Taking Stock Of The NBFC Bloodbath

The IL&FS crisis has led to a big correction in NBFC share prices. Should you limit your exposure to the sector or do a spot of bargain-hunting?

- Kundan Kishore

Non-banking financial companies, or NBFCs, have been in the news in the wake of the IL&FS disclosures. The erosion of shareholder wealth, especially of those investors who had a considerable exposure to NBFC stocks, makes scary reading. NBFC shares have gone down by 25-35 per cent in the past one month. After the Infrastructure Leasing and Financial Services (IL&FS) crisis, when DSP Mutual Fund sold some DHFL bonds in its portfolio at higher yields than the prevailing market rate, the markets went into panic over whether DHFL was also going the IL&FS way. On September 21, the DHFL share price tanked over 42 per cent in a day—from Rs 615 to Rs 246 before closing at Rs 351. Other NBFCs and housing finance companies (HFCs) followed suit. However, most NBFCs stocks have corrected significantly.