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Mumbai, March 6 (PTI): The Sensex plunged 894 points while the Nifty crashed below the key 11,000-mark on Friday as regulatory curbs on Yes Bank triggered a crisis of confidence among domestic investors.
A heavy sell-off in global markets on coronavirus concerns took a further toll on risk sentiment, traders said.
After nosediving over 1,459 points during the day, the 30-share BSE Sensex settled 893.99 points or 2.32 per cent lower at 37,576.62.
Likewise, the broader NSE Nifty tanked 279.55 points or 2.48 per cent to close at 10,989.45.
Banking counters wilted under selling pressure, with Yes Bank plummeting over 55 per cent, after the RBI placed the lender under a moratorium, capping deposit withdrawals at INR 50,000 per account for a month and superseding its board.
The unusual move late Thursday evening came hours after finance ministry sources confirmed that State Bank of India (SBI) was directed to bail out the troubled lender, once a Dalal Street darling.
Tata Steel was the top laggard in the Sensex pack, cracking 6.51 per cent, followed by SBI, IndusInd Bank, HDFC, ICICI Bank and ONGC.
Bajaj Auto, Maruti and Asian Paints were the only gainers.
During the week, Sensex plunged 720.67 points or 1.88 per cent, while Nifty sank 212.30 points or 1.89 per cent.
According to analysts, investors took the Yes Bank episode very negatively, raising questions on the stability of the overall Indian financial system.
"Another bank bites the dust. This time its Yes Bank - one of the large private sector banks. RBI has stepped in and leading state-owned institutions are patching up a bailout plan for the bank and more importantly, safeguard the interest of depositors. However, the already weak sentiments have been dented further.
"The series of accidents in the Indian financial sector sends out a very poor message to the foreign investors. The negative bias is expected would sustain in the near term," said Gaurav Dua, Senior VP, Head - Capital Market Strategy & Investments, Sharekhan by BNP Paribas.
Meanwhile, Finance Minister Nirmala Sitharaman and RBI Governor Shaktikanta Das on Friday assured Yes Bank depositors that their money is safe and all steps will be taken to ensure stability in the financial sector.
All BSE sectoral indices ended in the red, with metal plunging 4.40 per cent, followed by bankex, finance, energy, realty, oil and gas, power and industrials.
The broader BSE midcap and smallcap indices too skidded up to 2.36 per cent.
World markets sank deeper into red as the coronavirus outbreak stoked fears of a global recession.
Bourses in Shanghai, Hong Kong, Seoul and Tokyo sank over 2 per cent.
European benchmarks were also trading significantly lower in their morning sessions.
Brent crude oil futures fell 2.54 per cent to USD 48.72 per barrel.
A strategic investor like SBI will have to pick up 49 per cent stake in Yes Bank and stay invested for at least three years, as per the RBI's draft scheme of reconstruction for the crisis-hit lender announced on Friday.
The State Bank of India (SBI) has already shown interest in picking up a stake in the private sector lender, the central bank added.
In its draft 'Yes Bank Ltd. Reconstruction Scheme, 2020', RBI said the strategic investor bank will have to pick up 49 per cent stake and it cannot reduce holding to below 26 per cent before three years from the date of capital infusion.
From the appointed date, the authorised capital of the private sector bank would stand altered to INR 5,000 crore and number of equity shares to 2,400 crore having face value of INR 2 each.
"The investor bank shall agree to invest in the equity of the Reconstructed bank to the extent that post infusion it holds 49 per cent shareholding in the Reconstructed bank at a price not less than INR 10 (Face value of INR 2) and premium of INR 8," said the draft on which comments from stakeholders have been invited till March 9.
It further said SBI has "expressed its willingness" to make investment in Yes Bank and participate in the reconstruction scheme.
The draft comes a day after the RBI imposed a moratorium on the bank, restricting withdrawals to INR 50,000 per depositor till April 3.
The RBI also superseded the board of the bank, which is now being headed by former deputy managing director and CFO of SBI Prashant Kumar.
Meanwhile, Finance Minister Nirmala Sitharaman said the government has asked the Reserve Bank to look into what went wrong at Yes Bank and fix individual responsibilities.
Addressing a press conference here, she said the bank was being monitored since 2017 and developments relating to it were being monitored on a day-to-day basis.
She said the RBI has been asked to assess the causes of problems and identify the role played by individuals.
The government, she said, wants the RBI to ensure that due process of law is followed with a sense of urgency.
Earlier in the morning, RBI Governor Shaktikanta Das said Yes Bank resolution efforts are aimed at maintaining "stability and resilience" in the Indian financial sector and the difficulties will be overcome "very swiftly".
The 30-day moratorium deadline is an "outer limit", he said at a banking event in Mumbai, reiterating that the interest of depositors will be "fully protected".
He also defended the timing of the move as "appropriate", saying Yes Bank was unable to come up with a solution despite being given time for internal resolution.
Yes Bank has been struggling to raise capital. It sought to raise USD 2 billion initially during this fiscal, which was then pruned to USD 1.2 billion as it could not rope in any investor.
Also, the bank had deferred announcement of its financial results for the third quarter ended December. The bank had told stock exchanges that it will publish the same on or before March 14, 2020.
Stock of Yes Bank plunged by over 80 per cent during intra-day trade on BSE and closed 56.04 per cent down at INR 16.20.
As panicky depositors rushed to withdraw money from Yes Bank whose control was seized by the RBI in a dramatic late-night move, Finance Minister Nirmala Sitharaman on Friday assured depositors that their money is safe and said the central bank was working for an early resolution of the crisis.
The Reserve Bank of India (RBI) on Thursday evening capped withdrawals at INR 50,000 for the next one month and imposed strict limits on operations at the country's fourth-largest private lender that faced "regular outflow of liquidity" after an effort to raise new capital failed.
"I am in continuous interaction with the RBI. The RBI is fully seized of the matter and has assured they will give a quick resolution," Sitharaman said here.
She said no depositor will lose his or her money and insisted that the immediate priority is to ensure Yes Bank customers are able to withdraw money within the stipulated cap.