DHFL paper sale by DSP Mutual Fund triggered panic in stock market

MUMBAI: Friday’s sudden crash on Dalal Street had its origin in the debt market during mid-session. DSP MF — which had about Rs 630 crore worth of bonds by IL&FS, the company majority-owned by the government and which has defaulted on its loan — sold DHFL bonds worth Rs 300 crore at a price lower than what was prevalent in the market. Although the fund house sold DHFL bonds to enhance its liquidity and there was no fundamental call on the HFC, the debt market panicked, and the fear soon spread to the stock market.

Traders, already on edge due to the default by the IL&FS group with loans of around Rs 1 lakh crore, sold stocks of DHFL and other private sector HFCs. As a result, the DHFL stock plunged 60%, Indiabulls Housing Finance dipped 35% while Reliance Home Finance lost over 18%. As companies clarified that they were fully solvent and did not have any problem with their debt-servicing capability, by close of trade these stocks recovered from the intra-day lows. DHFL closed 42% lower and Reliance Home Finance was down 9%, while Indiabulls Housing Finance closed 8% off. DHFL CMD Kapil Wadhawan said that the company has not defaulted on any bonds or repayment nor has there been any single instance of delay on any of its repayment of any liability.

In addition, DHFL does not have any exposure to IL&FS, he said. Wadhawan also indicated that he would approach the regulators to have a deeper look into how and why DHFL stock was suddenly hammered without any change in its fundamentals. tnn