Global financial markets on Friday gave a knee-jerk reaction to the 60 per cent decline in the share price of the US-based Silicon Valley Bank (SVB) and its hasty fund raising plans. The stock price fell as the bank liquidated all the portfolio securities available for sale and forecasted a sharp decline in net interest income.

Stock market investors across the globe, including India, turned risk averse after a sharp sell-off in the US markets on Thursday and on speculation that the SVB contagion could spread to other financial institutions in the US. Benchmark stock indices declined by nearly 2 percent in the US on Thursday.

BSE Sensex and NSE Nifty were trading lower by more than 1.25 percent each on Friday. On an intra-day basis, while the Sensex declined by more than 850 points, Nifty 50 was down by nearly 240 points.

As per Thursday’s data, foreign portfolio investors (FPIs) were holding net short positions in the index futures segment to the tune of over 10,000 contracts. The short positions rose by more than 13 percent from 88,000 contracts on Tuesday, indicating their bearish sentiment. The domestic institutional investors and mutual funds have been a counter to the FPI selling in India.

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India’s rupee depreciated 8 paise to 82.14 against the US dollar in early trade on Friday, mainly weighed down by foreign fund outflows and fall in equity markets. Analysts say the rupee could stabilise and recover against the US dollar on the back of news reports that eight countries have opened 50 special rupee vostro accounts for trade in rupee in 6 months.

On Friday, stocks in other Asian markets too declined as equity investors and traders awaited the closely watched February non-farm payrolls report from the US that could further determine the course of Federal Reserve bank’s rate hike ahead.

The treasury yields in the US are already trading near the high levels of 1981, indicating that the US Fed was close to its peak interest rate. Investors will be looking for commentary from the US Fed chief in the coming days since he has been maintaining his hawkish stance for more than a year now. 

US jobless claims came in higher at 2,11,000 against expected 195,000. Analysts are of the view that the market will be focusing on the US February jobs report which will be released on Friday. It assumes even more significance since Fed chief Powell, in his latest testimony at the Capitol Hill, had said that the March rate hike decision would be based on totality of data.

Crypto currency focused lender Silvergate also tumbled 21 percent as it announced plans to wind down operations and voluntarily liquidate after it was hit with losses following the collapse of crypto exchange FTX.