Banks, Financial Stocks Lead Market Crash, Nifty Bank Slides 2%: Key Driver?
An intense sell-off was witnessed across Dalal Street on Friday after the Indian benchmark indices opened sharply lower in early trade, following negative cues from global markets ahead of key US jobs data that will provide a clearer picture of the Federal Reserve’s upcoming interest rate hikes to control inflation.
Investors on Dalal Street witnessed their wealth tumble by a combined over Rs 3 lakh crore on Friday, led by sharp declines majorly across banking and financial stocks.
Headline indices Nifty50 tanked 1.04% to 17,406.55 points and Sensex slashed 686.36 points or 1.15% while writing. India’s market fear barometer India VIX jumped over 8% to 13.8 levels.
Nifty PSU Bank was the top loser under the Nifty umbrella of sectoral indices, tumbling 2.5% at the time of writing, led by Canara Bank (NS:CNBK), Bank of Baroda (NS:BOB) and Indian Bank (NS:INBA). All the 12 constituent stocks sank deep in red.
Nifty Bank followed the sentiment and plunged 1.9% with all 12 constituent stocks painted in red, led by BoB, HDFC Bank (NS:HDBK) and Axis Bank (NS:AXBK). Nifty Financial Services fell 1.7%.
The US financials index ended the overnight session on Thursday sliding more than 4% and recorded the steepest one-day fall since June 2020.
This came as SVB Financial Group, a bank that mainly funds startups, crashed 60% in the session, wiping out over $80 billion of its market capitalisation amid worries about financial stability.
In a note provided to Investing.com, Dr VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services said that Thursday’s sell-off in US markets was triggered by a crash in SVB Financials, which impacted sentiments and banking stocks took a beating on concerns that rising interest rates might trigger loan repayment defaults.
Vijayakumar added that even though it will not have a direct impact on Indian banking stocks, the sentiment impact could be negative.
The information you provided is from an article dated Friday, mentioning a market crash led by banking and financial stocks. Since today is Tuesday, April 9th, 2024, that event likely happened last week.
Without the full article, it’s difficult to pinpoint the exact driver of the crash, but here are some common reasons for financial sector downturns that could be the culprit:
- Interest Rate Changes:Â If there’s an expectation of rising interest rates, it can lead investors to sell bank stocks. This is because higher rates can reduce banks’ future profits.
- Economic Slowdown:Â Worries about a recession or slowing economic growth can cause investors to lose confidence in the financial sector, leading to a sell-off.
- Industry-Specific Issues:Â There could have been news related to banking regulations, a major loan default, or another factor specifically affecting Indian financial institutions.
To understand the specific cause of the crash, you can try the following:
- Search for the full article:Â Look for “Banks, Financial Stocks Lead Market Crash, Nifty Bank Slides 2%: Key Driver?” by Malvika Gurung on Investing.com [the source mentioned in the search result I can’t return]. This should provide the details about the crash.
- Financial News Websites:Â Look at financial news websites like Economic Times India or Moneycontrol for articles dated last week that discuss the market crash.