Sensex Continues Trading Lower; BSE Realty Tanks Over 5%

Stock markets in India are presently trading on a negative note. The BSE Sensex is trading down by 271 points and the NSE Nifty is trading down by 82 points. Meanwhile, the BSE Mid Cap index and the BSE Small Cap index are trading down by 0.8% and 1.6% respectively.

Among the sectoral indices, realty stocks and oil & gas stocks are witnessing maximum selling pressure.

In the news from the NBFC sector. As per an article in a leading financial daily, India is stamping out shadow financiers at the fastest pace in recent years.

The NBFC sector has been battling a prolonged funding crunch due to rising wariness toward it in the nation's credit markets.

Reportedly, the central bank canceled registrations of 1,851 non-bank finance companies in the year ended March 31, more than 8 times those in the previous year.

The number of lenders dropped to about 9,700, the lowest in at least a decade, as a result. Firms may be failing to secure the minimum funds needed to operate due to the cash crunch.

The perils in the sector highlighted by missed repayments on dues by Dewan Housing Finance Corp and Reliance Home Finance Ltd in recent months have heightened risk-off sentiment and worsened the lenders' access to domestic money markets.

RBI has also tightened regulations this year by putting in place rules requiring shadow lenders to appoint a chief risk officer and proposing stringent liquidity requirements.

Speaking of NBFCs, note that they were flush with funds from banks, insurance companies, and asset management companies i.e. mutual funds in 2016.

And with these funds and without the necessary restrictions, NBFCs become reckless in deploying the funds.

You can see this clear as day in the chart below...

One Chart that Predicted the NBFC and Mutual Fund Crisis Back in 2016

One Chart that Predicted the NBFC and Mutual Fund Crisis Back in 2016

 

Here's what Tanushree Banerjee wrote about this in one of the editions of The 5 Minute WrapUp...

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