The SVB Fiasco and after-effects!!

What does the SVB chaos mean for the global markets??

Although the immediate crisis from SVB has been averted, there are still many unanswered questions that could make it a long-term issue for the markets. In addition, the collapse of SVB has exposed underlying issues in the financial markets that may suggest further problems down the road.

For context, the collapse of SVB - the largest bank to fail since Lehman Brothers - occurred around the same time as the failure of Bear Stearns in 2007. Bear Stearns demonstrated significant issues in the financial markets, which were not fully addressed until the subprime crisis hit a few months later. At the time, however, Bear Stearns' acquisition by JPMorgan provided some relief to the markets.

The specifics of what led to SVB's collapse are unclear, but it is speculated that bad hedging, moral hazard, and regulatory issues played a role. Like other US banks, SVB purchased treasuries to hold in reserve for their clients' deposits, as required by regulators. When the Fed raised interest rates, the face value of the bonds fell, resulting in unrealized losses for the bank. SVB, like other banks, could keep these losses on the books as long as they did not have to use the funds. However, when a large number of depositors withdrew their money, the bank had to sell these assets and incur losses, leading to its collapse.

Although the Fed has announced a new program that gives banks unlimited credit to pay out their depositors, preventing another situation like SVB, there are still risks. Other banks have failed or are at risk of failing, and there are concerns about how depositors will get their money back from SVB. The Fed and the US Treasury have guaranteed that depositors will get their money back, but it is unclear when the money will become available. This uncertainty has led to speculation that firms may withdraw money from other banks to ensure liquidity, which could put those banks at risk.

The collapse of SVB and other banks has shifted the consensus among traders to expect a 25bps hike at the next Fed meeting. The market does not expect a 50bps hike and is pricing in rates remaining flat for the rest of the year after the March meeting. If inflation does not trend down, however, the dollar may weaken further.

What's the impact of SVB fallout on Indian Startups:

The collapse of Silicon Valley Bank (SVB) has sent shockwaves through the financial world and raised concerns about the impact on the Indian startup ecosystem. SVB was the largest bank to go under since Lehman Brothers, and its failure is expected to have far-reaching consequences.

SVB's collapse is particularly concerning for Indian startups as the bank had been a major source of funding for the sector. According to a report by YourStory Research, SVB has invested over $3 billion in Indian startups since 2005, with investments in companies like Flipkart, Ola, and Byju.

The fallout from SVB's collapse has also led to concerns about liquidity in the Indian startup ecosystem. Many startups rely on funding from foreign investors, and the loss of a major investor like SVB could make it more difficult for them to raise capital.

In addition, the collapse of SVB has highlighted broader issues in the financial markets. The banking system in the US carries about $620 billion in lost value from lower-interest treasuries, and other financial institutions are believed to be in a similar position as SVB. This could lead to a domino effect, with more banks collapsing and further impacting the global financial system.

The impact of the SVB fallout on the Indian startup ecosystem remains to be seen. However, the collapse of a major investor like SVB will have significant consequences for the sector. Startups will need to be more creative and proactive in seeking out new sources of funding, and investors will need to be more cautious and vigilant in their investment decisions.

To sum it up, The SVB fallout has sent shockwaves through the Indian startup ecosystem. With several startups relying on SVB for funding and banking services, the collapse has caused a significant disruption. However, it's not all doom and gloom. Indian startups have proved to be resilient in the face of adversity and have shown remarkable growth over the past few years. The impact of the SVB fallout may be significant in the short term, but it's not likely to derail the overall progress of the Indian startup ecosystem. As the Indian government continues to promote startup growth through initiatives like Startup India and Digital India, the country remains an attractive destination for entrepreneurs and investors alike. The future looks bright, and with the right support and infrastructure in place, the Indian startup ecosystem is poised to reach new heights.

Let's keep our fingers crossed, the trauma is gonna be over!!!