Mumbai: A probe into a bribes-for-loans corruption scandal battered the shares in India’s construction and property developers on Friday as the country’s environment ministry put a project on hold and investors feared fears the scam could be deeper than earlier perceived..
The shares continued to fall after India’s Central Bureau of Investigation told Reuters it has sent notices to 21 companies in the bribery investigation case, but added that it was not yet considering widening the investigation.
Shares in Hindustan Construction Co, whose hill-side township unit Lavasa Corp was mentioned in the initial CBI report on the bribery case, tumbled more than 19% to their lowest since 2009.
The stock, which was down about 10% on Friday morning, slid further in the afternoon, following an inquiry by India’s environment ministry into the small town the company has built outside the western city of Pune.
Most of the companies named in the bribery case are related to infrastructure and real estate, pulling the BSE real estate sector index down 4.9%. The index fell nearly 15% on Friday morning.
By 2:16pm, the 30-share BSE Index was trading down 0.18% at 19,283.18, taking losses this week to 1.6%. Two-thirds of its components declined.
“It is all an overreaction. Market has erased a lot of earlier losses right now,” said Deven Choksey, managing director and chief executive of KR Choksey Shares. “There are issues but the fears seen to have been blown out of proportion. It is pure panic.”
More than six shares declined for every share that advanced.
The scandal in the banking sector has tarnished the image of Asia’s third-largest economy, coming on the heels of a telecoms scandal that has paralysed the Indian parliament and also following the corruption-riddled Commonwealth Games.
India’s Central Bureau of Investigation (CBI) has sent notices to 21 medium-to-large sized Indian companies regarding the ongoing probe into a financial bribery scandal, a senior CBI source told Reuters on Friday.
Infrastructure firm Jaiprakash Associates led the losses as it tumbled 13.9% to 99 rupees, its lowest in more than 16 months, after media reports named it in the bribery scandal.
Jindal Steel & Power declined 8.3% after the environment ministry said on its website it has told the company to provide a reason why it should not cancel a green nod for the firm’s 6 million tonne per year Orissa plant.
Shares of property developer Unitech were down 10% in mid-day trade after falling more than 26% in the morning.
The company has not been named in any media reports so far but traders said the market was reacting to the possibility of more companies coming under fire from the CBI.
Other companies alleged to be involved in the scandal by media such as Suzlon Energy, DB Realty declined 3.3% and 10% respectively. Money Matters dropped by 10%.
The CBI had said on Wednesday it arrested eight officials from state-run listed companies, including the chief executive of LIC Housing Finance, for taking hundreds of millions of dollars in bribes to facilitate large corporate loans.
Senior executives at state-run Punjab National Bank, Bank of India and Central Bank of India were also taken into police custody late Wednesday.
LIC Housing and Central Bank of India were down between 9.8% and 7.1% respectively.
Bank of India and Punjab National Bank reversed early losses and rose 3% and 0.9% respectively. The 50-share NSE index was down 0.03% at 5,797.75.