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Bad loans turn ugly, Sensex sinks 807 points

The benchmark Sensex plunged 807 points, or 3.4%, to end at a 21-month low of 22,951.83, as concerns over global economic outlook and mounting bad loans wiped off over `3 lakh crore from investor wealth.

business Updated: Feb 12, 2016 00:55 IST
HT Correspondent
Sensex fell 701.45 points to reach 23,057.36.
Sensex fell 701.45 points to reach 23,057.36.(File Photo)

The benchmark Sensex plunged 807 points, or 3.4%, to end at a 21-month low of 22,951.83, as concerns over global economic outlook and mounting bad loans wiped off over Rs 3 lakh crore from investor wealth.

Investors took to panic selling after US Federal Reserve chairperson Janet Yellen flagged global risks even while keeping options open for further interest rate hikes, and the country’s largest lender, State Bank of India, disappointed Street with a 62% slump in quarterly profit.

The broader NSE Nifty also ended down 239.35 points, or 3.3%, to at 6,976.35 — its lowest since May 2014.

The government sought to assure investors that India has a “fortress” like balance sheet and is well prepared to deal with the impact of global economic turbulence. “Investors should think long term, they should recognise the fundamentals of Indian economy.”

RBI governor Raghuram Rajan also moved to calm jittery nerves and said: “The market turmoil will pass. The clean-up will get done, and Indian banks will be restored to health.”

Shares of State Bank of India declined 3% after its gross non-performing asset (NPA) rose 28% in the October-December quarter. It also dragged the banking index lower, with Kotak Mahindra Bank falling 5.7%, Punjab National Bank declining 4% and Indusind Bank, ICICI Bank, Axis and HDFC Bank dropping more than 3%.

Around 400 stocks hit their 52-week low, including Adani Ports, Allahabad Bank, BHEL, Cipla and DLF, among others.

“We are seeing a spillover of volatility from other global markets. Domestically too, there have been no positive surprises from the corporate earnings… We don’t see any major positive news flow right now,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services.

Fed chairperson Janet Yellen told US Congress on Wednesday that she does not expect to reverse the rate hike programme that began in December, but said, she saw risks to the economy.

Foreign institutional investors have pulled out Rs 12,170 crore from India’s equity markets since the beginning of January 2016, according to data from the National Securities Depository Ltd.

Oil slid again on Thursday on record US supply and weak demand outlook, with brent crude futures trading at $27 a barrel. Goldman Sachs has said it wouldn’t be surprised if crude prices drop below $20 a barrel.

Outside European stocks fell 3%, while Hong Kong tanked 4%.

Global developments will drive market movements ahead, analysts said. “On the domestic front, we need to closely watch the budget where the finance minister has a difficult task of supporting growth while maintaining fiscal prudence,” said Dipen Shah, head of private client group research at Kotak Securities.