Will Silicon Valley Bank (SVB) crisis dictate Indian stock market this week?

Stock market of India witnessed heavy sell off during week off trade in the weak gone by on weak global cues caused by Silicon Valley Bank (SVB) crisis. The Silicon Valley Bank news on bankruptcy led to huge beating as major three Wall Street indices — S&P 500, Dow Jones and Nasdaq lost up to 2 per cent on Friday deals. This led to weakness in banking stocks on Dalal Street as Nifty Bank index crashed 771 points or around 1.87 per cent and most of the major banking stocks corrected heavily on Friday.

According to stock market experts, falling banking stocks dragged other key benchmark indices like Nifty and Sensex on Friday session. But, Silicon Valley Bank news of bankruptcy won't last long as it is completely sentimental news for Dalal Street. From fundamental perspective, Indian banks are completely insulated from Silicon Valley Bank and margins of Indian banks have improved in recent quarterly results. They advised bargain hunters to buy quality banking stocks in this fall as these banking stocks would bounce back strongly during trend reversal. 

However, stock market experts maintained that margins of banks have improved due to high interest rate regime. But, high interest rate regime works in favour of banks for short term. If the interest rate regime lasts for long, then it affects business of banks due to high lending rates and US-based banks are facing the same issue these days.

Banking stocks in focus

Speaking on the Silicon Valley Bank crisis and its impact on Indian stock market, Avinash Gorakshkar, Head of Research at Profitmart Securities said, "From fundamental perspective, Indian banks have no connect with SVB crisis neither the American bank has any penetration in Indian corporate sector. So, the stock market crash on Friday was only sentimental as bias was already negative on Dalal Street."

However, Avinash Gorakshkar maintained that high interest rate regime has worked in favour on Indian banks that led to strong Q3 numbers of Indian banks. But, this is not going to work for long and hence suggested positional investors to keep an eye on the RBI monetary policy committee (MPC) outcome in near term as any further rate hike may hit business volume of Indian banks. He also said that some section of the corporate are comparing this SVB crisis with subprime loan crisis that started with the fall of Lehman Brothers.

Unveiling stock market strategy in current fall caused by Silicon Valley Bank's bankruptcy news, Anuj Gupta, Vice President — Research at IIFL Securities said, "Indian banks are in sound financial condition as demands are high on both retail and corporate front. Falling US dollar rates are also going to brought back big corporates in India, who had shifted to overseas lending due to depreciation in Indian National Rupee (INR) against the US dollar."

Stocks to buy after stock market crash

Anuj Gupta said that it's an opportune time for bottom fishing investors as quality banking stocks are expected to bounce back strong after change in stock market sentiments. The IIFL Securities expert advised positional investors to buy quality banking stocks like ICICI Bank, Axis Bank, State Bank of India (SBI), Bank of Baroda and IDFC First Bank.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.