How stock markets have been affected by rising India-Pakistan tensions
Indian stock markets fell sharply on Friday as tensions with Pakistan intensified following Operation Sindoor, shaking investor sentiment. The Sensex dropped 880 points to 79,454, while the Nifty held just above 24,000. Broader indices also declined, and volatility surged amid escalating geopolitical uncertainty.
Indian stocks opened lower on Friday morning following reports of overnight drone and munition attacks by Pakistani forces along the western border.
While headline indices on Dalal Street (where the Bombay Stock Exchange is located) logged steep losses, the broader market took a heavier hit – small- and mid-cap stocks tumbled as much as two per cent. Market volatility spiked further, with the India Volatility Index (VIX) spiking over six per cent to 22.27, signalling rising investor nervousness.
Traders said markets had not fully priced in the scale of the latest escalation. 'We're unwinding all risk positions,' one trader told Reuters, warning that any flare-up over the weekend could trigger more selling next week.
Veteran investor Ambareesh Baliga said earlier sentiment had underestimated the threat of a wider conflict, amplifying Friday's downturn, according to India Today.
Amid the broader selloff, defence stocks stood out as rare gainers. Shares of Bharat Electronics and Hindustan Aeronautics climbed between two to three per cent, as investors anticipated a boost in defence spending and policy support for domestic manufacturers.
The Nifty Defence index was the only sector to rise, while all 13 other sectors ended the day with losses.
Dr VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said investors should not panic or sell in a hurry. He was quoted as saying by The Times of India: 'Under normal circumstances, on a day like this, the market would have suffered deep cuts. But this is unlikely due to two reasons. One, the conflict, so far, has demonstrated India's clear superiority in conventional warfare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, the market is inherently resilient, supported by global and domestic macros. Weak dollar and potentially weakening US and Chinese economies are good for the Indian market.'
He added: 'The domestic macros construct is further rendered stronger by the high GDP growth expected this year and the declining interest rate environment. These are the reasons why (Foreign Institutional Investors) FIIs have been on a buying spree in the Indian market during the last sixteen trading sessions. Investors should not panic and exit from the market now. Remain invested, monitor the developments and wait for the dust to settle.'
Earlier, Prashanth Tapse, senior VP (research), Mehta Equities Ltd told The Indian Express: 'There is growing uncertainty in the markets as investors are worried that the ongoing tension resulting in a major conflict between the two nuclear-powered nations going ahead could spark a major sell-off in equities, and hence profit-taking was seen in almost all the sectors barring select IT counters.'
Meanwhile, in global markets, Japan's Nikkei and Topix rose 1.2 per cent after a US-UK trade deal lifted investor hopes for broader negotiations. Other Asian markets showed mixed results: Hong Kong's Hang Seng gained 0.2 per cent, Taiwan's stock index rose 1 per cent, and Australia's ASX climbed 0.4 per cent.
The Indian rupee weakened by 30 paise, trading at 85.88 against the US dollar, while the dollar index dipped slightly to 100.6.
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