The incident

In the middle of the financial year 2018-19, there was panic in the Indian capital market. Both stock exchanges viz, Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) whirled in the month of September 2018. Especially, on 21st September 2018, the stock markets witnessed one of the most volatile trading days of this decade, as BSE’s benchmark index ‘Sensex’ itself has seen intra-day trade swung by nearly 1,500 points or 4 percent. Reason for this unprecedented fluctuation was that the deep plug in the stock prices of the majority of the Non-Banking Financial Companies (NBFCs). We can make out the gravity of this from Table 1. During this panic period, the share prices of few of the listed NBFCs have plunged up to 84 percent from their respective 52 weeks high. Since then within 28 trading sessions, this freefall has wiped out nearly INR 1,019 billion (INR 1.02 lac crores) from the market cap of leading NBFCs. The source of volatility was a crash in stocks of NBFCs, led by Dewan Housing Finance Corporation (DHFL) and Indiabulls Housing Finance.

This incident reminds us of the decade-old tremor to the world financial market commonly known as ‘Global Financial Crises (GFC)’ or ‘Sub-Prime Crises’, and even after ten years of efforts by sovereign bodies across the globe, the world economy is yet to recover from the impact of it. It might be coincident / may be the full circle of the life cycle of the financial market. A decade back, on 15th September 2008, Lehman Brothers had filed for Bankruptcy which has resulted in a stunning collapse of the global economy.

The financial pundits are flooded with several questions and doubts. Is it the beginning of another financial market mayhem? How much impact will this have on the Indian financial market? Is this the desired outcome which was expected by the financial system at the outset of prevailing stress scenario in Indian financial market on account of regulatory sanctions especially on public sector banks (PSBs) which are already tottering under the massive burden of stress assets?

 

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