Nifty and Sensex crashed over one and a half percent on Monday as global banking turmoil dented investor sentiment. The fears of a further rate hike by the US Federal Reserve and the continued withdrawal of funds from domestic markets by FPIs have made traders nervous as they shift from riskier assets to safe havens like gold. The NSE Nifty 50 touched an intraday low of 16828.35, falling 1.58% or 271.7 pts from the previous close of 17100.05. The BSE Sensex crashed over 900 pts or 1.56%, hitting an intraday low of 57,084.91. Bank Nifty tanked 650 pts or 1.65% to a low of 38941.9.
Why Nifty, Bank Nifty, Sensex are falling today?
Global banking crisis pulls Indian banks down
“In the short run, momentum and sentiment trump everything, even fundamentals. The Indian Banks are experiencing collateral damage caused by US Banking Crisis, despite having healthy balance sheets and liquidity. The consensus leader of the Bull Market has become the consensus leader of the ongoing Bear Market. Currently, the banking sector appears unattractive, but some pockets present interesting risk-reward opportunities for a small bounce,” said analysts at Artha Capital.
FPIs remain net sellers and unlikely to turn buyers in near term
“FPIs have invested a total amount of Rs 11344 crores till 18th March. This includes the bulk investment of Rs 15446 crores by GQG in Adani stocks. So, net of the bulk deals the FPI is negative. For 2023, so far, FPIs have sold equity for Rs 23283 crores (NSDL). FPIs have been consistent buyers only of capital goods. In financial services, they have been alternating between buying and selling on different fortnights. Since risk-off is the dominant market mood now following the bank failures in the US and fears of contagion, FPIs are unlikely to turn buyers in the near term,” said V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services
Investors eye US Fed rate hike decision
“Consistently unfavourable signs in global markets are encouraging investors to turn to safe havens such as the dollar and gold, while FIIs are withdrawing funds from the domestic market in response to the Indian rupee’s depreciation. Considering the 50 bps rate hike by the ECB, all eyes will be on the US Fed and Bank of England, which are set to hold their policy meetings this week,” said Vinod Nair, Head of Research at Geojit Financial Services.
Crude oil prices fall on recession fears
Oil prices fell on Monday to their lowest in 15 months on concerns risks in the global banking sector may cause a recession that would lead fuel demand to decline and ahead of a potential hike in U.S. interest rates this week. Brent crude futures for May settlement fell $2.32, or 3.2%, to $70.65 a barrel. The contract earlier declined to as low as $70.56, its lowest since December 2021.
Investors shift to safe haven; gold market soars to lifetime high
“In the aftermath of the American banking crisis, the gold market soared to a lifetime high. Bullion was purchased as a safe haven after the sudden fallout of the SVC bank and other banks. The U.S. bond rates saw unprecedented weakness, the dollar index fell, and gold prices increased. In view of the banking crisis and conflicting U.S. economic statistics, the U.S. Fed is expected to convene this week on March 22. The policy outcomes may provide further guidance for the bullion markets. Gold, a safe haven asset, is currently in a very favourable financial and economic situation. We anticipate a significant increase in price if gold closes over $2000 (spot), which could potentially occur at levels of $2070 and $2185. For domestic gold, the levels to watch after a close above Rs 60540 are Rs 61920 and Rs 64000. Yet, this week’s expected US Fed discussion is extremely significant,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.
Adani stocks continue to fall
Adani Group stocks fell on Monday with Adani Enterprises
Indian rupee depreciates amid weak domestic markets
“Indian Rupee depreciated today amid weak domestic markets and sustained selling pressure from FIIs. However, soft US Dollar and crude oil prices cushioned the downside. US Dollar declined on contagion fears from the US banking crisis and a fall in US Treasury yields. We expect Rupee to trade with a negative bias on deteriorating global risk sentiments. The banking crisis in US and Europe may continue to put downside pressure on riskier assets,” said Anuj Choudhary – Research Analyst at Sharekhan by BNP Paribas.