On May 7, 2025, Indian stock markets faced turbulence as geopolitical tensions escalated following India's military strikes on Pakistan and Pakistani Kashmir. The strikes were a direct response to a deadly attack by Islamist militants on Hindu tourists in Kashmir last month, which resulted in the tragic loss of 26 lives. This unprecedented military engagement marked the worst fighting in over two decades between the nuclear-armed neighbors, with Pakistan claiming to have shot down five Indian fighter jets during the conflict.
As the news broke, Indian shares initially dipped but later managed to pare early losses. The benchmark indices, however, still reflected a cautious investor sentiment. "I'd still be a bit cautious. The market move may not settle so soon," remarked Dharmesh Kant, head of equity research at Cholamandalam Securities. His comments underscore the uncertainty that investors are grappling with as military actions unfold.
The ongoing skirmishes led to increased volatility in the markets, particularly as both countries exchanged heavy gunfire across their de facto border in the Himalayan region of Kashmir. This situation prompted many investors to adopt short positions, anticipating a retaliatory strike from India. With the news of military action now public, many are covering those positions, leading to fluctuations in stock prices.
In addition to geopolitical concerns, the Indian stock market was influenced by domestic economic developments. On May 6, the BSE Sensex fell by 155.77 points (0.19%) to close at 80,641.07, while the Nifty dropped 81.55 points (0.33%) to settle at 24,379.60. This decline ended a two-day winning streak, primarily attributed to profit booking in key sectors such as banking and oil & gas, with notable losses recorded in State Bank of India (SBI), Axis Bank, NTPC, and Adani Ports.
Despite the tumultuous market conditions, some sectors showed resilience. The textile industry, for instance, saw a boost following the announcement of a trade deal between India and the United Kingdom, which is expected to eliminate tariffs on Indian textile exports, thereby enhancing competitiveness against major players like China and Bangladesh. Stocks in this sector rallied as investors anticipated increased demand.
Among individual stocks, Tata Motors experienced a significant upswing, with shares jumping 3.2% after shareholders approved a split of the automaker into two listed firms. This restructuring is seen as a strategic move to enhance operational efficiency and shareholder value. Similarly, Paytm shares surged 6% after the payments firm projected profitability in the upcoming quarter, signaling a potential turnaround for the company.
While the services sector in India displayed strength, with HSBC Services PMI rising to 58.7 in April, indicating robust activity and employment growth, the overall investor sentiment remained subdued due to the geopolitical tensions. The rise in Brent crude prices, which surged 2.76% to $61.85, added further pressure on inflation and oil-importing firms, complicating the economic landscape.
As the markets continue to react to the ongoing military situation, analysts predict that the geopolitical risk premium will remain elevated, keeping trading range-bound. Investors are advised to remain vigilant, as further developments could significantly impact market dynamics.
In the world of initial public offerings (IPOs), Ather Energy made its debut on the stock market on May 6, 2025, but the response was lukewarm. The company's shares opened with a modest 2% gain before slipping 8% intraday, closing at approximately ₹303, below its lower issue price of ₹304. The IPO had seen a lack of enthusiasm, with the retail portion subscribed just 1.89 times and the high-net-worth individual (HNI) segment at a mere 0.69 times, reflecting cautious investor sentiment in the current market climate.
In other notable market movements, Bank of Baroda reported a 3% increase in its consolidated net profit for the quarter ending March 2025, reaching ₹5,048 crore. The bank's board has recommended a final dividend of ₹8.35 per equity share, with a record date set for June 6, 2025. Meanwhile, CG Power and Industrial Solutions also reported a consolidated net profit of ₹274.26 crore for the same quarter, up from ₹233.81 crore in the previous year.
Additionally, several companies, including Ajay Poly Limited, Reggal Resources Limited, Laxmi India Finance Limited, and Jajoo Rashmi Refractories Limited, received final approval from the Securities and Exchange Board of India (SEBI) for their IPOs. These offerings are expected to attract investor interest, despite the current market volatility.
As the day progressed, the Indian rupee closed at 84.4325 against the U.S. dollar, down 0.2%, reflecting the pressures on the currency amid rising oil prices and geopolitical tensions. The market outlook remains uncertain, with analysts urging caution as investors navigate through these turbulent waters.
In conclusion, the Indian stock market is currently in a delicate balance, influenced by both domestic economic indicators and international geopolitical developments. Investors are advised to keep a close watch on the evolving situation, which could lead to significant shifts in market sentiment and stock performance in the days to come.
