotely a merger candidate in the banking sector. For instance,even UTI Bank was not left out of the prospective candidates by speculators.UTI Bank has shot up by over 50 per cent since November 25.

The most significant of the change in market perception is the surprisereturn that investors who had reluctantly entered the ICICI public issue afew months ago would enjoy now. Those who had been pessimistic based onconventional wisdom have been proven wrong with the new found merger theorygaining currency among investors. ICICI had offered its shares at Rs 73 tothe public and the scrip was struggling to break out of the shackles of apossible dilution. Overnight, the perception has changed, especially sincethe announcement of the HDFC Bank-TimesBank merger. On its IPO offer pricethe current price gives a return of 55 per cent.

IDBI, which has been bogged down by fears of NPA pulling down the leader'searning growth, saw its scrip shooting up to close at Rs 38.25, up from Rs35.45.

But investors appetite for HDFC Bank shares appears to be unsated. The scriphas almost doubled since the announcement of the merger. And the gap in thePE between HDFC Bank and HDFC is wideninng, with the former trading at over35 multiples and the latter at 9.59. Similaryly, the gap between ICICI andICICI Banking is also widening.

The M&A factor is expected to continue to play a key role in this sectoreven tomorrow after ICICI Bank and Centurion Bank sent notices to the stockexchanges stating that they had no comments about the reports of a merger.This leaves the field wide open for speculators.