Rate sensitive stocks crash; Nifty Auto, Bank index down over 10%

Among individual stocks, Axis Bank and City Union Bank were locked in 20 per cent lower circuit

Shares of interest rate sensitive sectors such as automobiles, real estate, banks, including non-banking financial companies (NBFC) and housing finance companies, tanked up to 20 per cent on Monday as most Indian states announced lockdown to stem the spread of the novel coronavirus (COVID-19).
 

At 10:15 am, Nifty Private Bank, Nifty Bank, Nifty Fin Service, Nifty Auto and Nifty Realty indices were down between 11 per cent and 13 per cent on the National Stock Exchange (NSE). In comparison, the benchmark Nifty 50 index dipped 9.6 per cent at 7,903 points. All these indices were trading at their multi-year low levels.

Among individual stocks, Axis Bank (Rs 343) and City Union Bank (Rs 130) were locked in 20 per cent lower circuit. State Bank of India (SBI), IndusInd Bank, ICICI Bank and Federal Bank, Shirram Transport Finance Company, Mahindra & Mahindra Financial Services, Bajaj Finance, Bajaj Finseve, Cholamandalam Investment and Finance Company and HDFC Life Insurance Company from the financial index plunged more than 11 per cent on the NSE.

Among automobile companies, Hero MotoCorp, Maruti Suzuki India, TVS Motor Company, Mahindra & Mahindra (M&M), and Motherson Sumi Systems and Oberoi Realty, Godrej Properties, Sobha, Brigade Enterprises and Sunteck Realty from the real estate index were down more than 12 per cent.

Unlike a financial crisis, which doesn’t cause work disruption, the need for social distancing in case of Covid19, has stalled every endeavor including financial activities, both supply-side and demand-side.

The S&P Global Ratings has updated its estimates of the total and permanent income loss for Asia-Pacific from COVID-19 of approximately $620 billion. This loss will be distributed across sovereign, bank, corporate, and household balance sheets. The agency now expect India's GDP growth rate to slow to 5.2 per cent in the financial year 2020-21.

“S&P Global Ratings acknowledges a high degree of uncertainty about the rate of spread and peak of the coronavirus outbreak. Some government authorities estimate the pandemic will peak in June or August, and we are using this assumption in assessing the economic and credit implications,” agency said in a press release on Monday, March 23, 2020.

S&P Global Ratings believe measures to contain COVID-19 have pushed the global economy into recession and could cause a surge of defaults among nonfinancial corporate borrowers. As the situation evolves, we will update our assumptions and estimates accordingly, it added.

“As for valuations, stocks of most OEMs are trading at the lower end of their historic range, suggesting limited downside risk. Valuations of select two-wheeler, such as Bajaj Auto and Hero MotoCorp, and CV stocks, are approaching levels experienced that were witnessed during the GFC,” analysts at Dolat Capital said in auto sector update.

The brokerage firm believes that due to supply issue from China for BS-VI products and lockdown in India due to fear of the virus spreading, the government may extend the BS-IV transition deadline from the current March 2020, which could be solace for Hero MotoCorp, Bajaj Auto, TVs Motors, Mahindra & Mahindra and Ashok Leyland.