Indices tumble on US bank shares sell-off; Sensex declines 671 points

India’s stock market fell along with global peers on Friday after the over $50-billion sell-off in US banks, prompted by the crisis at Silicon Valley Bank (SVB), triggered risk-off bets. Nervousness ahead of the release of US payroll data also weighed on the market.

The Sensex declined 671 points, or 1.1 per cent, to close at 59,135, while the Nifty50 index settled at 17,413, with a decline of 177 points, or 1 per cent. Foreign portfolio investors were net sellers to the tune of Rs 2,061 crore, while domestic institutions pumped in close to Rs 1,400 crore on Friday, according to provisional data from the exchanges.

Shares of SVB, a technology-focused lender in the US, plunged about 60 per cent in Thursday’s trading, driving other banks sharply lower. Trading in SVB shares was suspended on Friday after tumbling as much as 66 per cent in premarket hours.

SVB’s troubles highlight the additional stress caused by the rate hikes by central banks, said market experts. Banks that tend to hold a large portfolio of bonds are staring at losses as major central banks plan to raise rates to curb inflation.

“Investors are worried that the crisis in SVB is a precursor to a larger crisis on the lines of Lehman Brothers. SVB is not such a big bank, but the fear has taken root. Geopolitical tensions and rate hike fears are adding to the volatility,” said U R Bhat, co-founder, Alphaniti Fintech.

A flight to safety by investors triggered a rally in bond markets. The 10-year US bond yield fell to 3.85 per cent from 3.9 per cent in the previous session. The two-year US bond yield was down to 4.82 per cent from 4.87 per cent.

Banking stocks in India too underperformed.

Analysts said the SVB rout won’t impact the domestic financial system but could weigh on equity market performance as investors would move to safe haven assets. The Bank Nifty index fell 1.9 per cent; the India Vix index rose 5.4 per cent.

The Nifty 50 index ended below its 200-day moving average (DMA), a key technical indicator, for a second week in a row. This, experts said, will keep downward pressure on the markets.

“Any rebound towards the 17,500-17,600 zone would attract selling pressure while the Nifty may find support around the 17,000-17,200 zone. Participants should align the positions accordingly and focus more on risk management in view of the erratic global cues,” said Ajit Mishra, VP of technical research, Religare Broking.

The market breadth was weak with 2,219 stocks declining and 1,298 rising on the BSE. HDFC Bank declined 2.6 per cent and contributed the most to the Sensex’s decline. Reliance Industries fell 1.6 per cent.

Despite a 2 per cent drop in the previous two trading sessions, the Nifty and the Sensex ended just a per cent lower for the week, while Nifty Midcap and Smallcap indices finished little changed.