From Silvergate to Credit Suisse and the impact on markets: A tick-by-tick timeline

Global markets have had a week of turmoil. At the start of the week, the turn of events were being compared to Lehman and the subsequent financial crisis of 2008.

Thankfully, it turned out to be nothing like any of those episodes. But I have to say that history was written tick-for-tick. Here's why:

The story begins last Wednesday, when Silvergate Bank announced that it is shutting down and that announcement came after the US market shut on March 8 which is last Wednesday.

The market went into a state of worry but not full blown panic.

And then, the Silicon Valley Bank failed, and went into FIDC receivership last Friday. Things started to accelerate post that.

Signature Bank went down last Sunday. These are regional banks as we have been discussing and that sent markets into panic mode.

Monday morning began in India with news that the US has stepped in to protect the depositors.

A major consequence of the crisis that emerged, coupled with the uncertainty, the prospects of the Federal Reserve hiking interest rates at its March 21-22 meeting completely vanished. From 50 basis points four days earlier, the new week began with zero rate hike expectations.

Core CPI numbers on Tuesday turned out to be stronger than expected and that led to some rate hike expectations being priced back in.

Out of nowhere, the action suddenly shifted from the US to Europe, as Credit Suisse became the epicenter of all the panic, sparking a major sell-off in European equities.

On Thursday, Credit Suisse, took $50 billion from the Swiss National Bank and the ECB later that evening hiked interest rates by 50 basis points as well. Lastly, on Friday, a US bank consortium put $30 billion in deposits into First Republic Bank.

Despite all the crisis, the S&P 500 was down just under a percent until Thursday evening when compared to closing levels of March 8. On the other hand, the Nasdaq was positive.

However, with all the distance that the Nifty 50 and its constituents have from the crisis, the index took it on the chin, declining 4.2 percent.

The Nifty 50 and Sensex are the worst-performing emerging markets in this current risk-off episode. The only Asian market which has done poorly as compared to Nifty 50 is Japan. Perhaps some of the reasons is the FII selling.

The total institutional inflow (FIIs + DIIs) into secondary markets this year stands at 7,200 crores that is paltry. Valuations have come off quite a bit, with the Nifty one-year forward PE now as of the end of Friday’s trade stands at 17.3x. The average for the last 15 yours is 17x.

But when you look at PE multiples, the discount rate matters quite a bit and that goes back to talking about interest rates.

The direction of interest rates is extremely important and that will determine what happens to interest rates and hence valuations etc. in that context, we have got the FOMC, which will be meeting next week.

All-in-all, markets are volatile, markets are jittery, and it will take some time for some normalcy to return to the street.