US crisis continues to weigh on stocks

Ripple effects of Silicon Valley bank closure felt globally, wiped out In India alone, investor wealth increased to Rs 4.04 lakh crore on Monday. Foreign portfolio investors (FPIs) did temporary selling 1,547 crore, the deficit is worsening. The total market capitalization of the National Stock Exchange fell 256.56 trillion to 260.6 trillion on Friday, with four out of five stocks declining.

Vinod Nair, head of research at Geojit Financial Services, said investors are worried about the strength of the US banking system as global markets witnessed a bloodbath due to the Signature Bank turmoil following the closure of the Silicon Valley bank.

Domestic indices which opened with some gains on Monday, however, started declining again in line with global equities. The joint statement issued on Sunday by the US Treasury, the Federal Reserve and the Federal Deposit Insurance Corp. on the safety of depositors’ money was not enough to calm markets for long.

Global markets continued to be in turmoil despite news that HSBC had agreed to buy the British arm of the troubled US tech startup-focused lender for £1.

Bhavesh A., Managing Director, Investment Banking, Equirus. “We are clearly in uncertain times with the upheaval in the US banking system,” Shah said.

Shah said investors are concerned about the potential contagion risk that could arise from these events and emphasized that all eyes are now on the Federal Reserve’s actions and any possible actions in the banking industry to mitigate these risks. on mergers and acquisitions.

Siddharth Khemka, head of retail research at Motilal Oswal Financial Services Ltd, said the emerging uncertainty around several mid and small-sized banks in the US has created jitters among global investors about the health of the US banking sector.

Investors remained cautious, and sentiment took a hit on banking stocks.

Not surprisingly, banking indices led the selling pressure on Nifty and others as realty, infrastructure, auto and IT sector indices also saw heavy losses on the day when all sectoral indices ended in the red. Reliance Industries saw a 52-week low 2,275 during intraday trading.

Ajit Mishra, vice-president, technical research, Religare Broking Ltd, said the broader indices also declined sharply, indicating that participants were uneasy due to the US banking crisis and were reducing positions.

Experts said all eyes will be on the Fed’s decision at the upcoming meeting, which will have a significant impact on the market, as consensus appears to be slowing or no rate hike. In this regard, the US inflation data coming on Tuesday will also have a significant impact in the near term as the market expects a cooling off from January levels.

Goldman Sachs Group Inc. U.S. economists said the investment bank no longer expects the Fed to raise rates next week. The risk of a banking crisis highlights the tension between the Fed’s efforts to cool the economy and tame inflation, with growing concerns that a one-year rate hike of 4.5 percentage points would trigger a recession and a decline in riskier assets. said Deepak Jasani, head of retail research at HDFC Securities.

Meanwhile, the rupee depreciated 8 paise to close at 82.12 on selling in global equities and safe haven bids against the dollar.

Heavy bearish bets were placed on banks, with open positions in Bank Nifty futures contracts rising by 19% as the index fell over 2%. Open interest refers to the outstanding buy or sell positions of market participants. An increase in OI along with a fall in price indicates a bearish signal.

The benchmark Nifty futures contract saw a rise of 5.5% in open interest, in line with the decline in Nifty, which is also a bearish marker.

Sunil Singhania, founder, Abacus Asset Manager, said, “Things are very liquid with the Silicon Valley bank hitting the global markets out of the blue.” However, the medium to long term potential of the Indian market remains intact.”