India stocks plunged as a measure of real estate shares fell the most in 18 months. Some firms may be failing to secure funds amid a cash crunch as the central bank cracks down on shadow financiers.
The S&P BSE Sensex slipped 1.6% to 36,472.93 to a five-month low in Mumbai. The NSE Nifty 50 Index also declined 1.6%. The S&P BSE Realty Index slid 6%, its biggest drop since February 2018.
The central bank has stepped up efforts to cancel the registrations of shadow lenders that have failed to secure the minimum funds needed to operate due to a liquidity squeeze in the system. Missed repayments on dues by Dewan Housing Finance Corp and Reliance Home Finance Ltd in recent months have heightened risk-off sentiment.
India needs a “significant” fiscal package – one funded by offshore borrowings, a gradual decline in the rupee and more liquidity infusion into the troubled shadow-banking system to ease tight financial conditions, Rohit Garg, strategist at Bank of America Merrill Lynch said in a note.
“Market is getting impatient with regards to the prospects of a stimulus package from the government,” said Vivek Ranjan Misra, head of fundamental research at Karvy Stock Broking Ltd. Investors still await clarification on tax proposals for foreign portfolio investors made in the budget, he said.
“We continue to expect some weakness in the near term, but expect the economy to stabilize in 2Q FY2019-20 and recover in the second half,” he said.
Seventeen of 19 sector sub-indexes compiled by BSE Ltd declined, led by the gauge of realty companies.
DLF Ltd sank 16% after a newspaper reported that it had been served a notice by the Supreme Court. HDFC Bank contributed the most to the index decline, decreasing 2.3%.
Yes Bank had the largest drop, falling 12%; relative strength index on the stock was below 30, indicating it may be oversold. Sell-off in the market pushed S&P BSE Small Cap Index down 2.2% to its lowest level since December 2016.
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