Sensex on Thursday plunged by 554 points as concerns over the liquidity crisis in the NBFC sector in the wake of the downgrading of DHFL debt hit market sentiment.
Though the RBI announced a 25 basis points rate cut on the expected lines, the Sensex fell 553.82 points, or 1.38 per cent, to settle at 39,529.72 as investors who were expecting some measures to bail out troubled NBFCs were disappointed as the RBI did not announce any speciific measures. The broader NSE Nifty plunged 177.90 points, or 1.48 per cent, to end at 11,843.75. It was the biggest fall in the Sensex in 2019.
Vinod Nair, head of research, Geojit Financial Services, said, “We are bound for some correction in the short-term post the in-line measures of the RBI which was well-done, acknowledging the worries in the economy. No specific comment regarding the NBFC crisis was taken as a surprise while delay in monsoon added to the fear. … market is eager to know the new reforms to sustain the rally which has got expensive…”
The downgrade of DHFL debt has unnerved the market as banks, mutual funds and institutions have big exposure in the mortgage major, said an analyst.
Jagannadham Thunuguntla, senior VP and head of research (wealth), Centrum Broking, said “The leg room for further rate cuts is limited. Further, the repayment delay by DHFL (with outstanding loan of over Rs one lakh crore) is way too big a strain for the market considering IL&FS default (to the tune of Rs.90,000 crore) itself remained unaddressed after 10 months of default.”
NBFC stocks witnessed heavy selling pressure following the bond defaults by mortgage lender DHFL on June 4, which led to a slew of rating downgrades for the company. The stock lost more than 15 per cent Thursday. Other losers included Shriram Transport Finance, Indiabulls Housing Finance and L&T Housing Finance, which lost up to 8.61 per cent.
Interest rate sensitive bank, auto and realty shares also came under selling pressure and fell up to 7 per cent even as the RBI slashed the policy rate. The rupee recouped most of its early losses and closed marginally lower at 69.28 to the US dollar after the RBI move to cut key interest rates.