Stock market crashWhy D-Street bulls left early for the weekend

By Koustav DasThe bulls on Dalal Street seem to have left early for the weekend as benchmark market indices crashed on Friday, extending losses for the second straight day.

The S&P BSE Sensex fell over 900 points during intraday trade, while the NSE Nifty 50 was down over 250 points. While both benchmarks recovered some ground, the bears seem to be maintaining an iron grip on proceedings.

At around 12 pm, the 30-share Sensex was still down nearly 659.50 points at 59,146.78, while the Nifty 50 was trading 173.85 points lower at 17,415.75.

Today’s trading session has seen a spike in volatility, led by a sharp sell-off in bank and financial stocks. Investors are also concerned about weak global cues, amid fears of prolonged interest rate hikes.

Also Read | Bloodbath on D-Street as Sensex plunges over 900 points, Adani Enterprises tank

Here are some factors that led to today’s bloodbath on Dalal Street

Silicon Valley Bank crash

The main trigger for today’s stock market crash seems to be the sell-off in banking and financial stocks. This sell-off comes after shares of American commercial lender Silicon Valley Bank (SFB) saw its shares decline sharply by 60 per cent. It triggered panic among technology companies and even dragged down banking shares across the world.

The shares of SFB plunged after it announced a share sale to shore up its finances, following a significant loss on its portfolio. SVB’s parent company, SVB Financial Group, has asked clients to stay calm as panic spread and wiped out $80 billion in value from the bank’s shares.

Domestic bank stocks tank

Although the SVB crisis is a US-specific issue, it has hurt sentiments of banking stocks around the globe, including in India. Sectoral heavy weights, Nifty Bank and Nifty Financials, have plunged into negative territory as sentiments were shaken by the sudden plunge in the share price of SVB.

Nifty PSU Bank, down 2.56 per cent, took the biggest hit. Nifty Financial was down 1.80 per cent, Nifty Bank was down 1.89 per cent and Nifty Private Bank was down 1.86 per cent. HDFC Twins, SBI, ICICI Bank, Bajaj Finserv and IndusInd Bank were some of the top losers among banking and financial stocks.

Investors panic over high interest rate

Investors at home and around the globe are also worried about the impact of high interest rates on economic growth. The US Federal Reserve, which is the strongest central bank in the world, maintains a hawkish monetary policy stance.

Also Read | RBI may hike rate to 7-year high in next policy review

This could mean interest rates around the globe could remain higher for longer, which could limit inflation but take a toll on global economic growth. There are chances that the US Federal Reserve could even hike rates during its upcoming March meeting and it could result in further rate tightening by central banks around the world.

As of today, investors are nervously awaiting key US February jobs data, which will provide key insights into future rate hikes by the Fed.

Global cues and FII selling

Domestic markets also weakened on Friday due to weaker global cues, as markets in the US, Japan and Hong Kong ended lower. The weaker sentiments are directly related to the possibility of future interest rate hikes by the US Federal Reserve.

Another factor that has led to the bulls retreating on Dalal Street is selling activity by foreign institutional investors. FIIs turned net sellers after a four-session buying streak. On Thursday, FIIs offloaded shares worth Rs 562 crore on a net basis.

Also Read | ExplainedWhy foreign investors are on a selling spree on Dalal Street