Tremendous volatility in the stocks of Housing Finance Companies, is sending a chill down the spine of investors. On Tuesday, the stock of IndiaBulls Housing Finance Company dropped 6 per cent in intraday trade to trade at Rs 652 and jumped 3 per cent by 3.20 pm, showing a volatility in excess of 10 per cent.

DHFL had no such luck, after reports from Cobrapost that the promoters of the company had siphoned of Rs 31,000 crores. The stock hit a low of Rs 164 and closed at Rs 170.

The company did clarify after market hours on the Cobrapost allegations. In a release to the exchanges it said:

"Despite the recent liquidity regime, DHFL as a responsible corporate has met all its obligations to the lenders and has paid back to them in excess of Rs.17,000 crores in the last three months. DHFL has a strong corporate governance regime and has received AM credit rating from leading credit agencies. The company is fully tax compliant and its books are audited by global auditors.

DHFL and its group companies are confident of meeting any scrutiny on any aspect of our operations and will pursue these frivolous allegations to its logical conclusion."

Significant damage and price destruction in the stock has already been witnessed. The shares which were trading at a high of Rs 691 in Sept, have come crashing down to levels of Rs 170.

Is there more pain left? This answer is hard to give. Markets have almost "zero tolerance", where governance issues are concerned. The other problem is that sometimes the claims made our hard to verify for small investors. Though in the above case, it is difficult to believe the large sum of Rs 31,000 crores, given that DHFL has paid back lenders to the large sum of Rs 17,000 crores.

For traders, who love volatility, the DHFL stock could be a great bet.

GoodReturns.in