Stock markets on Friday witnessed a panic sell-off as shares led by mortgage lenders Dewan Housing Finance and Indiabulls Housing Finance tumbled amid reports of default by a finance company and rumours of a debt crisis in the non-banking financial companies (NBFC) sector. The BSE Sensex, which opened on a strong footing, suddenly plunged 1,127 points, or 3.03 per cent, to hit a low of 35,993.64 in the afternoon trade, before staging an equally sharp recovery within minutes. It finally closed at 36,841.60, down 279.62 points. The Sensex saw an intra-day swing of 1,495 points. Shares of housing finance firms slumped on fears of a liquidity crisis. Reports of debt defaults by IL&FS also sparked concerns, which spilled over into other NBFC counters. The scrip of Dewan Housing Finance Corporation went into a tailspin, nosediving 42.43 per cent to end at Rs 351.55 on BSE. Intra-day, it tanked 59.67 per cent to Rs 246.25 — its 52-week low. DHFL’s market valuation tumbled Rs 8,120.41 crore to Rs 11,031.59 crore on the BSE. Among others, shares of Indiabulls Housing Finance plunged 8.18 per cent, Can Fin Homes dived 5.70 per cent, LIC Housing Finance 5.05 per cent and PNB Housing Finance 4.92 per cent. Jayant Manglik, president, Religare Broking, said, “The beginning was upbeat, tracking firm global cues but the rumours of debt crisis in NBFC sector triggered panic selling across the board, especially in banking and housing finance stocks. Though the benchmark index managed to recoup losses significantly in the latter half, the situation remained bleak on broader front.” “Housing finance companies nosedived on rumours of liquidity crunch which caused the stocks to fall up to 50 per cent. Though the stocks are fundamentally sound, herd mentality had caused the sudden panic in these stocks. However, they have recovered from their day’s low,” said Jimeet Modi, founder & CEO of Samco Securities & StockNote. Shares of non-banking finance firms also took a beating with Bajaj Finance falling 4.58 per cent, Edelweiss Financial Services 3.15 per cent and Shriram Transport Finance Company 2.47 per cent. “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 sell-off in papers of other companies,” said Joesph Thomas, head of Research, Emkay Global Financial Services. Till about 1 pm, the Sensex was trading 1 per cent higher. Then shares of Dewan Housing Finance plunged as much as 60 per cent, while Indiabulls Housing Finance dropped 35 per cent. The broader NSE Nifty shed 91.25 points to finish at 11,143.10. Shares of Yes Bank plunged 28.71 per cent on the BSE. Sector-wise, realty declined 3.48 per cent, banking 3.13 per cent, finance 2.51 per cent, power 1.91 per cent, healthcare 1.66 per cent, auto 1.18 per cent, IT 1.08 per cent, infrastructure 0.85 per cent, teck 0.76 per cent, FMCG 0.74 per cent, consumer durables 0.68 per cent, capital goods 0.61 per cent, metal 0.42 per cent and PSU 0.42 per cent. Oil and gas rose 1.50 per cent. In the broader markets, the BSE small-cap index dived 3 per cent, while the mid-cap gauge lost 1.72 per cent. Globally, most Asian and European markets rose, tracking positive closing in the US market overnight on easing trade war concerns. In the Asian region, Hong Kong’s Hang Seng was up 1.73 per cent, Shanghai Composite Index edged higher by 2.50 per cent while Japan’s Nikkei gained 0.82 per cent. In the Eurozone, Paris CAC 40 was up 0.68 per cent and Frankfurt’s DAX advanced 0.70 per cent. London’s FTSE too was up 1.08 per cent. Meanwhile, the rupee continued its bullish trend for the second day, rising 17 paise to end at 72.20 against the US dollar on sustained selling of the American currency even as local equities witnessed a high volatility, according to a PTI report. The domestic currency hit an intra-day high of 71.70 before giving back early strong gains swayed by domestic stock volatility. The Indian unit briefly touched a low of 72.48. Although, forex market reacted muted to the ‘escalation’ in the US-China trade conflict with no meaningful safe haven bid for the dollar as investors adopted a “wait and see” approach ahead of China’s possible retaliation to the latest round of US tariffs.
