How India's Military Strikes Impacted Stock Market Volatility

Market Reactions to Military Actions

Mumbai: The equity markets, represented by the Sensex and Nifty, experienced significant fluctuations during Wednesday morning trading following India's missile strikes targeting terrorist locations in Pakistan and Pakistan-Occupied Kashmir.

The Sensex recorded a peak of 80,844.63 and a low of 79,937.48, while the Nifty reached a high of 24,449.60 and a low of 24,220.

Throughout the morning session, both indices exhibited range-bound trading. The BSE benchmark index fell by 87.81 points to settle at 80,553.26, and the Nifty decreased by 16.55 points to 24,365.05.

In response to the Pahalgam terror incident, Indian forces executed missile strikes on nine terrorist targets, including significant bases of Jaish-e-Mohammad in Bahawalpur and Lashkar-e-Taiba in Muridke, under the operation named 'Operation Sindoor'. This operation was initiated two weeks after the attack that resulted in the deaths of 26 civilians.

"The noteworthy aspect of 'Operation Sindoor' from a market perspective is its precise and non-escalatory approach. We will need to observe how the adversary reacts to these targeted strikes. The market is not expected to be adversely affected by India's retaliatory actions, as this was anticipated and factored in by investors," stated VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.

He further noted that the primary driver of market stability in India has been the consistent foreign institutional investor (FII) buying over the past 14 trading days, amounting to a total of Rs 43,940 crore in the cash market.

"FIIs are concentrating on global macroeconomic factors such as a weakening dollar, slower growth projections in the US and China for 2025, and India's potential for superior growth. This could help maintain market resilience, but investors should remain vigilant regarding border developments," Vijayakumar added.

Among the Sensex constituents, companies like Asian Paints, IndusInd Bank, Sun Pharma, Nestle, Tata Consultancy Services, and ITC faced declines.

Conversely, Tata Motors, Power Grid, Titan, Bajaj Finance, Kotak Mahindra Bank, and State Bank of India saw gains.

According to exchange data, foreign institutional investors purchased equities worth Rs 3,794.52 crore on Tuesday.

"Geopolitical tensions, such as the ongoing situation between India and Pakistan under 'Operation Sindoor', typically induce immediate market volatility. While a cautious approach is advisable in the short term, historical trends indicate that Indian markets tend to recover strongly once clarity is restored. Unless there are broader economic or global shocks, Indo-Pak tensions have not resulted in lasting negative effects. Investors should prioritize fundamentals over fear," remarked Pankaj Singh, small case manager and Founder and Principal Researcher at SmartWealth.ai.

In the Asian markets, indices such as South Korea's Kospi, Japan's Nikkei 225, Shanghai's SSE Composite, and Hong Kong's Hang Seng were performing positively.

Meanwhile, US markets closed lower on Tuesday.

"The markets are currently influenced by three main factors: potential further military actions, progress on global tariffs, and the US Federal Reserve's policy decision scheduled for May 7," noted Prashanth Tapse, Senior VP of Research at Mehta Equities Ltd.

On Tuesday, India and the UK finalized a significant free trade agreement aimed at reducing tariffs on 99% of Indian exports, facilitating easier access for British companies to export whisky, cars, and other goods to India, thereby enhancing the overall trade relationship.

Global oil prices saw an increase, with Brent crude rising by 0.97% to USD 62.75 per barrel.

After two consecutive days of gains, the BSE benchmark fell by 155.77 points or 0.19% to close at 80,641.07 on Tuesday, while the Nifty dropped by 81.55 points or 0.33% to 24,379.60.