HDFC Bank's shares jumped 3.3% to a record high of 1,757.50 rupees, while HDFC's shares rose 3.7% to 2,927.40 rupees, their highest since April 2022, when the merger was first announced.

The $40-billion merger-the biggest in India's corporate history-closed on June 30 to create a financial behemoth that can now underwrite larger ticket loans, including those for infrastructure.

Since the deal was announced, the private lender's shares have risen about 14.5%, while the housing finance company's stock has gained over 17%, both outperforming the roughly 9% rise in the benchmark Nifty 50 index in that period.

That gives the combined entity a market capitalisation of around $157 billion, Reuters calculations showed, more than top global lenders such as Morgan Stanley and HSBC Holdings.

Still, Morgan Stanley believes HDFC Bank's valuation is attractive.

"The merger is synergistic. HDFC Bank gets access to secured and long-tenor retail mortgage products as well as a large customer base," the brokerage said in a note dated July 2.

It expects the merged entity's loan growth to accelerate to 17%-18% in four quarters, from 15%-16% currently, particularly as mortgage loan growth accelerates.

The brokerage resumed coverage of HDFC Bank with an 'overweight' rating and a target price of 2,110 rupees per share, implying a 26% upside to its last close.

Sashidhar Jagdishan, managing director and CEO of HDFC Bank, has an equally bullish target.

"The pace at which we aim to grow, we could be creating a new HDFC Bank every 4 years," Jagdishan told employees over the weekend.

The combined entity, with a large and growing distribution and customer franchise, more than adequate capital, healthy asset quality and profitability, will be "best positioned" to capture growth, he said.

Both companies have set July 13 as the "record date" to swap HDFC's shares with HDFC Bank's stock for its shareholders.

(Reporting by Siddhi Nayak; Editing by Varun H K and Savio D'Souza)