Is Infra related IL&FS default has been wrongly diverted TO HFC / NBFC sector to create panic??

Discussion in 'Ask A Query About Your Stock Picks And Portfolio' started by kharb, Sep 26, 2018.

  1. kharb

    kharb Well-Known Member

    Aug 15, 2015
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    I am no expert but if I am right IL&FS is related to infrastructure and all of we know how many of infrastructure related companies like JP ASSOCIATED, IVRCL,and large no of other infra related companies are bleeding and many other infra related sectors like roads , real estate, power Telecom etc has become loss making and are route cause all NPAs of banks mostly PSU banks are suffering. Then how we need to be surprised if a company which is related to Infrastructure Finance becoming defaulter. But I am surprised how Housing FINANCE COMPANIES are being punished which has houses as security for repayment and this model is more strong then Infrastructure finance Unless there is some concrete negative information, which is definitely not in public domain, huge correction in housing finance companies looks to be over done. Can members further give their opinions on the subject. More over how infrastructure stocks remains steady with wrong negative focus on HOUSING Finance Sector. I am no expert on any of subject being discussed and neither have exact details of issues except price movements of the stocks. Just for discussion and no recommendation.
    Last edited: Sep 26, 2018
    Pee Vee likes this.
  2. Pee Vee

    Pee Vee New Member

    Sep 2, 2018
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    The problem appears to be related to a liquidity issue arising from the IL&FS problem.

    This is what an article in the Hindu says.

    "The recent past has seen concerns related to liquidity primarily at IL&FS, which has led to investors turn wary of the whole sector. The market has been abuzz with talks of defaults at some other listed NBFCs as well. However, some have clarified that they have not defaulted on any payment obligations.

    “There can be no smoke without fire and the entire sector comprising housing finance companies and NBFCs has taken a pounding ...

    “It is apparent that there is some mismatch between asset and liabilities. The worst may be over but it will take quite a time for business as usual for these entities ....

    In a note released last week after concerns emerged at IL&FS, domestic brokerage IIFL said that some NBFCs would not be able to roll over their short-term positions. If they raise funds at higher rates, then the margins would be impacted, the brokerage firm said.

    Capital raising issues

    “There are concerns over short-term liquidity in the market for commercial papers raised by NBFCs. Further, there is also an uncertainty about the ability of certain NBFCs to raise capital,” stated the report while adding that margin calls could trigger further sell-off."

    Personally, I feel that is a short-term issue which will blow away sooner than later. This may be the ideal opportunity for long-term investors.
    kharb likes this.