Mr. Mitul Shah - Head of Research at Reliance Securities.
Indian equities ended lower amid weak global cues with weakness across sectors and the ongoing crisis in the US banking system. Nifty was down 0.7%. Broader markets also ended in red as Nifty Mid Cap and Nifty Small Cap lost 0.5% and 0.8% respectively. All sectoral indices ended in red except Nifty Media (+0.2%). Nifty PSU Bank was the major laggard, falling 1.9% followed by Nifty IT and Nifty Metal which were lower by 1.7% and 1.2% respectively.
The Dow Jones dropped on Monday as a plan to backstop all the depositors in failed Silicon Valley Bank, along with other extraordinary measures, failed to boost bank shares. The losses were contained as some investors bet the financial shock could cause the Federal Reserve to pause interest rate hikes. The S&P 500 closed 0.2% lower, the Dow Jones slipped 0.3%. However, the Nasdaq rose 0.5%. Regional bank stocks plunged, and investors piled into government bonds to seek safety after regulators took extraordinary measures over the weekend to limit the impact of the collapse of Silicon Valley Bank. The yield on the 10-year U.S. Treasury note fell to 3.513%, from 3.694% on Friday.
Globally, the crisis in the US banking system has roiled markets with the banking sector coming under pressure across markets on fears of contagion. Markets are concerned over the health of the financial system and the February jobs report that again showed employers adding more jobs than expected. The collapse of Silicon Valley Bank following losses in its bond portfolio is the biggest bank failure since the global financial crisis and has sent shockwaves through the banking sector. The markets will closely track the macroeconomic data due this week both in India and globally as well as the unfolding crisis in the US banking system. The India Feb CPI at 6.44% was lower than 6.52% seen in January, but higher than consensus estimates of 6.30%-6.35%. Persistent cereal and milk inflation is a cause for concern and is likely to be on RBI's mind ahead of the next MPC meeting in April. The higher than normal temperatures and the forecast of unseasonal rains across large swathes of India are likely to impact crops which should keep food inflation higher in the coming months. The Feb WPI cooled down further to 3.85% from 4.73% in Jan and was also lower than the estimates. The markets keenly await the US Feb CPI data today.