Stock of Ujjivan Financial Services witnessed its biggest fall in three months on Monday, tanking over 5 per cent in early trade.
Kotak Institutional Equities downgraded Ujjivan to Reduce from Add earlier, but kept the target price unchanged.
The scrip was trading 5.64 per cent down at Rs 396.60 at around 11.27 am (IST). The BSE Sensex was up 123 points, or 0.35 per cent, at 35,038 at around the same time.
The stock slide is seen mainly because of worries over farm loan waiver as parties jostle to outdo each other on this count. The waiver as announced by the BJP would apply to loans up to Rs 1 lakh from nationalised banks and co-operatives.
“If the BJP does win, it would be a while before the details of any waivers are released or put into effect. Meanwhile, the temptation to default is likely to be high. Public banks and MFIs are likely to bear the brunt of this impact. Ujjivans recent price performance leaves negligible upside,” Kotak said.
The scrip had earlier witnessed a fall of 7.5 per cent on February 2.
Karnataka accounts for 8 per cent of all agriculture loans in India and this race to waive off loans impacts most banks.
“Similar events in the past indicate that waivers have an immediate negative impact on the MFI portfolios of banks and NBFCs. MFIs have just emerged from the demonetisation-led crisis, with Karnataka having been affected. We watch closely to check the impact of the latest waiver announcement. Ujjivan Financial Services and Bharat Financial have around 11-15 per cent of their loan book in this state,” Kotak said in a report.
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