Indian Stock Market Hit by SVB Crisis and Global Market Volatility
The Indian stock market is reeling from the recent failure of Silicon Valley Bank (SVB) in the United States and the ripple effect it is having on global equity markets. This comes on the heels of the Adani crisis, making it another blow to the market’s recovery efforts.
Investors have lost a whopping Rs 6.6 lakh crore in the last three trading sessions, with the Sensex crashing around 2,000 points. Bank stocks were hit the hardest, despite analysts and brokerages reassuring investors that Indian banks are well-positioned in a tight regulatory framework.
Here are the key factors that are troubling investors on Dalal Street:
The failure of SVB and Signature Bank in the US has negatively impacted global markets, with Dalal Street veteran Sunil Sanghai warning that any larger contagion effect will also impact Indian markets. US regulators have jumped into action, but the sentiment in the market remains fragile.
Asian markets are following the cues from Wall Street, which saw the Dow Jones, S&P 500, and Nasdaq dropping significantly last week. Japan’s Nikkei is down over 1%, and Australia’s ASX 200 is 0.5% lower.
Selloff in Bank Stocks
Shares of banks are suffering a global rout, with Nifty Bank losing over 2% today. IndusInd Bank was the biggest loser in the pack, trading over 7% lower. PSU bank stocks lost up to 3.5%. However, analysts believe the risk of contagion within the banking system is limited, and this is more of a company-specific issue.
The chances of a 50 basis point rate hike have decreased in the wake of the SVB crisis, but investors are still closely watching the February consumer price index and the producer price index for February. Analysts warn that if they come in hotter than expected, bigger bets of 50 basis points and higher rate hikes can be expected.
On the weekly charts, Nifty has been consolidating for the past few weeks, with prices gradually shifting their base lower, indicating a bearish to sideways momentum. Last Friday, the index formed a bearish engulfing candlestick pattern and closed below its short-term averages (9 & 21) EMA on the daily charts. The index’s new support is now seen at the 17,000 level after the 17,200 level was breached.
In a globalized world, the impact of financial events in any corner of the globe can have a ripple effect. Therefore, investors are advised to stay cautious and brace themselves for any further shocks that may affect the Indian stock market.