Benchmark stock indices Sensex and Nifty declined for a third day on the trot to close at five-month low levels on Monday due to a massive sell-off in banking, finance and auto stocks triggered by fears of potential contagion from the biggest bank failure in the US since 2008.
Unabated flight of foreign capital and a weak domestic currency amid global rate hike fears added to the gloom, traders said.
Falling for the third straight session, the 30-share BSE Sensex plunged 897.28 points or 1.52 per cent to settle at 58,237.85, the lowest closing level in five months. Only one Sensex stock ended higher while the rest 29 dropped.
The index opened higher and later rose by 375 points to touch a high of 59,510.92 in early trade amid positive Asian markets. However, bears gripped the markets and the index tanked over 1,400 points from the day’s high to 58,094.55.
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The NSE Nifty tanked 258.60 points or 1.49 per cent to end at a five-month low of 17,154.30, with 45 of its scrips ending in the red.
IndusInd Bank was the biggest loser in the Sensex pack, shedding 7.46 per cent, followed by SBI, Tata Motors, M&M, Bajaj Finserv, Axis Bank and Infosys.
In contrast, Tech Mahindra was the only winner.
The US-based SVB Financials, which mainly funds startups, crashed 60 per cent in the US market last week, triggering concerns over the health of banks’ bond portfolios and its possible rippling effects globally.
“…jitters over the largest US bank failure since the 2008 financial crisis, driving investors to the safe-haven asset,” Navneet Damani, Senior VP – of Commodity Research at Motilal Oswal Financial Services, said.
“Bloodbath was seen in the global market as the fallout of Silicon Valley Bank was followed by turmoil at Signature Bank, keeping investors worried about the strength of the US banking system. Importantly, the Fed’s decision in the upcoming meeting will have a crucial impact on the market sell-off, as the consensus is reversing to no rate hike trajectory,” Vinod Nair, Head of Research at Geojit Financial Services, said.
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“Also, the US inflation data due on Tuesday will have a vital impact in the short-term as the market anticipates a cool down from January levels,” he added.
The selling pressure was widespread wherein banking, auto and IT majors were beaten down badly. The broader indices too plunged sharply lower and lost nearly 2 per cent each.
“The move shows that participants are not comfortable, citing the US banking crisis and reducing positions, ignoring the news of the bailout. Banking and financials were acting as saviors earlier but the tone has changed completely now, which is further adding to their worries,” Ajit Mishra, VP – Technical Research, Religare Broking Ltd.
US President Joe Biden has assured the American people and businesses that a resolution of the collapse of the Silicon Valley Bank will not put taxpayer’s money at risk, and they can have confidence that their bank deposits would be there when they need it.
In a late-night statement on Sunday, Biden also announced that on Monday morning he will deliver remarks on how the US will maintain a resilient banking system to protect the economic recovery.
The California-based Silicon Valley Bank (SVB), the 16th largest bank in the United States, was closed on Friday by the California Department of Financial Protection and Innovation which later appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver.
Meanwhile, the UK government announced on Monday that it has facilitated London-based banking major HSBC to buy the embattled UK arm of Silicon Valley Bank for 1 pound, securing the deposits of more than 3,000 customers worth around 6.7 billion pounds.
HSBC shares tanked more than 4 per cent on UK bourses after the deal.
Analysts said that uncertainty over several mid and small size banks have created nervousness among global investors about the health of the US banking sector.
In the broader market, the BSE smallcap gauge dipped 2.08 per cent and the midcap index declined 1.82 per cent.
All the sectoral indices closed in red. Bankex declined 2.24 per cent, Telecommunication slipped 2.08 per cent, auto dipped 2 per cent, realty (1.98 per cent), financial (1.93 per cent) and tech (1.49 per cent).
In Asian markets, Shanghai, Hong Kong and Seoul ended in the green, while Tokyo settled lower.
European equity markets were trading with significant losses in the afternoon trade.
Meanwhile, the rupee declined 10 paise to close at 82.16 against the US dollar on Monday.
International oil benchmark Brent crude declined 1.79 per cent to USD 81.30 per barrel.
Foreign portfolio investors (FPIs) offloaded shares worth ₹2,061.47 crore on Friday, according to exchange data.