In an interview with ETMarkets, Deuskar said: “Market corrections often reflect investors’ concerns about uncertainty. This is a common phenomenon in the financial markets. In the last six months, the Nifty index has been making lower lows and lower highs” Edited excerpts:
What led to the downfall of SVB Bank and Signature Bank in a matter of hours?
On Wednesday, SVB announced that it needed to raise $2.25 billion in order to maintain its balance sheet, shocking its investors with the aggressive rate expansion of its fade reserves.
Additionally, some venture capital firms began withdrawing deposits from SVB amid a less than favourable IPO market.
In a sense, this led to a bank run, leaving SVB short on capital. The bank eventually sold its bond portfolio at a $1.8 billion loss as a result.
Finally, the bank was closed by the regulator. Although the deposit insurance pool had protected the depositor’s money. Taxpayers won’t have to bear any losses.
The Signature Bank experienced a similar bank run. The only difference is that the signature contained crypto currency asset deposits. Another cryptocurrency-focused bank silver gate was forcibly closed earlier last week.
Post collapse of FTX (Foreign Trade Exchange), Signature Bank planned to shed $10 billion in deposits from digital assets. Investors started a bank run on Signature Bank as a result of their concern over Silver Gate and SVB.
The selloff continues in the stock market across the globe – are we staring at another Lehman moment? Another global financial crisis in the offing? What is the impact you see on the stock market?
‘NO’ is the clear answer to this — since it is only confined to SVB or Signature. These are typical instances of a pure bank run, not an interbank issue. Additionally, the FDIC is covering deposits (Federal Deposit Insurance Corporation).No shortage of system liquidity or decline of a highly leveraged financial asset, such as a housing bond, occurred in 2008. However, this may prevent the Fed from raising rates further. The markets will experience some speculation volatility in the meantime.
What a week for Indian markets as bears took control pushing the Nifty50 below 200-DMA on Friday. What led to the price action?
The recent correction in the global and US markets is largely attributed to two factors: the problems faced by Silicon Valley Bank and the increase in jobless claims in the US.
It is now clear that there will be a 25 basis points hike in rates in March. However, given the mounting challenges, the Federal Reserve may consider pausing further rate hikes.
This event has underscored the inadequacy of the large banks’ asset-liability management (ALM) mismatch tracking and monitoring. Fluctuations in bonds can have significant impacts on other assets of a bank.
What does a breach of 200-DMA mean for traders/investors? Important levels to watch out for?
Market corrections often reflect investors’ concerns about uncertainty. This is a common phenomenon in the financial markets. In the last six months, the Nifty index has been making lower lows and lower highs.
It is likely to reach the 17000 or 16800 level. It is advisable to hold some cash to invest in stocks that are part of large megatrends and have strong independent investment theses with high conviction.
I am optimistic about the prospects of railway, solar, some auto ancillaries, and green hydrogen stocks. In addition, there is a growing trend in data centers and generators. As mentioned earlier, the manufacturing sector of multinational corporations is still thriving.
Is it a buy on dips market or sell on the rally?
The current situation in the stock market depends on what type of investments you hold. If you are a trader who follows specific rules or seeks short-term opportunities, this may be a challenging time for you.
However, over the past year, I have done well with investments in stocks such as Canara Bank, Nikhil Adhesives, Gravita India, Kamdhenu, and Cummins India. (Disclaimer and disclosure: These are not investment recommendations, but examples of why it is essential to be selective in choosing stocks and have an independent investment rationale. Conduct your own research and seek advice from a SEBI-registered intermediary. Some of these stocks may be held by our clients.)
Realty stocks fell the most last week – what is worrying the sector?
As a sector that is highly sensitive to interest rates, real estate investors are often concerned about how fluctuations in rates can impact their project’s Internal Rate of Return (IRR).
Delays in projects can also result in challenges that were seen in the past. While demand for real estate was picking up following the pandemic and the accumulation of savings and salary hikes in the IT and finance sectors last years, there has been a slight decrease in demand.
Compared to the US or China, the real estate sector in India is likely to perform better. However, the property sales index has only increased marginally by 1.2% in the December-ending quarter.
If there is an increase in connectivity, especially with the metro, and rates remain stable, it is possible that some of the top players in the industry will be able to make good profits.
Any stock which is looking like a value pick at current levels after the recent fall?
I have a positive outlook on the railways, solar, a few auto ancillaries, and the green hydrogen sector. Additionally, the data center and generator themes are currently trending.
As I previously mentioned, multinational corporations’ manufacturing operations are also still active. However, I would like to clarify that I am not providing any specific stock recommendations.
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)