Sensex retreats nearly 400 points as NFBC meltdown resumes

BSE Realty and BSE Auto index were the top losers, losing 3.17% and 3% respectively.

Mumbai: Fears of defaults by real estate companies hammered shares of non-banking financial companies (NBFCs) on Wednesday, driving benchmark equity index Sensex nearly 400 points down after a positive start.

Shares of Indiabulls Housing Finance Ltd tanked 13.17% after a BloombergQuint report, citing a Macquarie sales team note to clients, said its loans to default-rated SuperTech could be over 500 crore. The loan, the brokerage said citing its discussions with the management, was for a specific project that is ring-fenced and earns monthly rentals of close to 30-35 crore, the report added.

On 10 October, Brickwork Ratings had downgraded the ratings on 1,866.4 crore of SuperTech’s bank facilities to default (D) from BB-.

In a wave of selling in NBFCs, Dewan Housing Finance Corp. Ltd slipped 12.34% and Edelweiss Financial Services Ltd lost 10%.

“Credit facilities of a large property developer in NCR region have been downgraded to default. Investors are concerned about its exposure mainly by NBFCs," said V.K. Sharma, head, private client group (PCG) & capital markets group, HDFC Securities.

“Automobile stocks were also prominent losers as many feared lower sales in this festive season on fears of rising insurance costs and lower liquidity from NBFCs," added Sharma.

BSE’s 30-share Sensex lost 1.09% or 382.90 points to close at 34,779.58 points, while National Stock Exchange’s (NSE) 50-share Nifty closed 1.24% or 131.70 points lower at 10,453.05 points.

In early trade, Sensex rose as much as 1.26% or 442.95 points to 35,605.43 points, while Nifty climbed as much as 1.18% or 125.40 points to 10,710.15 points.

“The bigger variables—currency, global markets, and oil are gradually stabilising. The liquidity fear around NBFC still persists,"said Vaibhav Sanghavi, co-CEO, Avendus Capital Public Markets Alternative Strategies Llp.

“The market was and is going to be volatile for the next 6-8 months—both due to global and domestic factors," warned Sanghavi.

In Wednesday’s trade, nearly three shares declined for every share that advanced on BSE. Only BSE FMCG index managed to close in the green. BSE Realty and BSE Auto index were the top losers, losing 3.17% and 3% respectively. Twenty-four of 30 Sensex stocks closed higher.

Energy-to-telecom conglomerate Reliance Industries contributed the most to the losses for Sensex with a 1.27% decline, ahead of its quarterly earnings announcement.

ICICI Bank and Tata Consultancy Services Ltd (TCS) followed with losses of 1.98% and 1.73%. Top carmaker Maruti Suzuki India Ltd was down 3.79%.