India's Sensex Declines as Concerns Over Non-Bank Lenders Rise
(Bloomberg) -- India’s benchmark equity index fell to a one-week low as investors remained concerned over growing stress in non-bank lenders impacting the financial sector.
The S&P BSE Sensex declined 1.3 percent to 34,315.63 in Mumbai. Seventeen of 19 industry sub-indexes compiled by BSE Ltd. slipped, led by a gauge of energy companies. Reliance Industries Ltd., the nation’s most valuable company, was the biggest drag on the index after reporting its quarterly refining margin fell more than expected.
The risk appetite of Indian equity investors has been fast declining, led by a clutch of factors including liquidity concerns in the financial sector. Non-bank finance companies, especially those with exposure to real estate developers were hit hard on concerns these borrowers may default on obligations amid rising interest rates. This, despite the central bank allowing banks to lend more to financiers and mortgage companies.
“We have entered a cycle where things can grow worse before they can get better,” said A. K. Prabhakar, head of research at Mumbai-based IDBI Capital Market Services Ltd. “The cost of funds for many such companies have begun to surge while lending has come to a standstill adding to investor worries that there will be no growth and margins may take a hit.”
Stocks including PNB Housing Finance Ltd., Indiabulls Housing Finance and SREI Infrastructure Finance plunged at least 15 percent in the session.
A measure indicating the strength of stock buying and selling for the S&P BSE Sensex Index has reached levels not seen since the height of the global financial crisis in October 2008. The gauge has tumbled 11 percent since a record in August.
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