By Amit - March 11, 2023
New Delhi19 minutes ago
Silicon Valley Bank has been barred from trading after its stock plunged nearly 70%.
The American banking system appears to be in trouble. America’s 16th largest bank – Silicon Valley Bank (SVB) has been ordered to be closed by the regulators. The FDIC is now responsible for protecting bank deposits. It has been barred from trading after the bank’s stock fell by nearly 70%. Due to the SVB crisis, there has been a decline in the stock market of not only America but also of other countries including India.
The effect of SVB’s problem was visible on the Indian market.
US major stock index affected by SVB’s trouble on Friday S&P 500, The Dow Jones and the Nasdaq declined by up to 2%. Its impact was also felt on Dalal Street. Selling was witnessed in the Sensex on this day, and the Sensex fell over 900 points in early trade. However, it later closed at 59,135, down 671 points or 1.1%.
Like the rest of the markets across the world, banking and financial stocks in India too saw major declines. The Sensex’s banking sector and financial services index declined by about 1.8%.
SVB money is also invested in many startups of India
The impact of this crisis can also be seen on Indian investors and Indian startups. Silicon Valley Bank has invested in many Indian startups. In such a situation, now these startups can fall due to the bank getting into trouble. SVB has investments in startups such as Paytm, one97 Communications, PaytmMall, Naaptol, CarWale, Shaadi, InMobi and Bluestone.
SVB does not have direct connection with Indian market and banking sector
Anuj Gupta, Vice President (Commodity & Currency), IIFL Securities, says that Silicon Valley Bank (SVB) does not have any direct connection with the Indian stock market and banking sector. In such a situation, its effect will not be seen much here. Although it can affect the American stock market (Dow Jones), it can affect Indian markets, because the effect of falling or rising Dow Jones is also seen on the markets of other countries.
The effect of increasing the interest rate
Anuj Gupta tells that America has increased interest rates by 5% in the last 1 year. This has also had a negative impact on the banking sector. At the same time, only 2.5% interest rate (repo rate) has increased in India during this period. That means our banking sector is in a better condition than America.
Here’s A Quick Look At The Silicon Valley Bank (SVB) Crisis
What is SVB?
Silicon Valley Bank (SVB) is a bank based in California. Which focuses on tech startups.
What is happening in SVB?
On March 8, SVB reported that it had sold several securities of the bank at a loss. Also, to strengthen its balance sheet, it announced the sale of new shares worth $ 2.25 billion.
What was its effect?
This created an atmosphere of fear among many big capital firms and the firms advised the companies to withdraw their money from the bank. This led to a sharp decline in the bank’s stock.
How did the SVB crisis escalate?
Shares of major US banks such as Bank of America, Wells Fargo and JPMorgan all slid at least 5%. Due to this, their market cap saw a decline of more than $ 80 billion (Rs 6.6 lakh crore). After this, the shares of banks of Asian countries also saw a decline.
what happened next?
Silicon Valley Bank was ordered to shut down by regulators. The FDIC announced the takeover of Silicon Valley Bank on Friday. The FDIC said the bank had $209 billion in assets and $175 billion in deposits. Silicon Bank will now open on March 13.