Duetsche Bank slumps on $14bn fine, European Stocks dipped

In 2008, when the Lehman Brothers was not bailed out by the U.S Government, it led to the collapse in the financial market with the squeezing of credit markets leading to a freefall in equities worldwide. The Indian market also followed its global counter parts. The equity benchmark Index Nifty dived straight from the level of 4000 to 2200 in the period of a month.A recent phenomenon occurred when the German Duetsche Bank had been fined by the U.S department of justice by 14 billion USD for market irregularities. The present market cap of the Duetsche Bank is 18 billion USD and the markets are in a doubt whether, the bank is in a condition to pay the heavy fine imposed on it.The U.S department of justice news came in on 16th September and there have been rumors that Duetsche bank might have approached the German government for bail out, however, nothing has been confirmed.Deutsche Bank has been trying to reassure the investors that it has enough funds to sustain the heavy fine for the accusation.The Bank, run by Briton John Cryan, had taken a strike on markets even before the threat earlier this month of a USD 14bn (£11 bn) demand from the US Department of Justice for mis-selling of the bonds between the period of 2005 and 2007.Yesterday the market fell by 7.5 per cent to EUR 10.55 with several senior executives sighting that the bank will not require a bail out to pay the potential fine. However, the markets are already rattled by the prospect of hard landing by the European banks after the Brexit.The shares of the Bank have more than halved during this year on the growing concerns about its financial position. They have dropped to a level not seen since the mid-1980s and are currently at a record low, according to some calculation methods.European stocks reversed course mid-morning on Tuesday as weakness in banks, led by another drop to record lows for Deutsche Bank, once again weighed on markets. The pan-European STOXX 600 Index was down by 0.5 per cent, a full percentage point lower from the day’s highs. The STOXX Europe 600 banks Index was down 1 percent, while the euro zone bank index fell 1.4 per cent.The Bank has exposure to trillions of dollars in the derivative market and any crisis of confidence can jeopardize the whole market including India as FIIs in this Country have invested billions of dollars in the Equity and Debt market. Ever since this crisis broke out, in the last five days, the Indian markets have shown major correction. Nifty share price fell from the level of 8900 to 8730, while Bank Nifty share price fell from 20,300 to 19,580, thereby, signaling some stress.Important level to watch out for German Dax is 10,258 which is the recent low of the index. As long as Dax sustains over this level, there is nothing to panic with regards to Duetsche bank.