HDFC twins, fear of global banking crisis pull down mkt
Dragged by HDFC twins on concerns of post-merger fund outflow and fear of a global banking crisis, domestic equity market tumbled more than 1% on Friday.
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Published: 06th May 2023 08:07 AM | Last Updated: 06th May 2023 08:07 AM | A+A A-
The bank saw healthy growth in retail loan.
NEW DELHI: Dragged by HDFC twins on concerns of post-merger fund outflow and fear of a global banking crisis, domestic equity market tumbled more than 1% on Friday. The BSE Benchmark Sensex plunged 695 points to close at 61,054, while the broader NSE Nifty50 fell 188 points to settle at 18,068. In addition, global cues were lacklustre as the European Central Bank (ECB) raised rates by 25bps and signalled the need for further rate hikes to control inflation. The US market also witnessed strong selling pressure on Thursday on worries that more regional banks are facing an existential crisis.
While there is no immediate fear that Indian banks may collapse like some foreign banks, it is the merger exercise at the country’s largest private lender that seems to have spooked investors. The two heavyweights- HDFC and HDFC Bank - plunged up to 6% on Friday after global index MSCI said post the merger of HDFC and HDFC Bank, it will include the merged entity in its large-cap index.
However, instead of using the adjustment factor of 1, the adjustment factor would be 0.5. The adjustment factor is the weightage of a stock assigned within a particular index. This, according to Nuvama Research, will result in an outflow of $150 to $200 million in the merged entity. MSCI’s update and fall in share prices came even as HDFC on Thursday reported a 20% increase in its PAT to Rs 4,425 crore for the quarter ending March.
With the National Company Law Tribunal (NCLT) already giving the green signal to the approval, the merged entity is likely to have a combined asset base of Rs 18 lakh crore. “Markets reversed the
gains of the previous session and shed a per cent on Friday. Apart from feeble global cues, the sharp cut in the HDFC twins was largely weighing on the sentiment,” said Ajit Mishra, VP - Technical Research, Religare Broking.
“The decline in the index has faded the bullish tone and indications are now in favor of consolidation. On the index front, Nifty has major support at 17,850 so any dip towards that mark may prompt fresh buying,” added Mishra.