Non-banking financial companies (NBFCs) across the spectrum also witnessed a huge sell-off with Bajaj Finance and HDFC declining by 11.8% and 10.8%, respectively.
Indian equities fell again on Monday, led by a collapse in banking and financial stocks, erasing last week’s gains. The benchmark Sensex crashed 1,375.27 points, or 4.6%, to close at 28,440.32. The broader Nifty50 declined 379.15, or 4.38%, to close at 8,281.1. Nifty Bank underperformed the markets and was down by 6.06%.
Explaining the reason for the decline in banking and financial stocks, Ambareesh Baliga, an independent market expert, said that there are expectations in the market that the non-performing assets (NPAs) will rise. “Banks and financials have fallen because there is a fear that regardless of the three-month moratorium that has been given, there will be a rise in NPAs. The MSMEs will be hurt, so would the individual borrowers, thus the fear that the NPAs will rise,” he said. During Monday’s trading session, Bandhan Bank, Federal Bank, Kotak Mahindra Bank, HDFC Bank and ICICI Bank declined the most. Bandhan Bank’s stock declined by 14.6%, and Federal Bank was down by 8.7%. Kotak Mahindra Bank and HDFC Bank were down by 8.3% and 8.1%, respectively. ICICI Bank was down by 7.2%. ICICI Bank and HDFC Bank contributed 75% to Nifty Bank’s fall.
Non-banking financial companies (NBFCs) across the spectrum also witnessed a huge sell-off with Bajaj Finance and HDFC declining by 11.8% and 10.8%, respectively. Midcap NBFCs such as Shriram Transport Finance, Manappuram Finance as well as Mahindra and Mahindra Finance were down between 10-15%. Deven Choksey, managing director, KR Choksey Investment Managers, said that the fall could be related to deferred payments. “It could lead to a situation where it could put banks under pressure since, it would impact their collection mechanism,” he said.
According to Bloomberg, Sensex was set for a quarterly drop of about 30%, surpassing the previous record of a 28% decline in the quarter through June 1992. That slide followed India’s steps to cede control over the economy, open up for foreign investment, cut tariffs and devalue its currency, to pull the nation from an unprecedented balance of payments crisis, Bloomberg said.
The figures cannot be compared with that of 1992 since the scenario was different. It was an India centric scam and our markets had mostly domestic investors. Now the global markets are in a panic mode due to a global pandemic,” said Ambareesh Baliga.
Foreign portfolio investors that had turned buyers on Friday continued to sell on Monday pulling out $578.26 million from Indian equities. The cash volume turnover on the NSE on Monday was Rs 36,076 crore as opposed to the last six months average of 3.92 lakh crore. The biggest losers on the Nifty were Bajaj Finance, HDFC, Kotak Mahindra Bank, HDFC Bank and Tata Steel. The stock of Tata Steel was down by 8.03%. The biggest gainers, on the other hand, were Cipla, Tech Mahindra, Nestle India, Dr Reddy’s Laboratories and Axis Bank, which were up by 6.7%, 4.7%, 3.7%, 2.5% and 2.35%, respectively. Shares of Sun Pharma Industries, which were down by 1.6%, ended at an eight-year low after the company received an OAI for its Halol unit. Sectorally, Nifty Pharma and Nifty FMCG outperformed the market ending their day higher by 1.2% and 0.3%. Nifty Midcap shed 2.7% and Nifty Smallcap shed 2.2%.
Globally, the Asian markets too ended their day in the red with stock exchanges in Taiwan, China and Hong Kong down between 0.7% to 1.3% . The bourses in Europe were also trading in the red at the time of the press.