In a tumultuous trading session marked by escalating tensions between India and Pakistan, the Indian stock market experienced significant declines on May 9, 2025. The BSE Sensex plunged 1.7%, or 1,366 points, to close at 78,968, while the Nifty50 fell 1.39%, or 338 points, settling at 23,935. The volatility index, India VIX, surged over 10%, indicating heightened investor anxiety amid fears of a broader military conflict.
The backdrop of this market turmoil is rooted in the recent military actions undertaken by India. On May 7, the Indian armed forces initiated "Operation Sindoor," targeting nine locations in Pakistan and Pakistan-occupied Kashmir in retaliation for a terrorist attack in Pahalgam that resulted in the deaths of 26 tourists. This operation was characterized as a measured response, aimed at neutralizing terror infrastructure.
On May 8, tensions escalated further as India successfully intercepted eight missiles fired by Pakistan aimed at various military installations in Jammu and Kashmir. The Indian government reported that an air defense system in Lahore had been neutralized after Pakistan attempted to engage military targets in Northern and Western India. These developments have contributed to a fragile market sentiment, with investors rushing to book profits amid fears of potential conflict.
Market analysts noted that the atmosphere of uncertainty has led to widespread profit-taking across sectors. "There is a lot of caution in the markets as investors are worried that the ongoing tension could spark a major sell-off in equities," said Prashanth Tapse, Senior VP (Research) at Mehta Equities. This sentiment was echoed by Ajit Mishra, SVP of Research at Religare Broking Ltd, who remarked on the sharp sell-off that occurred in the latter half of the trading session.
As the market opened on May 9, the Sensex initially gapped down by as much as 1,366 points, reflecting the growing apprehension among investors. The Nifty50 opened below the 24,000 mark, further emphasizing the market's downward trajectory. By noon, the Sensex was down approximately 800 points, while the Nifty50 had dropped 246 points. The India VIX, a measure of market volatility, continued to rise, sitting above 22, indicating that investors were bracing for further fluctuations.
The rupee also faced pressure, depreciating significantly against the US dollar. On May 8, it settled at 85.58, marking its steepest single-day fall in over two and a half years. This depreciation is attributed to the risk-off sentiment prevailing in the market, as forex traders noted increased demand for the US dollar amidst geopolitical tensions.
In terms of market breadth, the sentiment was overwhelmingly negative. Out of 2,217 stocks traded on the NSE, 1,983 were declining, while only 194 advanced. Key losses were seen in frontline stocks, with HDFC Bank, Bharti Airtel, and Mahindra & Mahindra contributing significantly to the downturn. The Nifty Realty, Metals, and Auto sectors were among the hardest hit, reflecting the pervasive negative sentiment.
Despite the grim outlook, some stocks managed to gain traction. Titan Company and L&T both rose by around 4% following strong quarterly results, highlighting that positive earnings can still attract investor interest even in turbulent times.
Looking ahead, analysts suggest that until the geopolitical tensions ease, the market may continue to experience volatility. "Ongoing uncertainty continues to make traders cautious, potentially clouding the prevailing trend amid lingering geopolitical tensions," Mishra advised. He recommended that investors maintain a hedged strategy and focus on stock selection during this turbulent period.
Moreover, S&P Global Ratings has indicated that the hostilities between India and Pakistan could heighten risks to the credit metrics of both countries, potentially affecting their sovereign credit ratings. Moody's also cut India's GDP growth projections for 2025 from 6.5% to 6.3%, citing global economic uncertainties and geopolitical stresses as key factors.
As the situation develops, market participants are urged to remain vigilant. The current geopolitical landscape poses significant risks, and the market's response will largely depend on how these tensions unfold. Investors are advised to monitor developments closely and consider the potential implications for their portfolios.
In summary, the Indian stock market is navigating through a challenging phase, driven by external geopolitical factors and internal market dynamics. The recent military actions and their repercussions have created a climate of uncertainty that is likely to persist until a resolution is reached.
