The Indian stock market is facing heightened volatility as geopolitical tensions escalate following India's military operation against terror infrastructure in Pakistan. Dubbed 'Operation Sindoor', the Indian armed forces launched a series of strikes early on Wednesday, May 7, 2025, targeting nine sites in Pakistan and Pakistan-occupied Kashmir (PoK). This retaliatory action comes in response to a terror attack in Pahalgam, Jammu and Kashmir, where 26 Indian tourists were killed by Pakistan-backed militants on April 22.
As a result of the military action, the BSE Sensex and NSE Nifty are set to open lower. The GIFT Nifty index was down 39 points, or 0.16%, at 24,376 at 8:40 AM, signaling a gap-down opening for domestic equity benchmarks. Analysts predict that the market may experience some consolidation following the strong recovery in recent weeks, driven by cautious sentiment amid the escalating tensions.
On the technical front, the NSE Nifty is currently at 24,380, with a downside risk of 6.4%. Key support levels are set at 24,200, 24,000, and 23,700, while resistance is expected around 24,350, 24,460, and 24,589. The BSE Sensex, on the other hand, is trading at 80,641, with a downside risk of 4.3% and support levels at 79,365 and 78,070.
Market analysts are particularly focused on shares of aviation companies like IndiGo and SpiceJet, as well as defense stocks including Hindustan Aeronautics (HAL) and Bharat Electronics (BEL). These stocks are expected to be in the spotlight following the military strikes. Additionally, hotel stocks such as ITC Hotels and Indian Hotels may face increased cancellations due to the ongoing conflict.
Despite the immediate negative impact on the market, historical data suggests that the Indian stock market has generally shown resilience in the face of serious geopolitical events. For instance, the market responded positively in the aftermath of past conflicts, such as the Kargil War and the Balakot airstrike, which saw significant recoveries within a year.
Dr. Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, noted, “It’s important to recognize that the likelihood of a full-scale war remains low. As long as such escalation is avoided, India’s economic growth trajectory is unlikely to face any major setbacks.”
Moreover, foreign institutional investors (FIIs) have remained net buyers in the Indian stock market, providing support to the indices. Data shows that FPIs have been net buyers for 14 consecutive trading sessions, pumping in a cumulative ₹43,940 crore into Indian equities.
As the market reacts to these developments, the focus will also be on the quarterly earnings reports from various companies, including Godrej Consumer Products and Coal India, which are scheduled to be released today. Analysts will be watching closely to gauge how these earnings reports might influence market sentiment amid the ongoing geopolitical tensions.
In international markets, U.S. equities closed lower ahead of the Federal Reserve's policy decision, which is expected to maintain interest rates unchanged. This backdrop adds another layer of complexity to the Indian market, as investors weigh both domestic and global economic indicators.
As the day progresses, market participants will be keenly observing how the situation unfolds, particularly in terms of military responses and any potential escalations in conflict. The Indian Army has stated, “Justice is served,” following the strikes, emphasizing the precision and intent behind the operation.
In summary, the Indian stock market is navigating through turbulent waters as geopolitical tensions rise. While immediate reactions may indicate a bearish trend, historical patterns suggest that markets often recover from such events, provided that the situation remains contained. Investors are advised to focus on fundamentals and maintain a long-term perspective amidst the current volatility.
