Move gets thumbs up

■ Markets reacted positively to government’s swift action, according to analysts

The surprise move by the government to take over the control and management of Infrastructure Leasing & Financial Services ( IL& FS) has come as a major relief to financial markets as fears about further default had triggered widespread risk aversion towards the entire banking sector.

The change in sentiments was very much visible by the way the share prices of IL& FS group companies responded as soon as the government moved a special petition before the National Company Law Tribunal ( NCLT) seeking a change in the management of the company.

“The government has acted fast to avoid any collateral damage. The financial market runs on sentiments and it seems the markets have responded positively to the latest government move,” said Deven Choksey, managing director of K. R. Choksey Securities.

According to him, the new board comprises of competent individuals with strong credentials, which is providing a greater degree of confidence to financial market participants.

The shares of IL& FS Engineering soared 20 per cent while that of IL& FS Transportation and IL& FS Investment Managers surged 19.50 per cent and 10 per cent respectively.

Even the Sensex and Nifty staged a smart recovery from their days lows and closed the day higher snapping their three day losing streak.

“There was fear about the crisis at IL& FS spreading to other banks and non- bank finance companies ( NBFC). The government move has allayed those fears,” said Ambareesh Baliga, senior research analyst.

While the government takeover has brought some amount of sanity into financial markets, Ambareesh Baliga said it would take little time for everything to get back to normal.

“The processes have definitely started and let us hope that there is a solution,” Mr Baliga added.