Benchmark market indices Sensex and Nifty fell for the fifth consecutive day on Monday, despite Finance Minister Arun Jaitley's assurances that the government would support financial markets.
"The government will take all measures to ensure liquidity to NBFCs (Non-Banking Finance Companies), mutual funds and SMEs (small and medium-sized enterprises)," Arun Jaitley said on Monday. Previously, a joint statement released during the weekend from the Reserve Bank of India and SEBI had assured investors that they were monitoring the situation and would take necessary steps.
The fall in the market was led by finance, banking, auto stocks. The NBFCs also register losses. HDFC, India's biggest NBFC, fell by 6.2 per cent while IndiaBulls Housing Finance dropped 8 per cent. Bajaj Finance also dipped 5.5 per cent.
However, the two stocks, which triggered Friday's scare- IL&FS and DHFL, recovered on Monday because low prices made these stocks a good buy. IL&FS closed 5.3 per cent up while DHFL closed 12 per cent up.
But the concern on IL&FS liquidity crunch still remains. The infrastructure lending firm owes Rs 90,000 crore to various mutual funds and institutions. Out of this, it has to repay Rs 3,600 crore in the next six months but has only about Rs 200 crore of liquidity.
It has now reportedly appealed for an emergency cash infusion from two cash rich government firms and major stock holders, Life Insurance Company (LIC) and State Bank of India.
However, after IL&FS defaulted on series of payments since August, it has raised concerns about a cash crunch in the markets thus triggering the government to say that it will ensure liquidity.