What’s worrying investors as Sensex today falls over 800 points, Nifty below 17k
Benchmarks Sensex and Nifty declined on Monday on lingering worries of contagion risks in the global banking system despite troubled Credit Suisse’s acquisition by UBS Group. Sensex was down more than 800 points to 57,177 whereas the Nifty 50 was below 17,000 mark.
Investors are trying to get a sense for how quickly the economy may be slowing and whether the problems in the banking sector will lead to an ‘accelerated slowing’, as per analysts.
“The fears of financial contagion rising from the banking crisis in US and Europe appear to be largely contained by the quick response of the governments and central banks. The volatility index in the US at around 25 doesn’t indicate any panic like in 2008. However, investors may remain cautious and wait for stability. The boost to India’s macros arising from reduction in trade deficit and big decline in Brent crude to $73 are positives from the market perspective,” said Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
US stocks ended lower on Friday as worries about banking-sector stability reemerged following a bankruptcy filing by SVB Financial Group and the release of data showing banks borrowed $165 billion from the Federal Reserve over the past week.
“Markets may be in a vulnerable position ahead of the Federal Reserve’s meeting this week, as traders bet the banking crisis could lead to meaningful interest-rate cuts over the next year. Investor wariness about a potential banking crisis despite a lifeline offered, could restrict a fast upmove. Unexpected outcome of the US Fed meet could bring some turbulence in the markets,” said Deepak Jasani, Head of Retail Research, HDFC Securities.
Over the weekend, UBS said it will buy Credit Suisse for 3 billion francs ($3.2 billion), and assume up to $5.4 billion in losses, in a deal engineered by Swiss authorities. Asian stocks fell after opening higher on Monday after relief at a weekend rescue deal for Credit Suisse. Investors are wary about a range of risks including contagion, the fragile state of US regional banks, and moral hazard, say experts.
On Friday, foreign institutional investors (FIIs) were the net sellers and sold Indian equities worth ₹1,766.53 crore while domestic institutional investors (DIIs) were net buyers at ₹1,817.14 crore.
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