Benchmark index Sensex gave a scare to investors on Friday after plunging swinging almost 1500 points in intraday trade after a fall in the shares of Yes Bank and Dewan Housing Finance set off an exodus from financial shares. Sensex recovered to end the day 0.75% lower at 36,841.60 points, while the Nifty50 shed 0.81% or 91.25 points to close at 11,143.10.
The Sensex slipped below the 36,000 mark for the first time since June 28. The 50-scrip NSE Nifty tumbled 367 points to touch 10,886, a level last seen on July 10. Analysts said panic selling in non-banking financial companies amid fears of outflows led to the sharp fall. The indices, however, recovered some ground in late afternoon deals.
The markets dropped tracking a sharp sell-off in Dewan Housing Finance Ltd (DHFL) shares, which plunged 59.67% to ₹246.25. DHFL is a liquid stock and part of the derivatives segment, and hence has no circuit limits. The shares later recovered partially, closing 42.4% lower at ₹351.55.
The market panicked after news emerged of DSP Mutual Fund selling DHFL’s one-year Rs 300 crore paper at 11%. In reaction, Edelweiss Financial Services 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
The sentiment for financials has turned weak after problems emerged at IL&FS Group and RBI denied a three-year extension to Kapoor, Yes Bank’s managing director and chief executive officer.
RBI instructions to Yes Bank to replace Rana Kapoor as its chief put a lot of stress on the bank, as well as weaker peers across banks and NBFCs.