How did the news of sinking of America’s famous bank shook the stock market of the world?

How did the news of sinking of America’s famous bank shook the stock market of the world?

America is considered the most powerful economy in the world, but the lockout in a famous bank there has shaken many countries including India. The news of the lockout in America’s Silicon Valley Bank (SVB) has created such a stir not only in America but in the stock market around the world that on Friday it forced everyone to fall face down. This bank is not only closed, but it has also raised a big alarm of economic recession in the world.

That is because this bank had invested heavily in startup business in many countries including India. There are about 21 big startup industries in India where this bank has openly invested, but now no one knows what will happen next. By the way, the closure of this well-known bank has also reminded us of the economic recession that came 15 years ago, which had shaken the economy of many countries including America. In fact, in the year 2008, America’s famous finance company Lehman Brothers declared itself bankrupt, which was probably the first time the US stock market had suffered the blow. 

Then in the last single day of the month of September, about 1 lakh 20 thousand crore dollars were lost to the investors. To understand how serious that loss was, it is enough that then that amount was equal to the total GDP of India. During that time, in view of the rapidly growing property market in America, Lehman had acquired 5 lending companies, but due to increased interest rates, the demand for real estate in the market decreased. The result was that those who had taken loans from those companies could not repay them at all. As a result, Lehman’s shares fell by 48 percent, and after that, on September 15, 2008, Lehman pleaded to declare itself bankrupt. 

This news was no less than a historic shock for the American market. That is why the news of lockout in SVB has reminded of the bankruptcy of Lehman Brothers in 2008. That is why the markets around the world are shocked thinking whether this global recession is the beginning of? However, when this news came to the fore on Friday, till then there was not much trading time left in the Indian market. But it showed its full effect in the American markets. On Friday, the Sensex of all major US markets closed with heavy losses, which was a shocking event. Perhaps that’s why analysts are fearing that its impact might not be seen on the Indian market next week i.e. on Monday.

But the big question is that why did such a famous bank sink? According to financial experts there, Santa Clara-based SVB’s troubles began when its parent company SVB Financial Group announced the sale of shares worth about $2.25 billion from its portfolio. The company claimed that shares worth $ 2.25 billion were being sold to strengthen its financial position. Analysts say a widespread slowdown in the startup industry led to high deposit withdrawals at the bank, which led to the move.

Although after the increase in interest rates by the Fed, SVB had expressed the possibility of a big decline in interest income, but due to the increase in interest rates from the Fed, SVB Bank’s math got messed up. But the truth is that the biggest reason for the closure of SVB is that most of the investors took out their money from the bank at the same time. It is believed that the investors were afraid of the sinking of the bank, so they had sold big simultaneously.

Now a question is also that will the closure of this American bank affect the Indian startups  industry as well? Experts say that this cannot be denied because his biggest investment has been in this sector only. According to Traxon Data, which collects data on startups, SVB has invested in around 21 startups in India. However, no official information is available about the amount invested in them. But SVB’s most significant investment in India is believed to be in SaaS-unicorn iSertis.

According to the information, this startup company was successful in raising capital of about $ 150 million from this American bank in October last year. Apart from this, money has also been invested in Bluestone, Paytm, One97 Communications, Paytm Mall, Naaptol, Carwale, Shaadi, InMobi and Loyalty Rewardz. Venture capital company Essel Partners also has some tie-up with this bank. However, the SVB argued that the founders of Essel had also used the bank to fuel the rapid growth of the company. But this reality is seldom known that even if a famous bank of the world’s most powerful country has drowned, then why and for what?

Note- The views expressed above are the personal views of the author. It is not necessary that ABP News Group agrees with it. The author is solely responsible for all claims and objections related to this article.

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