Stock Market: SVB contagion crowns volatility; Biden battles trust deficit

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By S Jha

New Delhi, March 13: Asian equity markets were whipsawed by the collapse of the California-based Silicon Valley Bank. Indian equity indices nosedived after the reality sank that the bailout of the SVB may just too little a help to the sinking financial institutions.

In the first few hours of trade, Dow Jones had done a swing of over 475 points to stage a sharp recovery from the day’s lows after taking confidence from the address of US President Joe Biden. So far the US administration has assured that the depositors’ interests would be protected and they would be able to withdraw their deposits.

But the bigger task awaits the US financial regulators as fear of the contagion effect now threatens to batter the regional banks. US treasury secretary Janet Yellen has told the television there that he task is to stop the contagion to spread to the sound banks. She clearly mentioned that the risks to the regional banks are around following the collapse of the much celebrated high-tech SVB.

Nifty has broken below all support levels, and chartists are now claiming that the index is headed to the 17000 level. The indices are in situations of falling knives and extreme volatility. Nifty gave up over 110 points of gains in the morning to nosedive by over 275 points. This was despite the fact that the domestic institutional investors nearly matched the sale of the foreign institutional investors in the cash market. The FIIs had a net sell of over Rs 1500 crores on Monday.

Legendary equity investor Mark Minervini said on Monday that the bulls will have chances only if the volatility subsides. The consensus view remains that the stock indices are currently in bear phase. The bears will make more money by shorting the markets than the bulls, who too may have a few chances amid the volatility.

Tech Mahindra flew in the morning and remained firm throughout the day after the announcement of Mohit Joshi quitting Infosys after two decades of jobs to join the Anand Mahindra-owned firm. Infosys was marginally down. IndusInd Bank was a mirror image of Tech Mahindra, opening the session with over six per cent cut.

The Bank Nifty cracked first in the day, while taking Sensex and Nifty to the abyss. The rising interest rates are now threatening to erode the margins of the banking and financial institutions. The week is likely to remain hostage to volatility as positive cues are least likely to emerge.