Stock rout wipes Rs 1.12 lakh crore off 12 financial firms
Banking, finance and insurance stocks led a sharp sell-off on Dalal Street on September 24
Indian stock markets saw a sharp fall on September 24. During intraday trading, the combined market capitalisation of 12 financial companies fell by more than Rs 1.12 lakh crore. The heaviest selling was seen in banking, finance and insurance sector stocks.
The pressure on the market is being attributed to rising US bond yields and crude oil prices. There is also growing concern over proposed changes to insurance sector regulations.
Bajaj Finance suffered the biggest loss, with its value falling by around Rs 29,000 crore. PB Fintech lost around Rs 20,000 crore and HDFC Bank around Rs 15,000 crore. Axis Bank's market capitalisation fell by around Rs 14,000 crore. Insurance company shares also came under heavy pressure.
Insurance company shares saw a big fall as well. HDFC Life's market capitalisation fell by around Rs 7,600 crore, Max Financial's by Rs 6,800 crore and ICICI Prudential Life's by around Rs 3,000 crore. Turtlemint's market capitalisation also fell by around Rs 802 crore. Together, these four insurance companies lost around Rs 38,100 crore in market capitalisation. L&T Finance's market capitalisation also fell by around Rs 6,200 crore. IndusInd Bank, IDFC First Bank and AU Small Finance Bank each saw their market capitalisation fall by around Rs 3,000 crore.
The biggest worry in the market is that if commission limits are cut, distributors' earnings per policy could fall. This could hit companies that depend heavily on insurance distribution harder. Brokerage firm Bernstein said the proposed commission cuts are far steeper than it had estimated, and that this could hit PB Fintech. Bernstein also said growth in the health and term insurance segments could come under pressure. However, the brokerage said some of the benefit of lower distribution costs could eventually be passed on to customers, which could boost policy sales.
Macquarie said the proposed arrangement could affect different insurance sales channels differently. Jefferies estimates that a 10 percent cut in commission rates could reduce revenue for PB Fintech and Turtlemint by 10 to 12 percent.
