Markets

Tweet Buster: How to handle NBFC crisis and navigate the market now

NEW DELHI: The truncated week gone by did not end well for the bulls on Dalal Street, with the benchmark indices finishing on a weak note.

The DHFL crisis cast its shadow on the NBFCs and HFCs. Lack of commentary from the Reserve Bank of India on the liquidity woes plaguing the economy or any guidelines regarding the NBFC sector did little to nothing to dispel investor worries.

The entire fiasco brewing at DHFL also put rating companies in limelight. Amid all this, Twitter was abuzz with top D-Street honchos discussing what RBI could have done differently and what investors should do now.

Question mark over raters

In a matter of one year, ratings on DHFL's long- and short-term papers have gone from AAA or A1+ to default. Sandip Sabharwal, an independent market expert, said there are serious issues with rating companies. He asked how valuable these ratings really are?

DHFL was rated AAA on Long Term and A1+ on short term papers till last year Now they have cut it down to Default T… https://t.co/hXOmgWtt83

— sandip sabharwal (@sandipsabharwal) 1559810343000

Amar Ambani, President, and Head of Research at YES Securities, said for rating companies it would be business as usual before the next crisis hits Street.

Like I said before… For Rating agencies, it will be business-as-usual, till the next crisis hits. https://t.co/hdoqepCppp

— Amar Ambani (@AmarAmbani) 1559880757000

The failure of DHFL to service interest payment on non-convertible debentures triggered a mandatory markdown by mutual funds holding its papers, causing net asset values of many debt schemes to tumble by up to 53 per cent in a single day.

In the light of this development, Sabharwal said, "Debt fund managers are out to destroy the mutual fund industry due to their unnecessary exposure to over risky debt papers." He said risk-taking should be left to smallcap and midcap firms.

Debt Fund Managers are out to destroy the Mutual Fund industry due to their unnecessary exposure to over risky debt… https://t.co/WJ9Giy2L6U

— sandip sabharwal (@sandipsabharwal) 1559792154000

Sabharwal said the finance ministry must address the liquidity crisis in the NBFC sector and warned that like the IL&FS crisis, it can go out of hand much soon.

The Finance Ministry needs to address the #NBFC liquidity issue upfront. @nsitharaman As during #ILFS time it can go out of hand very fast

— sandip sabharwal (@sandipsabharwal) 1559811445000

The liquidity crisis has also raised a lot of questions on RBI. Sabharwal had a few suggestions for RBI and what it could have done differently, take a look:

The problem of the Reserve Bank of India is that it has not learnt anything from the 2008 financial crisis In the f… https://t.co/FzJaJbW5vs

— sandip sabharwal (@sandipsabharwal) 1559795625000

Instead of doing fancy swap transactions @rbi should just buy US Dollars from the markets and release liquidity int… https://t.co/OtXdYrI49O

— sandip sabharwal (@sandipsabharwal) 1559552727000

Unlike in many developed economies where Monetary Policy has been unable to stimulate demand, in India lower rates… https://t.co/KS7TOnOA72

— sandip sabharwal (@sandipsabharwal) 1559871771000

And now, its time for some investment tips and stock market gyaan.

Midcaps — the next wealth creators?

As markets stabilize around all time peaks Midcaps could outperform…..

— sandip sabharwal (@sandipsabharwal) 1559621964000

Good news and good price together is a myth

To outperform in markets always remember Good news and good price doesn't come together Good news and good price d… https://t.co/3Fs3oyoSEd

— sandip sabharwal (@sandipsabharwal) Read More – Source
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