Sensex closes at record high Shares of high-debt firms tank on liquidation fears

The Sensex made a smart recovery of 255 points to close at a new peak of 31,312 on Monday and the Nifty reclaimed the 9,600 level, riding piggyback on goods and services tax (GST) headway and expectations of reforms by Securities and Exchange Board of India. The markets saw a flurry of buying as investors sensed non-performing assets (NPA) resolution gaining traction after the Reserve Bank asked lenders to initiate bankruptcy proceedings against large defaulters.

Positive global cues emerging from other Asian markets that ended higher in tune with the weekend record closing at Wall Street propped up the markets here.

A firm opening at European shares in a reaction to the strong victory for President Emmanual Macron’s centrist party in Shares of several high-debt companies tanked on Monday on fears that some of them would be forced into liquidation. Last week, the Reserve Bank of India (RBI) identified 12 companies against which lenders can initiate insolvency proceedings under the Insolvency and Bankruptcy Code (IBC). The combined debt of these 12 firms is ~1.5 lakh crore, a quarter of total non-performing loans in the banking system. Shares of Bhushan Steel tanked 16 per cent, Alok Industries fell 11.6 per cent, Lanco Infra dropped 20 per cent, Amtek Auto declined 20 per cent, Jaypree Infra dipped 6 per cent and Monnet Ispat fell 12 per cent. These are some of the companies that could be facing bankruptcy action, according to bankers. French parliamentary elections, as Britain begins formal Brexit talks, buoyed trading sentiment here. “The market is back to the buoyed sentiment due to relaxation in return filing timeline to minimise the impact of transition to the GST. RBI’s insistence that banks start the bankruptcy proceedings which will improve asset quality & strengthen balance sheet, led the index to climb by 1 per cent,” said Vinod Nair, head of research, Geojit Financial Services.

After a strong opening, the BSE 30-share index hit a high of 31,362.15, before closing at a record high of 31,311.57, up 0.82 per cent, breaking its previous record closing of 31,309.49 on June 5. The gauge had lost 99.51 points in the previous two sessions.