Stock market falls as NBFCs take a beating; RIL, HDFC, Infosys stocks down

The benchmark equity indices fell over 1 per cent for a second straight trading session as stress in the financial sector continued to weigh on investor sentiment. A slide in index heavyweights — Reliance Industries, HDFC, and Infosys — added to woes with the Sensex dropping as much as 640 points. 

Reliance Industries' shares ended 4.1 per cent down after the company's gross refining margin disappointed investors. Shares of technology companies posted declines over concerns that the United States government might tighten visa rules. 

The biggest sell-off, however, was seen in the shares of NBFCs, particularly housing finance firms, on fears that profitability could be hit because of the liquidity tightening. Speculation that more real estate developers could default on obligations due to rising stress kept investors on tenterhooks. Shares of PNB Housing dropped 18.6 per cent and Indiabulls Housing Finance declined 17 per cent, extending its three-day fall to 30 per cent.

"After the IL&FS crisis, NBFCs are facing a credit crunch, with liquidity drying up and banks becoming reluctant to lend to the sector," said Hemang Jani, head of advisory at Sharekhan. "The markets continue to be extremely volatile on the back of negative news flow that is keeping investors on the edge." The Sensex ended 1.33 per cent, or 464 points, lower at 34,315, while the Nifty50 index fell 1.43 per cent, or 150 points, to 10,303. Both the indices posted their sixth weekly decline in seven weeks. The fall in the past two trading sessions erased the bounce seen in the markets last week.

Foreign portfolio investors sold shares worth Rs 6.2 billion. Even domestic institutional investors turned marginal sellers on Friday. Among the Sensex components, shares of YES Bank fell the most at 6.1 per cent, followed by HDFC and Reliance Industries, which declined over 4 per cent each. Infosys fell 3.11 per cent and Tata Consultancy Services declined 0.55 per cent, while mid-tier information technology companies saw a deeper cut in their stock prices. Despite appreciation in the rupee against the dollar and stability in bond and oil prices, the markets saw a sell-off. "The recent slide indicates pessimism among the participants, which is triggering selling on every rise," said Jayant Manglik, president at Religare Broking. 

Market players said it was critical for the market to sustain above the recent lows, as they were key support levels. The Sensex on October 11 had declined to 34,001 and the Nifty had dropped to 10,235, their lowest in six-months. Of the BSE's 19 sectoral indices, 17 ended with losses. BSE Energy and BSE IT declined the most at 2.75 per cent and 2.6 per cent, respectively.