Moneycontrol
Last Updated : Sep 25, 2018 11:51 AM IST | Source: Moneycontrol.com

Weakness in NBFCs continue, stocks down 3-22% on liquidity fears

The higher yield for the commercial papers is due to tight liquidity into the system.

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The weakness continues in the NBFC (non-banking financial companies) stocks as they were trading lower by 3-22 percent on Tuesday as liquidity fears dragged the share prices.

The carnage was started on September 21 after the news spread that DSP MF sold commercial papers of DHFL in the secondary market at a higher yield.

Shares of NBFCs including Can Fin Homes, Indiabulls Housing Finance, DHFL, Reliance Home Finance, Gruh Finance, IL&FS Investment Managers and GIC Housing were down 3-22 percent intraday Tuesday.

Tight liquidity in the system is the leading cause of the higher yield on commercial papers. Investors raised concerns over tightness in money market amid continuing financial crisis at IL&FS, IIFL said in a report.

Market participants are linking crisis in IL&FS with other NBFCs and Housing Finance companies which hold commercial papers as one of their sources of funding.

Meanwhile, DHFL management clarified that they have not defaulted on any bonds and their commercial book stands at around Rs 7,500 crore, IIFL added.

On the other hand, DBS feels that the lending reluctance for NBFCs is expected to continue. It expects a low probability for default (due to timely RBI intervention) and said it continues to prefer NBFCs with favourable ALM maturity.

The research house maintained a buy rating on Bajaj Finance, Edelweiss Financial Services, L&T Finance Holdings, Magma Fincorp and Shriram Transport.
First Published on Sep 25, 2018 11:34 am
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