Indian shares declined on Friday, erasing weekly gains, amid weakness in financials stocks due to declines in Housing Development Finance Corp and HDFC Bank, and persistent fears over the US banking sector. The Nifty 50 closed 1.02% lower at 18,069.00, while the S&P BSE Sensex lost 1.13% to 61,054.29.
Financials stocks led the slide in the Nifty, falling 2.34% in the worst single-day drop in over three months. Housing Development Finance Corp Ltd and HDFC Bank Ltd declined over 5.5% each after MSCI said it included the merged entity of the two companies in its large-cap index, but with an adjustment factor of 0.5. Nuvama Research estimated this would lead to an outflow of $150 million to $200 million from the entity.
“The event is one-time, but the businesses of HDFC and HDFC Bank are perpetual,” said Avinash Gorakshakar, head of research at Profitmart Securities, adding that the fall in the shares is temporary.
Analysts expected Nifty 50 to consolidate after the recent rise on strong March-quarter earnings, but added that monsoons would be a key monitorable in the near term. “If monsoons are poor, it will spark a slide in markets due to adverse impact on the country’s predominantly agri-linked economy and consumption,” Gorakshakar added.
The European Central Bank’s rate hike and concerns in the U.S. banking sector due to the collapse of PacWest Bancorp also dragged investor sentiment.
Among individual stocks, TVS Motor Company Ltd jumped nearly 4% to a record high after reporting an uptick in March-quarter profit. The auto index rose 0.40% and was among the top sectoral gainers in a weak market.
Shares of shadow lender Manappuram Finance Ltd fell over 11% after India’s financial crime agency, Enforcement Directorate said it froze assets of the company worth 1.43 billion rupees.
Despite the overall negative trend, some sectors managed to gain ground. The auto sector index rose 0.40%, with TVS Motor Company Ltd being one of the top performers. The company reported an uptick in March-quarter profit, which led to a nearly 4% jump in its stock price to a record high.
On the other hand, shadow lender Manappuram Finance Ltd suffered a significant loss as its shares fell over 11%. This came after India’s financial crime agency, Enforcement Directorate, froze assets of the company worth 1.43 billion rupees.
Looking ahead, analysts are closely monitoring the monsoon season, which could have a significant impact on the market. If monsoons are poor, it could negatively impact the country’s predominantly agri-linked economy and consumption, leading to a slide in the markets.
Despite the current slide in the markets, many analysts believe that the fall in the shares of HDFC and HDFC Bank is temporary, and that the businesses of both companies are perpetual.
The slide in Indian shares is part of a broader global trend, with concerns over the US banking sector and the European Central Bank’s rate hike leading to a drag on investor sentiment.
The Indian stock market ended the week on a negative note as the benchmark indices erased their weekly gains due to weakness in financial stocks. On Friday, the Nifty 50 index closed 1.02% lower at 18,069.00, while the S&P BSE Sensex lost 1.13% to 61,054.29.
The slide was led by financials stocks, which fell 2.34% in the worst single-day drop in over three months. The decline was largely due to the poor performance of Housing Development Finance Corp Ltd and HDFC Bank Ltd, which dropped over 5.5% each. The decline was attributed to MSCI’s announcement that it had included the merged entity of the two companies in its large-cap index, but with an adjustment factor of 0.5. This would lead to an outflow of $150 million to $200 million from the entity, according to Nuvama Research.
