Rate sensitives plunge on panic selling in banks; YES Bank tumbles 30%

Based on publically available data, analysts at Macquarie said in a recent report that YES Bank, Bank of Baroda (BOB) and IndusInd Bank are the most exposed to Indiabulls Group

Shares of rate sensitive sectors like banking, real estate and automobile companies came under heavy selling pressure on Tuesday, falling by up to 30 per cent on the National Stock Exchange (NSE).

The Nifty PSU Bank index tumbled 8 per cent in intra-day deals to 2,118, its lowest level since May 2016. Nifty Realty, too, slipped 6 per cent to 241, while Nifty Private Bank and Nifty Auto indexes down 3 per cent and 2 per cent, respectively. In comparison, the benchmark Nifty 50 index down 1.75 per cent at 11,273 points.

Analysts say the sharp fall in the frontline indices and especially these sectors was triggered by a panic, following the sharp fall seen over the past few sessions in select banking counters.

“Markets seem to have punished banking and real estate sectors badly over the past few sessions. Even the ones that have reasonably sound fundamentals have taken a beating. As a result the premium these counters commanded has been knocked-off, which is unwarranted,” says G Chokkalingam, founder and managing director at Equinomics Research.

Among individual stocks, YES Bank hit an over decade low of Rs 29.05 - slipping 30 per cent on the NSE. The stock of private sector lender was trading at its lowest level since July 2009. In past one week stock plunged 48 per cent from level of Rs 56.

State Bank of India (SBI), RBL Bank, DLF, DCB Bank, IndusInd Bank, Indian Bank and Punjab National Bank were down between 9 per cent and 22 per cent in intra-day deals. Except Central Bank of India, the remaining 11 stocks including SBI, Bank of Baroda and Bank of India hit their respective 52-week lows on the NSE on Tuesday.

Meanwhile, the Reserve Bank of India (RBI) placed Lakshmi Vilas Bank (LVB) under prompt corrective action (PCA), leading investors to re-assess the likelihood of the Indiabulls Housing Finance-LVB going through. 

The Delhi High Court also issued notices to Indiabulls (IHFL), RBI and other respondents in a public interest litigation (PIL) seeking a probe into allegations of fraud against the mortgage lender.

Based on publically available data, analysts at Macquarie said in a recent report that YES Bank, Bank of Baroda (BOB) and IndusInd Bank are the most exposed to IHFL group (10-22% of net worth), whereas HDFC Bank and Kotak are safer (0.5-1% of net worth). ICICI Bank, they said, has no exposure to the group at all.

“We believe a large part of the loans outstanding for IndusInd Bank and HDFC Bank may already be repaid / withdrawn. IndusInd Bank's release to exchanges appears to corroborate our thesis – as per them, their exposure to the housing finance group is only 0.35% of loans (approx Rs 7 billion, or 2.3% of net worth, instead of Rs 31 billion),” wrote Suresh Ganapathy of Macquarie in a co-authored report with Nishant Shah and Akash Nainani.

Macquarie on banks