The Dewan Housing Finance stock made a partial recovery in early trade after statements from the clarification of Dewan Housing management on the default possibility, finance minister Arun Jaitley, country's largest lender SBI , SEBI and RBI sought to pacify investor's concerns after Friday's crash of 60% in intra day trade.
The Dewan Housing Finance stock rose up to 24.80% or 87 points to 438.75 level in early morning trade. On Friday, the stock went into a tailspin, nosediving 42.43 per cent to end at Rs 351.55 on the BSE. Intra-day, it tanked 59.67 per cent to Rs 246.25-its 52-week low. DHFL's market valuation tumbled Rs 8,120.41 crore to Rs 11,031.59 crore on BSE.
At 9: 40 am, the stock was trading at 413 level, higher by 18 percent on BSE.
The stock has gained after two days of consecutive fall and opened with a gain of 10%.
The stock has lost 26.05% during last one year and has fallen 27.95% since the beginning of this year.
Minutes before the market opened today, finance minister Arun Jaitley said the government would take all measures to ensure adequate liquidity for non-banking financial companies (NBFCs) and mutual funds in an effort to calm the nerves of worried investors.
"The Government will take all measures to ensure that adequate liquidity is maintained/provided to the NBFCs, the mutual funds and the SMEs," Jaitley tweeted ahead of the opening of stock markets.
In a rare move, the RBI and Sebi on Sunday said they are "closely monitoring" activities in the financial markets and ready to take appropriate actions, if required, following a sharp meltdown on Friday in equity and debt markets.
The regulators came out with separate but identical statements amid apprehensions about steep volatility in markets on Monday.
Country's largest lender SBI assured lending support to crisis struck non-banking financial companies with its Chairman Rajnish Kumar on Sunday clarifying there was no concern on liquidity of NBFC firms, amid ongoing debt crisis in IL&FS Group.
Ratings agency Care Ratings has reaffirmed credit ratings on its various instruments, including NCDs and long-term bank facilities, DHFL said on Saturday.
"...we wish to inform you that CARE Ratings Limited (CARE), vide its letters dated September 22, 2018, has re-affirmed its credit ratings" on its instruments/facilities, DHFL said in a stock exchange filing.
In another filing, the company said ICRA has re-affirmed its credit ratings for its commercial paper of Rs 15,000 crore.
Soon after the stock tanked 60% on Friday, Kapil Wadhawan, CMD of DHFL, had said the market movement has come as a big surprise to not only the company but also to the industry at large.
"We wish to categorically state that DHFL 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. We do not have any exposure with IL&FS," he said.
He said company's fundamentals are strong.
Wadhawan further said promoters of DHFL have neither pledged any of their shares nor have availed loan against shares of the company.
The statement seemed to pacify panic-stricken investors who helped the stock recover some lost ground on the same day.
However, shares of other other NBFCs were down in early trade. Bajaj Finance fell 5%, Gruh Finance 5.13%, Cholamandalam Investment and Finance 5.56%, Edelweiss Financial Services 4.42%, Indiabulls Housing Finance 5.95%, Repco Home Finance 6.51%, GIC Housing Finance 4.35% and PNB Housing Finance 3%.
Brokerage HSBC said liquidity and asset quality concerns led to the sharp correction in NBFC stocks. While cost of funding is certainly going up, it sees heightened asset quality and liquidity concerns as unwarranted.
Credit Suisse said ripple effects of IL&FS default are visible. MFs are likely to cap/prune their NBFC exposures even as credit ratings for most NBFCs are maintained. NBFCs with relatively weak pricing power will also see net interest margin compression.
Meanwhile, the Sensex dropped over 200 points in early trade on increased selling of realty, consumer durables, auto and banking stocks, amid weak Asian cues and surging global crude oil prices. The depreciating rupee also dampened investor sentiment.
The rupee fell sharply by 29 paise to 72.49 against the dollar as the greenback strengthened overseas. Forex dealers said the greenback's strength against other currencies overseas, after reports that China had cancelled upcoming trade talks with the US, weighed on the Indian rupee.
The 30-share index, after opening positive at 36,924, quickly succumbed to selling pressure and fell by 210.22 points, or 0.57 per cent, to 36,631.38 in early trade. The Nifty declined by 65.50 points, or 0.59 per cent, to 11,077.60 after touching a high of 11,170.15.