March 6, 2020 / 5:06 AM / in a month

Indian shares plunge as Yes Bank woes hit banking stocks

BENGALURU, March 6 (Reuters) - Indian shares tumbled on Friday, as banking stocks came under pressure after the country’s central bank placed troubled lender Yes Bank under a moratorium and took over its board.

The NSE Nifty 50 index fell as much as 3.92% to an over five-month low of 10,827.4 points, led by a 40% slump in the shares of component Yes Bank.

The stock hit an over decade low and was the biggest percentage loser on the blue-chip index.

The Reserve Bank of India said late on Thursday it had taken over the Mumbai-based bank’s board for 30 days and imposed limits on withdrawals, due to a serious deterioration in the fifth-largest private sector lender’s financial position.

The Nifty Bank sub-index fell as much as 5.74%, also weighed by a 12% slide in shares of top lender State Bank of India.

The state-owned bank said late on Thursday its board had given an in-principle approval to explore an investment opportunity in Yes Bank.

Credit rating agency Moody’s said the lack of a coordinated, timely action highlighted continued uncertainty over bank resolutions in India.

The broader BSE Sensex dropped as much as 3.79% to 37,011.09.

“We are seeing hits across the board in the market today, as a lot of people had big positions in F&O in Yes Bank,” said Deepak Jasani, head of retail research at HDFC Securities Ltd.

“A lot of buying happened on Thursday in Yes Bank, and these buyers and older investors could be selling now. To cover their losses, these traders may have to sell other stocks as well,” he said.

Yes Bank closed 25.6% higher on Thursday after reports that a group led by State Bank of India would inject capital into the bank.

The Indian rupee weakened to 74.02 against the dollar, compared to its previous close of 73.6.

Sentiment was also dampened by declines in Asian shares and U.S. stock futures following another Wall Street rout as disruptions to global business from the coronavirus beyond China worsened, stoking fears of a prolonged world economic slowdown. (Reporting by Philip George and Chris Thomas in Bengaluru; Editing by Sriraj Kalluvila)

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