Investors in India should not panic over the collapse of California-based Silicon Valley Bank as the financial system is fundamentally sound, believes Samir Arora, Founder and Fund Manager at Helios Capital.
With the regulator stepping in to ensure full protection of depositors, many who banked with Silicon Valley Bank heaved a sigh of relief.
SVB was deeply entrenched in the tech startup ecosystem and was the main bank for many high-flying startups; its abrupt fall marked one of the largest bank failures since the 2008 global financial crisis.
Samir Arora in an interview with CNBC-TV18 spoke about the Indian market and its reaction to the concerns surrounding the US banking industry. According to Arora, the Indian market is overreacting to the US banking concerns.
“I would think that in general the Indian market is overreacting. Broadly, I don’t think this contagion has much to do with India,” he said.
Despite the worries about the US banking system, Arora does not think that anything will be felt in the Indian financial system beyond equities.
“Indian banking system is very different. There is one bank here or there but I would not think that that beyond a point – it will matter to Indian banking sector just because if one sector does badly, somewhere there is some pressure but broadly I don’t think any of that will be felt here beyond the stock market impact for a few days,” he said.
He maintains that the banking industry in India is fundamentally sound and should not be impacted by the situation in the US.
Arora went on to explain that the Indian financial system is highly regulated and has undergone significant reforms in recent years, making it more robust and resilient.
However, Arora did express some concern that Indian banks might perform poorly in the market if there is a sell-off globally.
“In India, the held-to-maturity (HTM) is a valid concept for about two-thirds of bonds being held-to-maturity and these maturities are not 10-20 years but broadly 2-4 years. So I don’t see why it should transfer to India except in this concept that if banks are doing badly everywhere then they might do badly here in terms of stock price movement for a few days here or there,” he said.
He emphasised that it would be crucial to monitor the situation closely and take appropriate measures to mitigate any potential risks.
For more details, watch the accompanying video
(Edited by : Pradeep John)
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