By now readers must have heard about the sad closure of the Silicon Valley Bank in the US. Depositors rushed to pull out their money from the bank after news of its ill health hit the public. The ripples of this event have felt far and wide. The mutual funds in India have also been impacted by this event.
In today’s blog we will take a look at the story in full.
Banking mutual funds have lost up to 6% post the news of the debacle of the Silicon Valley Bank and Signature Bank. This debacle has created distrust in the minds of the investors regarding the banking sector as a whole.
The shares of the banking sector in India also dipped in the range of 3-13%. However, the good news is that the impact on the banking sector was negligible to low. This means as of now the mutual funds in India have bounced back from the impact of the Silicon Valley Bank debacle.
At present, there are only 16 schemes under the banking sector mutual funds. The short-term performance returns under this category are evident of the poor performance of this sector. Most of the banking sector mutual funds have given negative returns ranging from 8 to 10% in the short-term. However in the 9-month period these thematic funds have given good returns.
The reason for the fall in banking sector funds is volatility in the stock market both globally and nationally. Moreover, there is also the case of rising interest rates which has affected all the sectors of mutual funds.
Moreover Foreign Portfolio Investors have been selling their holdings since October 2021. They have parted their holdings in various banks and other financial institutes.
However, the collapse of the Silicon Valley Bank and Signature Bank has further caused distrust as a whole on the entire banking sector. Following the collapse of these two banks, there is also the trouble of Credit Suisse.
However, given the small reach of these banks in India, the Indian banking system is going to come out of the situation unscathed.
Indian banks in general have a healthier balance sheet and bad assets are at a decade low. So, the good news is that we’re going to tide over this season completely.
Banking mutual funds in India may bounce back given the situation. We’ll need to wait and watch for now before making any decision. So, watch this space for more information.
