Sensex Slumps 470 Points; Energy and Banking Stocks Witness Selling

Thu, 19 Sep Closing

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Indian share markets witnessed negative trading activity throughout the day and ended deep in the red. The BSE Sensex fell over 550 points intraday and breached the 36,000 mark. Meanwhile, NSE Nifty slumped below 10,700.

Barring telecom sector, all sectoral indices ended on a negative note with stocks in the energy sector, banking sector and metal sector, leading the losses.

At the closing bell, the BSE Sensex stood lower by 470 points (down 1.3%) and the NSE Nifty closed down by 136 points (down 1.3%). The BSE Mid Cap index and the BSE Small Cap index ended the day down by 1.2 and 1.5%, respectively.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 1.1% and the Shanghai Composite stood higher by 0.5%.

The rupee is trading at 71.30 against the US$.

In news from the media sector, Zee Entertainment (ZEE) share price witnessed selling pressure today. Shares of the company slipped 8% intraday after promoter Subhash Chandra was asked by a court to not sell his unpledged stake in the company till next month.

According to reports, the Delhi High Court-appointed arbitrator had restricted Essel Group chairman Subhash Chandra from selling unpledged shares till October 16, in an ongoing dispute with Indiabulls Housing Finance over default in repayment of loans worth Rs 2 billion.

The Essel Group, which owns ZEE, had reached an agreement in January under which the lenders agreed not to sell the Zee Entertainment shares pledged with them till September 30 and gave Essel time to find a buyer for a portion of Chandra's stake.

Promoters of the company had met mutual fund lenders on September 18 for extending the September 30 deadline. Reportedly, no decision has been taken on the extension.

How this all pans out remains to be seen. Meanwhile, we will keep you updated on the latest developments from this space.

Moving on to news from the banking sector, shares of private lender Yes Bank continued to reel under pressure and slipped over 15% after CARE Ratings downgraded NCDs of the bank's promoter, Morgan Credits (MCPL).

Non-convertible debentures of MCPL were downgraded to 'BBB-' from 'A-'. MCPL is one of the promoter entities of Yes Bank, holding a 3% stake in the lender.

As per reports, the rating revision takes into account the fall in the stock price of the underlying shares of Yes Bank which are held by MCPL or promoters and their relatives.

MCPL with its associate entities / individuals held 10.6% stake in Yes Bank as of March 31, 2019.

Note that earlier this month, Morgan Credits and Yes Capital had written to the surveillance departments of stock exchanges alleging that short sellers are hammering the stock by spreading negative messages about the private lender.

Yes Capital and Morgan Credit are facing heat from investors and stake holders over multiple rating downgrade and stakes in fraud-hit CG Power.

The letter said, "we continue to witness unabated speculation in Yes Bank stock, particularly by short sellers who appear to be speculating on the back of unpublished information led by the countless highly negative messages circulated on WhatsApp chat group banking institution - Yes Bank. We request you to kindly (look into) this highly serious matter."

The two shareholders had sent a similar letter to the stock exchanges last month as well.

Yes Bank share price ended the day down by 15.7%.

In other news, Axis Bank is planning to raise funds via QIP (qualified institutional placement) in the next few days. Reports state that the bank is looking to raise between US$ 1.5-2 billion via equity issuance.

The fund raised will be used for growth as well as strengthening of the balance sheet.

In July, the bank's board had approved a proposal to raise up to Rs 180 billion through an issue of equity shares, depository receipts, or convertible securities.

Axis Bank has been talking to many investors to assess interest of investors. There have been few lenders like HDFC Bank and Bajaj Finance who have given a cautious outlook on certain products in the retail segment.

Axis Bank share price ended the day down by 1.7%.

Speaking of the banking sector, it is interesting to note that public sector banks (PSBs) have struggled due to rising NPAs.

NBFCs have struggled after the IL&FS crisis and are wary to lend.

There has been a silver lining in this mess. i.e. the increased market share of private sector banks. This is evident in the chart below:

India's Credit Shift Megatrend

Since 2014, private banks have consistently gained market share mainly at the expense of PSU banks.

With PSU banks still struggling to get out of their NPA mess, this trend is set to continue.

One such good quality private bank makes it to Tanushree's top 7 stocks to buy list.

These 7 stocks will be a part of many such megatrends that will play out over the next decade in India.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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