Domestic markets have been on a downward spiral for the last four consecutive sessions led by weak global cues after the collapse of Silicon Valley Bank (SVB) in the US.
Three US banks collapsed within a week but the fall of Silicon Valley Bank, which was the 16th largest bank in the US at the end of 2022, has shocked markets. SVB is the largest lender to fail since 2008, as per Reuters.
Concerns over the health of financial institutions have been mounting. The Nifty Bank index is down over 5 percent in the last four sessions.
Market benchmarks the Sensex and the Nifty have fallen 4 percent each while the overall market capitalisation of BSE-listed firms has dropped to ₹256.39 lakh crore from ₹266.24 lakh crore on March 8, making investors poorer by ₹9.85 lakh crore in just four sessions.
Will the market fall accelerate?
After the fresh fall, there are chances that the market will bounce back. However, it needs a major positive trigger to sustain gains.
The market sentiment has been fragile since last year over concerns over sticky inflation, rate hikes, economic slowdown and geopolitical tensions. This year, the Adani-Hindenburg episode and now the SVB crisis have added additional negativity to the market sentiment.
Even though analysts, experts and top broking firms have been saying that the SVB crisis is not going to impact the Indian banks, the sentiment remains low.
In a recent report, global brokerage firm Macquarie noted that Indian banks are ‘goldilocks with a minor bump’.
According to Macquarie, low credit costs continue to drive multi-year high ROAs (return on assets). EPS (earnings per share) upgrade cycle continues and the brokerage has also raised EPS by 3-9 percent for FY23E-25E.
"We increase target prices across most banks as we roll forward to FY25E valuations," it said in the note.
Concerns over contagion in the banking sector may ease in the next few days provided there is no new collapse. Now the focus is on the US Fed rate hikes and any positive signal from that front may lift the mood of the market.
US inflation eased in February. When the economy is showing signs of weakness and there are fresh concerns over the health of banks, the US Fed is expected to raise rates mildly by 25 basis points on March 22.
As Reuters reported, "The Labor Department's CPI report showed consumer prices cooled in February, largely in line with market expectations, with headline and core measures notching welcome annual declines."
Inflation, however, still has to go down significantly to get to the central bank's average annual 2 percent target.
What should investors do?
Experts see the possibility for a pullback in the market.
Deepak Jasani, Head of Retail Research at HDFC Securities, pointed out that the overall trend of the market is still down, but we may see some temporary pullbacks.
He said for investors, asset allocation and portfolio reviews at regular intervals are a must.
"If asset allocation is done in a disciplined manner and at regular intervals, then in bullish times, profits are automatically taken and in bearish times, the cash raised is deployed," said Jasani.
"Portfolio review will enable investors to exit underperforming stocks (especially those which have not performed in the last few rallies) and either raise cash or divert the money to better stocks," Jasani said.
Manish Chowdhury, Head of Research at Stoxbox, feels that with the unfolding of the SVB crisis, the US Fed would take a holistic approach and would ideally refrain from raising interest rates in the March meeting, evidenced by the bond market reaction as well.
Chowdhury advises investors should wait on the sidelines before exiting their long positions.
Raj Vyas, Portfolio Manager at Teji Mandi, believes it is a good time to enter the Indian market.
"It's a typical greed and fear kind of market and we believe that we are approaching peak fear and it is a good time to enter the Indian market now both from the technical as well fundamental point of view," said Vyas.
"The fall is because of the global factors and that normally gives an investor the best entry opportunity. Also, bond yields are falling but the equity markets are not acknowledging that. At some point, markets will recognize that and that's equity positive," said Vyas.
Disclaimer: The views and recommendations given in this article are those of individual analysts and broking firms. These do not represent the views of MintGenie.
