On edge

Volatility is back in the Indian markets. Stock indices witnessed an extraordinary swing on Friday, with the Sensex moving 1,500 points between its high and low during the day and the Nifty almost by 370 points. The Sensex and the Nifty were down 279 and 91 points, respectively, at the end of trading on Friday after a significant recovery, but the day-end figures failed to capture the panic that struck investors during the day. Non-banking financial companies (NBFCs) were the major force behind Friday’s extreme volatility. Shares of Dewan Housing Finance Corporation Ltd (DHFL) had lost 42% of their value by the end of trading, after having fallen 60% during the day. Other financials such as Indiabulls Housing Finance, LIC Housing Finance, and Repco Home Finance also witnessed similar steep falls. The market panic was attributed to DSP Mutual Fund’s sale of bonds worth Rs. 300 crore issued by DHFL at yields higher than normal, leading to fears that it could be a precursor to higher borrowing costs that adversely affect the profitability of NBFCs. The Infrastructure Leasing & Financial Services Ltd.’s continuing default on its various liabilities also shook investors. The 29% fall in shares of Yes Bank, after the RBI refused to extend the term of its chief executive officer beyond January, further added to the panic. But Friday’s fall was not simply limited to financials, as scrips across the board witnessed panic-selling.

Source :  https://www.thehindu.com/todays-paper/tp-opinion/on-edge/article25023754.ece

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