MUMBAI: A near 17-minute share slam was all it took for benchmark Sensex to knock off 1,500 points during intraday trading, while Nifty plunged below the psychological 11,000 points.
At 12.52 pm, a flash crash was triggered by Dewan Housing Finance and Indiabulls Housing Finance, which themselves entered a sea of red following a debt default scare leading to panic selling.
It was a freaky Friday to begin with, with YES Bank tanking 35 per cent in early trade, which markets shrugged off. In fact, the Sensex was trading one per cent higher till 12.50 pm, but all hell broke loose, when traders dumped DHFL and IHFL stocks by 60 and 35 per cent, respectively.
In a blink of an eye, benchmark indices went to hell in a handcart, as Sensex fell to a nose-bleeding low of 35,994 – its biggest fall in four years – while Nifty 50 fell to 10,866.
Trembling traders sideswiped almost all financial stocks with BSE Finance Index tanking 6.6 per cent intraday, followed by Smallcap and Midcap indices. The bloodbath even spread to money markets, forcing rupee to erase early gains, though it recovered losses to close 0.25 per cent higher.
It all started when DSP Mutual Fund sold DHFL’s bonds, spooking investors that liquidity conditions were tightening as a fallout of IL&FS’ looming liquidity crisis and that housing finance companies’ margins will erode if costs escalate. Adding to market woes was speculation about RBI tightening screws to address governance concerns among NBFCs.
Did HFCs pull down the market?
Friday’s market crash was led by panic selling of housing finance firm stocks.
Dewan Housing Finance tanked 42 per cent over fears of a liquidity crisis, triggering a cascading effect on the broader market.
Dewan stock closed at Rs 351.55 on the BSE. Intra-day, it fell 59.67% to Rs 246.25, its 52-week low.
Among others, Indiabulls Housing Finance fell 8.18%; Can Fin Homes dived 5.7%, LIC Housing Finance 5.05% and PNB Housing Finance 4.92%. NBFCs also took a beating with Bajaj Fin dropping 4.58%, Edelweiss Fin Services 3.15% and Shriram Transport Finance Co 2.47%.