Indian equity markets are experiencing a rollercoaster of emotions as geopolitical tensions escalate following the launch of "Operation Sindoor" by the Indian Armed Forces. This military operation, aimed at dismantling terrorist infrastructure in Pakistan and Pakistan-occupied Kashmir (PoK), was initiated in retaliation for a brutal terror attack in Pahalgam that claimed the lives of 26 individuals. As of May 7, 2025, investors are bracing for a turbulent trading environment, with benchmark indices Sensex and Nifty 50 likely to start significantly lower, reacting to the unfolding situation.
On the previous trading day, May 6, 2025, the Nifty 50 index fell by nearly 100 points, closing at 24,379.60, a decrease of 0.33%. The Sensex also dropped by 155.77 points, or 0.19%, finishing at 80,641.07. The markets were already on edge, responding to disappointing quarterly results from several companies, particularly in the PSU banking sector, which saw a collective loss of nearly ₹60,000 crore in market capitalization following Bank of Baroda’s results.
Early indicators on May 7, 2025, pointed towards a negative opening for the markets. Trends on Gift Nifty suggested a gap-down start, trading around the 24,359 level, which represents a substantial discount of approximately 72 points from the previous close. Additionally, the Indian Rupee opened weaker against the US dollar at 84.63, compared to the previous day’s close of 84.43. The India VIX, a crucial measure of market volatility, had already risen by 3.60% on May 6, indicating increased nervousness among investors.
Technical analysts had previously noted signs of caution in the market. Shrikant Chouhan, Head of Equity Research at Kotak Securities, remarked that the formation of a bearish candle on daily charts and a lower top formation on intraday charts suggested potential for further weakness. He advised that as long as the Sensex remains below the 81,000 mark, weak sentiment is likely to persist, with potential downside targets set at 80,300 and possibly 80,000.
Despite the initial negative sentiment, Indian equity markets staged a remarkable recovery on May 7, 2025, closing higher by the end of the trading session. The BSE Sensex rebounded, ending the day up 105 points, or 0.13%, at 80,746. The NSE Nifty also gained 0.14%, closing at 24,414, successfully reclaiming the key 24,400 level. This unexpected turnaround in market sentiment was attributed to easing global trade concerns, the finalization of a free trade agreement (FTA) between India and the UK, and steady foreign institutional inflows.
Sundar Kewat of Ashika Institutional Equity noted that open interest remains highest at the 24,500 and 24,400 strike prices on the call side, while 24,300 and 24,400 dominate on the put side. The Put-Call Ratio (PCR) stands at 0.98, suggesting a relatively balanced market sentiment. Key sectors like auto, real estate, and metals led the recovery, with Tata Motors emerging as the top performer on the Sensex, rallying 5.2%. Other significant gainers included Bajaj Finance, Eicher Motors, and Adani Ports.
However, not all stocks participated in the rally. Asian Paints was the worst performer, falling 4%, followed by Sun Pharma, which dropped 1.95%. Other notable laggards included ITC, Nestle India, and Reliance Industries, which slipped by 1.3%, 1.06%, and 1.01%, respectively. Broader markets also posted strong rebounds, with the Nifty Midcap 100 and Nifty Smallcap indices each gaining around 1.5%, effectively reversing sharp losses from the previous session.
Market analysts have pointed out that the resilience shown by the stock market amid ongoing geopolitical tensions is noteworthy. Prashanth Tapse, Senior VP (Research) at Mehta Equities, mentioned that despite the military actions, markets managed to shrug off uncertainty and close slightly higher. He indicated that the mood would remain cautious due to the ongoing Indo-Pak tensions, but stock-specific activity could lead to choppy sessions in the coming days.
As the market digests the implications of Operation Sindoor and navigates existing technical pressures, heightened volatility and a risk-off sentiment are likely to characterize trading sessions in the near term. Investors will closely monitor the developments in various sectors, particularly those sensitive to geopolitical instability, as they assess the broader economic implications of the military actions.
Looking ahead, while the current caution is tactical, market veterans believe that India’s markets have historically rebounded from geopolitical shocks. A strategist noted that except for the Parliament attack in 2001, all major incidents have seen markets bounce back with healthy medium- to long-term returns. The possibility of a full-scale war is viewed as low, and as long as escalation is avoided, India’s economic momentum is expected to remain intact.
In summary, the Indian stock market has shown remarkable resilience in the face of geopolitical tensions and military actions. With a mix of caution and optimism, investors are navigating through these uncertain times, keeping a close eye on both domestic and international developments that could influence market dynamics in the days to come.
