Sensex and Nifty observed a major crash in the afternoon trade today following a sharp fall in housing finance stocks. However, benchmark indices soon rebounded as Sensex recovered nearly 900 points after falling over 1,100 points and Nifty reclaimed 11,100-level within a matter of minutes in afternoon session. The 30-share index fell 1127.58 points, or 3.03 percent, to hit an intra-day low of 35,993.64. The index was trading 171.39 points, or 0.46 percent, lower at 36,949.83 at the time of reporting.
The shares of DHFL slumped 45 percent. The stock of DHFL plunged a whopping 55 percent to over a 1-year low of Rs 275.30 on BSE while the share price crashed to Rs 305.30 on NSE, down 50 percent. The shares of Indiabulls Housing Finance fell as much as 30 percent to Rs 809.55 as trading volumes surged following sharp fall in DHFL.
“Big surprise and a shock to me. Sitting on strong liquidity position. We have been extremely conservative in maintenance of liquidity. There is no default whatsoever. The repayments are not even due yet. There is ample liquidity lying with us in the system to take care of interest as well as the principle payouts over the next couple of quarters. All this what we are seeing is panic-stricken market reaction. Total liability position till 31 March is just Rs 4,800 crore; obviously there is some amount of CP that is there in the system, but it’s not a very big amount. At the same time there is close to Rs 10,000 crore of liquidity available with us in the system other than collections that we accrue on a monthly basis. Those collections are anywhere between 2500-3000 crore. Not to go on a pledge shares; no loan against shares NPA position is strong; asset quality is top notch,” Kapil Wadhawan, MD, DHFL told CNBC TV 18.
Meanwhile, other banking stocks such as PNB, Federal Bank, Bank of Baroda, Kotak Bank and SBI, dropped up to 7.44 percent.
Here’s what top stock market experts say
“My view is that the markets are extremely overvalued, and can fall even 2,000 points from here. (Sensex). The Nifty can correct by about 1,000 points. Nothing has changed fundamentally, I mean we have the same macro-economic situation, etc, but when a sell-off happens, nobody can predict. Financials, especially NBFCs are overvalued,” Rajat Sharma, founder, Sana Securities told FE Online.
Terming the crash as a good opportunity to buy these stocks, Madhu Kela of Reliance Capital told ET Now,”Looks like a technical sell-off Their short-term liquidity is very very good; enough liquidity to match liability. Speculative unwinding Long term investor, if you understand the company and faith in management, excellent opportunity to buy these companies; if you think the management is good and will come out stronger, then it’s a good opportunity to buy the shares. Stock markets to worry about the liquidity of companies which have high credit ratings with good liquidity is purely speculative. Even if the interest rates are going up, the lending rates will also go up; to think that either the news is good, or the price is good.”
“My sense is that the bottom that we were unable to find, chances are that we have found it. Often things tend to panic and sell of, unless it’s a black swan event My sense is that whatever information is there is not so serious; may be a couple of stocks may remain dicey but overall if there is no systemic risk, what we are doing is we are buying back nifty now; because it’s not like the whole world is coming to an end May be there is a problem; it can be contained; but once the news is out that news is irrelevant. Given that we are now near the 200-DMA, we could now have that sustainable rally. There is no value in worrying about what’s gone wrong. Try to buy because prices tend to factor in most things. My sense is that by the close we should recover some more Buy the good quality NBFCs, such as Bajaj Finance, L&T finance I would be a buyer now that the fall is already over,” investment advisor Ashwini Gujral told CNBC TV18.
When asked if today’s stock market carnage could be a contagion effect of IL&FS default, Deven Choksey, Managing Director of KRChoksey Shares & Securities Private Ltd told CNBC TV18,”It is an asset-liability mismatch. The fear you have a money recovery taking place; the government of India is required to pay off the money pertaining to the projects, and particularly i think the road projects, where I think a question of Rs 10,000 crore of collection is required to be taken care of. According to me it’s a temporary mismatch, and I don’t think they are undercover on debt. We have sufficient amount of cover as far as the assets are concerned; may be they have defaulted on their payments, and as a result the ratings agencies have downgraded them, and that has led to this kind of a cascading effect. But to me, as I understand, this money should come back to IL&FS and that should ultimately help them in resolving the asset liability mismatch situation or a liquidity situation in which they are right now.”
Meanwhile, Asian stocks extend gains on Friday after Wall Street’s S&P 500 set a new all-time high, while the dollar slipped as investors viewed Beijing’s and Washington’s fresh exchange of import tariffs as less harmful than initially feared.