Indiabulls Housing slumps 8%, hits 52-wk low on Nifty rejig; Nestle up 3%

Shares of Indiabulls Housing Finance cracked 8 per cent on the National Stock Exchange (NSE) in Thursday's early morning trade after it was announced that the company will be excluded from the benchmark index Nifty50, with effect from September 27. The stock has fallen below its previous low of Rs 425 hit on August 8 in intra-day trade.

The troubled non-banking finance company will be replaced by the multinational fast-moving consumer goods company Nestle India in the broader index.

Indiabulls Housing could see exchange-traded funds (ETF) selling of above Rs 300 crore, further weighing on its stock price that has already fallen 51 per cent this year. In comparison, the Nifty 50 index has risen nearly 4 per cent thus far in the calendar year 2019.

Earlier, this month, Moody's Investors Service had downgraded Indiabulls Housing Finance’s long-term corporate family rating to 'Ba2' from 'Ba1', due to pressure on the cost and availability of funds for the company and certain other finance companies in India.

The downgrade also factors in deterioration seen in asset quality in the quarter ended June 2019, wherein stage 3 loans went up by 57 per cent on a quarter-on-quarter basis, albeit from a low base. Most of the increase in stage 3 loans has come from its corporate loan segment. This segment is facing significant headwinds for the overall finance company sector driven by a combination of very tight refinancing conditions and weak borrower profiles. This segment will continue to be a key source of asset quality risk for the company, the global agency said.

Meanwhile, shares of Nestle India hit a new high of Rs 12,890, up 3 per cent in early morning trade. In the past three months, the stock has outpaced the market by surging 15 per cent, as compared to a 5 per cent decline in the benchmark index.

“Nestle currently has huge headwinds as the input cost index has increased by 500bps since Q218 with prices of milk increasing sharply and wheat as well as sugar being at high levels. Though benign Palm-oil does give little cushion, margins are likely to contract from current high levels,” analysts at Prabhudas Lilladher said in company update. The stock, however, is trading above the brokerage firm's target price of Rs 10,900 per share.