Banking and NBFC stocks plunge

Select banking and NBFC stocks fell like a pack of cards with Dewan Housing Finance (DHFL) and Yes Bank being hammered out of shape.

In fact, the DHFL management has clarified that the housing finance company has more than adequate liquidity, the promoters have not pledged their stake and the ALM is very comfortable.

This however failed to assuage the fears of the market. Yes Bank too plunged on reports that Rana Kapoor's term would expire on Jan 31, 2019. The stock hit a 52-week low of Rs 172, from 52-week high levels of Rs 404, seen a few months back.

Government owned banks were also not spared with PNB, Union Bank, Bank of Baroda, Bank of India etc., all plunging to new 52-week lows.

Heavyweights manage to hold up

What was an interesting feature of the markets is that heavyweights like HDFC Bank, HDFC, Reliance, TCS and Infosys held quiet well. If these stocks had to fall, we would have seen an enormous amount of drop in the benchmark indices.

The midcap and the small cap index too fell sharply, particularly on Friday. With Friday's fall the midcap index has lost a staggering 19 per cent from peak levels, as against a drop in the Sensex of about 7 per cent from peak levels.

It is likely that the index may see some technical bounce given the way stocks from the sector have fallen.

Markets to remain volatile ahead of credit policy

Indian benchmark indices are expected to remain increasingly volatile ahead of the RBI Monetary policy.

It is also a truncated week for the market, which will be closed on Oct 2 for a holiday.

The RBI will conclude its two day policy meet on Thursday Oct 4. In all probability we will see a 25 basis hike in the repo rate given the way the rupee has collapsed. International developments like trade tariffs and the rupee will also dominate.

Investors may continue to buy selectively into good quality stocks. However, it is a good idea to stay partially in cash ahead of the crucial state elections in MP, Rajasthan and Chattisgarh.

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