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Sensex skips a heartbeat! NBFCs drive market down 1,100 points, recovers soon after

However, the indices later recovered on management of these companies allaying concerns over their financial position.

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Sensex skips a heartbeat! NBFCs drive market down 1100 points, recovers soon after

The Sensex and Nifty crashed in afternoon trade amid heavy selling in housing finance companies stocks. The stocks of non-banking finance companies (NBFCs) crashed today and spooked Sensex and Nifty which fell nearly 1,128 points and 368 points, respectively. However, the indices later recovered on management of these companies allaying concerns over their financial position.

The stock of Dewan Housing Finance fell 59.67 per cent or 364 points to a new low of 246.25, the most among the NBFCs. Other housing finance companies such as India Bulls Housing Finance, LIC Housing, L&T Finance Holding stocks too fell in afternoon trade.

DHFL CMD Kapil Wadhawan told CNBC TV 18 that stock fall has come as a surprise and shock. When asked if he had any pledged shares or loan against shares, Wadhawan said, "Absolutely not, that's a policy of the family not to go and pledge your own shares. We have never done this in the past. There is no intention of doing that in the future."

Responding to a question whether he was aware of a fund selling DHFL paper on Wednesday, Wadhawan added, "That's a secondary trade between a buyer and a seller. It's got nothing to do with the fundamentals of a company which are extremely strong. Obviously this panic has been started for some other fundamental reasons. There seems to be some cascading effect - my fundamentals are strong, my NPA position is strong, my asset quality...With all this unfortunate mayhem that has gone around in the market, this only puts a dent on any further primary issues that we do for the immediate future. These are all sentiment spoilers in the market."

The BSE Sensex recovered nearly 900 points after plummeting over 1,100 points within a matter of minutes in afternoon session on major selloff in finance stocks, despite firm global cues and rupee recovery. The 30-share index had plunged 1127.58 points, or 3.03 per cent, to hit an intra-day low of 35,993.64. It, however, recovered nearly 900 points within minutes of the fall.

The broader NSE Nifty cracked below the 11,000 mark, falling 367.90 points, or 3.27 per cent, to touch a low of 10,866.45, before recovering over 300 points to traded near 11,169.90.

The Sensex finally ended lower by 279.62 points, or 0.75 per cent, at 36,841.60. This is its lowest closing since July 25, when it had finished at 36,858.23.

YES Bank was the worst performer on the index, losing a whopping 28.71 per cent. The Reserve Bank on Wednesday curtailed the term of its founding CEO Rana Kapoor and asked the private sector lender to look for his replacement by January 2019.

The broader Nifty too suffered a mid-session plunge and ended at 11,143.10, down 91.25 points.

The indices closed with losses for the third straight week. The Sensex lost a hefty 1,249.04 points, or 3.28 per cent, while the NSE Nifty fell 372.10 points, or 3.23 per cent, during the week.

Joseph Thomas, Head of Research, Wealth Management at Emkay Global Financial Services said, "The events surrounding YES Bank and DHFL sent the broader markets sharply lower. The trigger on the surface seems to be the selling of debt papers of DHFL by one of the prominent AMCs, but the broader issue is that of a contagion leading to selloff in papers of other companies The ILFS exposure led to selling by the impacted institutional investor of some other unrelated NBFC to keep the liquidity channel open. The major concern here is of risk sentiment and that appears to be pretty weak in the wake of top quality papers getting downgraded to junk status in a matter of days All these influenced the markets to a significant extent.  But it was bit overdone given the fact that the markets closed much higher than the lows seen earlier in the day."

Heavy selling was witnessed in realty, healthcare, banking, IT, auto, teck, power consumer durables, FMCG, capital goods, infrastructure, metal and PSU indices, which fell up to 3.65 per cent.

YES Bank was the biggest Sensex loser intra day, cracking 34 per cent to hit a one-year low.

Other banking stocks such as PNB, Federal Bank, Bank of Baroda, Kotak Bank and SBI, dropped up to 7.44 per cent.

Other major losers were Adani Ports, Tata Motors, Infosys, Sun Pharma, SBI, Maruti Suzuki and HUL, falling up to 3.15 per cent.

Among housing finance stocks, DHFL led the pack by tanking over 50 per cent, followed by Indiabulls Housing Finance, Can Fin Homes, PNB Housing Finance and LIC Housing Finance cracking up to 17 per cent.

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