Stock market crash explained: Why IT, financial shares fell? All about Silicon Valley Bank crisis

India’s stock markets saw heavy selling in financial, IT and capital goods stocks making Nifty and Sensex plunge by over 1 percent. Investors lost over Rs 2.67 lakh crore in early trade on Friday. In a largely negative market, 1,966 of the 3,206 stocks traded declined.

The top losers were HDFC, IndusInd Bank, HDFC Bank, L&T, ICICI Bank, Reliance Industries, Axis Bank, Infosys, TCS, Adani Enterprises and Ultratech Cement. 

Why stock market crashed on Friday?

As per analysts, the stock plunge was triggered by weak Asian markets combined with sell-off in the US market overnight where major losses have dented benchmark indices. The reason behind the sell-off was a crash of over 60 percent in stocks of SVB Financials, also called Silicon Valley Bank. As per analysts, the SVB crisis affected market sentiment leading to hammering for banking stocks amid fears that rising interest rates may spark loan repayment defaults.

What is the SVB financial crisis?

SVB is a bank that majorly invests in tech startups. It saw its worst even single-day drop of over 60 percent. After-hour trading further led to a 20 percent plunge for SVB.

The bank is one of the important lenders for startups in early-stage businesses and has backed around half of venture-backed technology and healthcare firms in the US that were listed on stock markets last year, BBC reported.

The reason for the slump was a $1.75 billion share sale announcement by Silicon Valley Bank which was looking to shore up finances. However, it led to investors withdrawing their deposits with SVB in what was dubbed as a “brutal” and “wild” day.

SVB had decided on the share sale move after losing nearly $1.8 billion upon offloading a portfolio of assets which mainly comprised US Treasuries. However, a bigger concern for SVB now is that some startups are being advised to withdraw their money deposited with the bank.

The SVB crash triggered a drop in stock prices of banks globally including the biggest US banks like JP Morgan and Wells Fargo shedding over $50 billion in market value.

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(With inputs from PTI, IANS)