JET AIRWAYS SHARES FALL TO FOURYEAR LOW
FRIDAY MAYHEM Worries about housing finance firms roil markets, Sensex closes with 0.75% loss
MUMBAI: The benchmark equity index Sensex shed more than 270 points on Friday as nervousness on housing finance companies bothered investors. The index though had recovered after dropping as much as 1,100 points.
BSE’S 30-share Sensex closed 0.75% or 279.62 points lower at 36,841.60 points, while National Stock Exchange’s 50-share Nifty shed 0.81% or 91.25 points to close at 11,143.10.
Earlier in the day, the Sensex had fallen as much as 3.04% or 1,127.58 points to 35,993.64, while Nifty fell as much as 3.27% or 367.90 points to 10,866.45.
Markets dropped sharply in reaction to a sharp sell-off in Dewan Housing Finance Ltd (DHFL). Shares of DHFL plunged 59.67% to ₹246.25, a level last seen on January 5, 2017. DHFL is a liquid stock, and part of the derivatives segment, and hence has no circuit limits. They later recovered but still closed 42.4% lower at ₹351.55. “RBI’S instructions to Yes Bank to replace Rana Kapoor as its chief put lot of stress on the bank as well as weaker peers across banks and NBFCS,” said Vinay Khattar, head of Edelweiss Investment Research, while explaining the triggers that hurt the markets today.
The sentiment for financials has been weak in recent times owing to issues with IL&FS group and as the Reserve Bank of India denied a three-year extension to Kapoor, Yes Bank’s managing director and chief executive officer, and asked him to step down after 31 January 2019.
“While the change in leadership could be challenging for Yes Bank to maintain its growth momentum and manage the balance sheet quality, generally tight liquidity conditions indicated by tightening yields put pressure across the sector. DHFL and Indiabulls Housing Finance were the other prominent sufferers,” said Khattar.
“The uncertainty surrounding the future of IL&FS and, therefore, liquidity conditions is souring sentiment. Though these issues appear to be transient, they can be a source of significant volatility in the short term,” Khattar added.
The market panicked after news emerged of DSP Mutual Fund selling DHFL’S one-year ₹300 crore paper at 11%. In reaction, Edelweiss Financial Services Ltd fell 3.15%, Srei Infrastructure Finance Ltd dropped 10%, while Indiabulls Housing Finance Ltd shed 8.18%.
However, DSP MF clarified the situation. “Over the last many weeks, we have been reducing some exposure in our fixed income portfolio. Now that broadly interest rates are inching up, we are trying to bring down our portfolio maturity,” said Kalpen Parekh, president, DSP Investment Managers Pvt. Ltd. “DHFL happens to be one out of them. We have no credit issue with them, we are just trying to bring down our portfolio maturity. We continue to still hold a significant amount of DHFL papers,” said Parekh.
“Mid-september is a very tight phase for liquidity in general in the bond market. We sold oneyear DHFL paper worth ₹300 crore for 11% out of our book of ₹1,200 crore on Wednesday. We have reduced our exposure to many issuers, not just DHFL, to recalibrate our interest rate risk,” he added.
Meanwhile, shares of Naresh Goyal-led Jet Airways (India) Ltd plunged to their lowest in nearly four years on Friday amid investor worries after a survey by tax authorities at its offices in New Delhi and Mumbai. The sharp decline in shares adds to woes of the financially-beleaguered airline, which is battling higher costs largely as a result of rising jet fuel prices and a weaker rupee.
The Naresh Goyal-controlled airline had also come under the scanner of the civil aviation ministry, which ordered a probe on Thursday after a flight that took off from the Chhatrapati Shivaji International Airport in Mumbai for Jaipur that day had to return as several passengers suffered nose and ear bleeding. Shares of Jet Airways closed at ₹229.70 apiece on BSE on Friday, their lowest since October 21, 2014.
(Rhik Kundu contributed to this story.)