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India’s private banks and non-banking finance companies (NBFCs), which led the record-breaking stock market rally of recent months, rattled investor sentiments on Friday as their share prices fell like a pack of cards.
Panic and grief gripped investors as shares of YES Bank, the country’s third-largest private lender, crashed by 30 per cent. An even bigger crash – of 60 per cent – in the share price of DHFL, the three-decade-old home financier, spread further chaos. The Sensex tumbled by 1,100 points intraday and the Nifty by more than 350 points or over 3 per cent. Although the Sensex recovered sharply before closing at 36,841.60, down 279.62 points, YES Bank saw no pullback and closed at ₹227 on the BSE, down 28.71 per cent, after touching an intra-day low of ₹210. The broader NSE Nifty shed 91.25 points to finish at 11,143.10.
Uncertainty at YES Bank
The ongoing debt woes of Mumbai-based Infrastructure Leasing and Financial Service (IL&FS) sparked a vicious sell-off of commercial paper by finance companies to meet redemptions. Yet, it’s the uncertainty at YES Bank that has market experts worried in the short run.
“Friday’s fall is about YES Bank, where institutional investors hold 45 per cent. The 30 per cent crash was a shocker, and people are wondering what will transpire at the banks board meet next Tuesday,” said Rahul Arora, CEO, Institutional Equities, Nirmal Bang.
Arora said the street was caught offguard by the RBI’s move to oust YES Bank founder-promoter Rana Kapoor from the board.
DHFL shares closed at ₹351, down 42.42 per cent. The sell-off came following news that DSP Mutual Fund had offloaded DHFL debt papers worth ₹200-300 crore for an 11 per cent yield when the prevailing yield was well below 10 per cent, sparking concerns of a fire sale. Even when the DSP management clarified that it had done so to meet redemption pressure due to its high exposure to IL&FS debt, markets reckoned that the yield for other NBFC papers too would go up.
DHFL Chairman & Managing Director Kapil Wadhawan said the company “has not defaulted on any bonds or repayment nor has there been any single instance of delay on any of its repayment of any liability. Our fundamentals are strong and we hold liquidity of about ₹10,000 crore, equivalent to six months’ cash.”
With inputs from K Ram Kumar
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