New Delhi: Stock markets extended their losses on Monday, continuing their losing streak for the fifth trading session, largely pulled down by financial companies facing the risk of liquidity crunch after Infrastructure Leasing & Financial Services Ltd (IL&FS) and its arm defaulted on a series of loan repayments.
The renewed rally in the global oil market and the rupee slide also weighed on the investors’ sentiments. On Monday, the Sensex tanked over 500 points while Nifty shed 1.58% of its value in intra-day trading.
Five days of losses have knocked 1,700 points off the 30-share index and dragged Nifty50 below the 11,000-mark.
Bajaj Finance fell 5%, Gruh Finance 5%, Cholamandalam Investment and Finance 4%, Edelweiss Financial Services 3%, Indiabulls Housing Finance 3%, Repco Home Finance 4%, GIC Housing Finance 3% and PNB Housing Finance 3%, trading data showed.
Finance minister Arun Jaitley on Monday morning tried to calm the market, saying the government is ready to meet credit requirement of non-banking financial companies (NBFCs).
“The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs,” Jaitley said in a tweet.
Indian stocks had also seen panic selling on Friday, with the share price of Dewan Housing Finance Corp (DHFL) tanking more than 42% on its rumoured default on loan repayment.
In view of the last week’s stock market bloodbath, the Reserve Bank of India and capital market regulator SEBI had on Sunday offered assurance of appropriate action to jittery investors.
State Bank of India, the country’s largest state-owned lender, had also tried to assuage investors’ fear that it could stop lending to the NBFCs after implosion of IL&FS’s debt.
“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,” Kumar added.
The IL&FS crisis has been termed as India’s Lehman moment by some analysts to underline the risks of systemic contagion emanating from it.
Lehman Brothers, a US mortgage lender, filed for bankruptcy on September 15, 2008, triggering the global financial meltdown that resulted in recession.
Meanwhile, oil prices rose 2% on Monday as sanctions restricted Iranian crude exports, tightening global supply. Some traders even forecast that crude prices could spike to as much as $100 a barrel, according to Reuters.
Oil and Fed factors
Brent crude hit its highest since May at $80.47 per barrel, up $1.63 or more than 2%, before easing back slightly to about $80.40 in intra-day trading.
Oil prices rose as the Organisation of Petroleum Exporting Countries (Opec) and Russia snubbed calls by US President Donald Trump to increase crude output, ahead of US sanctions against Iran.
The rupee opened 27 paise lower against the US dollar. Foreign brokerage Nomura has said that the market expects a 25 basis points rate hike at the Fed meeting on September 25-26. With US growth above potential, a Fed pause is unlikely this year, it said.
A hike in US Fed rates could further exacerbate flight of foreign capital. Data showed foreign portfolio investors have sold Rs 8,837.92 worth of equities so far this calendar against Rs 49,729 crore equity inflows in 2017.