The recent escalation in India-Pakistan tensions, particularly following India’s Operation Sindoor, has led to significant turmoil in the Indian financial markets. Over the past two trading sessions, investor wealth has plummeted by approximately ₹7 lakh crore, reflecting heightened geopolitical concerns and market volatility.
Market Turmoil Amid Escalating Tensions
The Indian stock markets have witnessed substantial declines:
- BSE Sensex: Dropped by 880.34 points (1.10%) to close at 79,454.47. Over two sessions, it has lost 1,292.31 points (1.60%).
- NSE Nifty: Fell by 265.80 points (1.10%) to settle at 24,008.
This downturn is attributed to investor anxiety over the intensifying conflict, prompting a sell-off in equities.
Sectoral Impact and Stock Performance
The market decline has been uneven across sectors:
- Worst-Hit Sectors: Realty index fell by 2.08%, followed by utilities, financial services, power, bankex, FMCG, and services.
- Gaining Sectors: Capital goods, industrials, consumer durables, and metals posted gains.
Among individual stocks, ICICI Bank, Power Grid, UltraTech Cement, Bajaj Finance, HDFC Bank, Reliance Industries, Bajaj Finserv, and Adani Ports were major laggards. Conversely, Titan Company, Tata Motors, Larsen & Toubro, and State Bank of India saw gains.
Currency and Bond Market Reactions
The Indian rupee experienced its worst single-day decline in over two years, closing 1% lower at 85.71 per dollar. This drop was exacerbated by Pakistan’s retaliatory actions, leading to concerns of a broader conflict and reduced liquidity.
Indian bonds also faced pressure, with the benchmark 10-year bond yield rising over 7 basis points to 6.3807%.
Foreign Investor Activity
Despite the volatility, foreign institutional investors (FIIs) remained net buyers in Indian equities, investing $349.1 million on May 7. However, they sold $115.7 million in Indian bonds, indicating a cautious approach amid the escalating tensions.
Outlook and Expert Opinions
Market experts suggest that while the current downturn is significant, the impact may be short-lived, assuming the conflict does not escalate further. Historically, similar geopolitical tensions have led to temporary market corrections, with recovery following de-escalation.
