Sensex plunges over 500 points again Govt reassures investors as market liquidity fears grow
MONDAY BLUES IL&FS loan default, global trade tensions hit market sentiment MUMBAI:
Market benchmark BSE Sensex tanked nearly 537 points to end at over two-month low of 36,305.02 and the Nifty crashed below the 11,000-mark Monday, extending their slide for the fifth straight session after heavy losses in banking and auto stocks.
Reports of liquidity concerns following the default in repayment of loans by diversified IL&FS group spooked investors even as losses in global markets on reports that China had called off planned trade talks with the US in the wake of a new round of duties weighed on the market sentiment.
The 30-share Sensex hit a low of 36,216.95 before settling at 36,305.02, down by 536.58 points or 1.46%—the biggest single-session fall since February 6 when it had lost 561.22 points. This is the weakest closing since July 11 when it settled at 36,265.93. The index had lost 1,249.04 points in the previous four sessions.
The broader NSE Nifty cracked below the 11,000 level by dropping 168.20 points, or 1.51% to end at 10,974.90 due to foreign fund outflows amid prospects of a 25 basis point hike in the interest rate by the US Federal Reserve this week.
Mahindra and Mahindra fell the most by 6.46% among 30 Sensex stocks while Maruti and Bajaj Auto decline by 3% and 1.7% respectively. Financial stocks led by HDFC took a hit. HDFC dropped 6.22%, IndusInd Bank by 4.94%, ICICI Bank by 2.8%, Kotak Bank by 2.6%, HDFC Bank by 2.16%, and SBI by 2.04%. Yes Bank fell by another 0.35%, taking its total losses to more than 29% after the RBI curtailed the term of its founding CEO Rana Kapoor. Bucking the trend, IT stocks TCS and Infosys rose by 4.5% and 1.5%. Coal India rose by 2.1% while Reliance gained 1.27%.
Sentiments remained distinctly weak in sync with declining global markets as the intensifying dispute between the world’s two biggest economies has spooked financial markets worried about the fallout on global growth, brokers said.
The Reserve Bank of India (RBI) and market regulator Sebi said on Sunday that they were closely monitoring the developments in the financial sector and were ready to take “appropriate actions” to calm the jittery investors.
Meanwhile, Finance Minister Arun Jaitley said Monday that the government would take all measures to ensure adequate liquidity for non-banking financial companies (NBFCs) and mutual funds.
Housing finance company DHFL on Monday again asserted that it has not defaulted on any financial obligations and there has been no instance of delay in repayment of any liability.
The company’s shares had tanked by over 42% on Friday, in sync with the broader market trend, due to concerns of liquidity crisis and exposure of nonbanking financial companies (NBFCs) to the beleaguered IL&FS Financial Services.
“DHFL today reiterated that the company has neither defaulted on any bonds or repayment of its financial obligations, nor has there been any instance of delay on any repayment of any liability,” a company statement said.
The company Friday had also assured that it has not defaulted on any bonds or repayment. On September 21, 2018, DHFL fulfilled its commitment of repaying commercial papers worth ₹575 crore, and as per schedule and terms, the company is repaying ₹400 crore on September 24, 2018, it said further.
Minister Arun Jaitley said on Monday the government is ready to ensure credit is available to non-banking financial companies (NBFCs), just a day after the market regulator and the central bank sought to calm skittish investors.
Jaitley’s assurances followed panic selling in the equity market on Friday that pushed the benchmark Nifty more than three percent lower in less than 30 minutes.
It later recovered to end the day down 0.81%.
The sell-off was sparked by news that a large fund manager sold short-term bonds issued by Indian NBFC Dewan Housing Finance Corp at a sharp discount, raising fears of wider liquidity problem among NBFCs.
The news came amid soured market sentiment after one of the biggest names in the NBFC sector - Infrastructure Leasing & Financial Services (IL&FS) - defaulted on a series of its coupon payments. In a tweet on Monday Jaitley said, “The Government will take all measures to ensure that adequate liquidity is maintained/ provided to the NBFCs.”
Jaitley’s message came on the heels of assurances from both the Reserve Bank of India (RBI ) and market regulator Securities and Exchange Board of India (Sebi), which sought separately on Sunday to reassure investors they were closely monitoring developments in financial markets and stood ready to act if needed.
Indian equity markets have hit record highs this year despite sell-offs in domestic bonds and weakness in the rupee that has
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the world’s third-biggest oil importer, is considering cutting oil purchases to soften the blow from high crude oil prices and declining rupee, Indian Oil Corp. (IOC) chairman Sanjiv Singh said Monday.
State refiners are looking at optimising crude oil inventory levels without in any way affecting fuel supplies in the domestic market, he told PTI. Refiners maintain 7-8 days of inventory in tankages besides carrying stocks in pipelines as well as ships in transit. They are looking at reducing these so that monthly imports of crude oil can be reduced, he said.
made it Asia’s worst-performing currency this year.
A sharp correction in equity markets could hurt Prime Minister Narendra Modi and the ruling Bharatiya Janata Party (BJP) as they prepare for a series of key state elections later this year and a general election by May 2019.
A sell-off in equity markets, which have been one of the few bright spots in the economy, could further dent Modi’s popularity among some of the small business and trading community, a core base of BJP supporters, who were already stung by two of his largest reform moves demonetisation
India is the third largest importer of crude oil and rising international crude oil prices are inflating domestic transport fuel rates in a strong demand environment. Brent, the benchmark for half of world’s oil, climbed to $80 per barrel from $71 in the last five weeks, and the Indian rupee lost ground against the dollar by 5-6% during the same period, resulting in expensive crude imports. India is 81% dependent on imports to meet its oil needs.
Meanwhile, oil prices jumped more than 2% to a four-year high Monday after Opec declined to announce an immediate hike in production despite calls by US President Donald Trump for action to raise global supply.
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and a nationwide Goods and Services Tax (GST).
India’s largest bank, the State Bank of India, also sought to calm investors, issuing a statement on Sunday saying fears that banks were wary of lending to NBFCs were baseless.
“SBI lends support to NBFCs in the private and public sector within the regulatory policy framework and will continue to do so,” SBI Chairman Rajnish Kumar said in a statement. “There is no concern on liquidity of NBFCs in view of their liquid cash position and availability of committed lines.”