The issue of Punjab and Maharashtra Cooperative bank once again hit the markets on Monday. Dalal Street was abuzz with discussions that, looking at the real estate developer HDIL’s exposure to the bank, the magnitude of trouble in the whole real estate industry could be bigger than what was so far believed.
Given the disclosure over the weekend about HDIL, investors became skeptical about all financial companies, whether private banks or NBFCs, and their stocks were hammered.
Amongst the top losers was Indiabulls Housing Finance Ltd which witnessed a whopping drop of over 34 per cent to end the day at Rs 255 from Friday close of 390.10. Private lender Yes Bank saw a deep cut of 14 per cent which RBL bank saw a fall of 10 per cent. The decline in banking stocks made Bank Nifty, one of the top sectoral indices, lose 773 points or 2.59 percent at 29,103.
On a volatile day of trade, the broader market index Nifty 50 ended with a cut of 35.15 points or 0.31 per cent at 11,477.25 and BSE Sensex 30 ended with a drop of 155.24 points or 0.40 per cent at 38,667.33. The small fall in the main indices, though, masked the trouble which the broader market witnessed on Monday. The declining stocks outnumbered the advancing ones. On the BSE, 786 stocks gained while 1,708 lost.
Amongst the stocks which helped Nifty 50 to recover from early morning lows were from the IT sector. Reliance Industries too helped the recovery process. The NSE IT index gained 1.91 percent to end Monday trading session at 15,527 while RIL gained 1.86 to close at 1333.40. The other sector which showed a gain was the Nifty FMCG index, which ended the day at 31,125 with a marginal gain of 0.32 per cent.
Over the next couple of weeks, the earnings season of the companies would drive the Indian markets. Given the fact that it would be coming in the backdrop of declining auto sales, the July-to-September results are unlikely to throw any upward surprise. But because valuations have already been corrected, stocks may witness pressure but sharp declines may not happen. This situation is likely to lead to a spike in volatility in individual stocks in the coming weeks.
(Shilpa Nagpal is an analyst at Market Wizards Securities Private Ltd)
