July 25, 2013 / 19:01 IST
Moneycontrol Bureau
Stocks plunged for the second straight session Thursday, on worries RBI's efforts to reduce money supply in the system would hurt corporate earnings, and aggravate the slowdown in the economy.
The Sensex shed 285 points to close at 19,804.76, and the Nifty fell 83 points to close at 5,907.50.
"Credit quality of corporates is likely to be weakened by slow growth in GDP, heightened currency volatility, and higher-than-expected interest rates," said Roopa Kudva, Managing Director & Chief Executive Officer, CRISIL in a release by the rating agency.
"Specifically, stress will increase in sectors such as power, construction, engineering, and steel, and lead to higher non-performing assets (NPAs) in the banking system," she said.
The RBI has reduced availability of short term funds to banks to check the slide in the rupee. The idea was to make it costlier to speculate on the dollar by borrowing in rupees. But the move has pushed up borrowing costs across the board, and experts feel it could do more harm than good.
With today's fall, the Sensex has shed nearly 500 points in the last couple of sessions.
Lower than expected quarterly sales of ITC dampened sentiment for the FMCG sector in general. ITC shares fell over 4 percent and index heavyweight Hindustan Unilever around 3 percent. A 2 percent decline in shares of Reliance Industries added to the decline in benchmark indices.
Metal, healthcare and capital goods shares were among the worst performers of the day. Bank stocks continued to be under pressure, but the selling was much lower compared to that seen on Wednesday.
Ambuja Cements crashed 10 percent as the proposal by parent to increase stake in the company through a complex restructuring process is viewed as being negative for the Ambuja shareholders. Shares of ACC, part of the same group, fell around 3 percent.
"We believe that Holcim restructuring is value destructive for Ambuja minority shareholders as the hold-co structure will result in a potentially large hold-co discount getting applied to Ambuja’s stake in ACC. While the transaction seems to be EPS neutral, we note that there is a 28 percent equity dilution for Ambuja minority," brokerage house CLSA said in a note to clients.
Other prominent losers today included Jaiprakash Associates, Central Bank, JP Power, GMR Infra, L&T Finance Holdings, Jet Air India and REC, down 5-8 percent.
Gainers included Zee Entertainment, Apollo Tyres, JSW Energy, IPCA Lab, Adani Power, Hero MotoCorp, and Idea Cellular, up 4-6 percent.
