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NEW DELHI: Shares of housing finance companies came under sudden heavy selling pressure on Friday as investors raised concerns over rising cost of borrowing for the companies amid continuing financial crisis at ILFS.
Shares of Dewan Housing Finance Corporation (DHFL).
The company lost nearly Rs 10,000 crore worth in market cap.
Tightness in money market and a lack of clarity on ILFS exposure has led to a sudden sell-off in NBFCs.
"There is pressure on short-term money both in the short-term and longer-term debt flows.
The cost of money has escalated and there is tightness in the money market.
The lack of clarity about ILFS exposure is leading to the knee-jerk reaction.
There is no clarity on government's bailout for the company so far.
However, the fear will subside after the government steps in.
Once there is stability in the money market, things will be as usual," Sanjiv Bhasin, Executive VP-Markets Corporate Affairs, India Infoline told to ETMarkets.com.
"The cost of borrowing for NBFCs is going to shoot up and they may face challenge in raising money in the light of recent news on ILFS.
However, this knee-jerk reaction is baffling," Hitesh Agrawal, EVP head - retail research at Religare Securities told ETMarkets.com.
The entire NBFC space looked like a red sea.
Shares of VLS Finance (down 16.73 per cent), LT Finance Holdings (down 15.81 per cent), Crest Ventures (down 15.66 per cent), Centrum Capital (down 15.36 per cent) and SREI Infrastructure Finance (down 15.35 per cent) cracked over 15 per cent.
Magma Fincorp (down 15 per cent), Shriram Transport Finance (down 14.99 per cent), Reliance Home Finance (down 14.71 per cent), Reliance Capital (down 14.55 per cent), Bajaj Finserv (down 14.42 per cent), Capri Global Capital (down 14.20 per cent), Bajaj Finance (down 14.01 per cent), LIC Housing Finance (down 13.54 per cent), IDFC (down 13.23 per cent), Reliance Nippon (down 12.76 per cent) and Can Fin Homes (down 12.72 per cent) nosedived.
R Varadarajan, MD, Repco Home Finance denied any liquidity concerns, sayingcost of funds is increasing because of the bond market price.
"I feel that most of the NBFCs are capable to take it and pass it on to the customers without much affecting the quality of the assets as well as the growth," Vardarajan added.
However, few stocks such as India Cements Capital (up 11.28 per cent), Mukesh Babu Financial Services (up 9.78 per cent), Meenakshi Entp (up 6.97 per cent), AIIL (up 5.67 per cent), First Custodian Fund India (up 5.00 per cent), Jindal Capital (up 4.99 per cent), GILADAFINS (up 4.97 per cent), Times Guaranty (up 4.92 per cent), Suchitra Finance Trading Company (up 4.90 per cent) and Gogia Capital Services (up 4.89 per cent) were in the green around that time.
The 30-share BSE Sensex, after falling about 1,128 points, recovered and was down 267 points at 36,854.
