Business

IIE DIGITAL DESK : May 9, 2025 — India’s stock markets opened in the red on Friday, weighed down by rising geopolitical tensions between India and Pakistan. However, despite the decline, investor sentiment on Dalal Street has remained relatively stable, with most market participants viewing the drop as a short-term reaction rather than a signal of broader economic trouble.

The benchmark indices reflected the nervousness early in the session, with the BSE Sensex slipping over 900 points before recovering slightly to close around 1.12% lower at 79,443.08. Meanwhile, the NSE Nifty 50 also lost 1.18%, ending the day at 23,983.30. Market volatility, as measured by the India VIX, jumped more than 10%, signaling increased caution among traders.

The market downturn comes in the wake of India’s recent military operation targeting terror camps in Pakistan-occupied Kashmir, followed by reports of retaliatory drone and missile activity from Pakistan. This escalation in military activity has prompted concerns about regional stability, prompting some investors to lock in profits or adopt a wait-and-watch approach.

Yet, unlike previous instances of heightened Indo-Pak tensions that triggered deeper corrections, Friday’s reaction was relatively muted. Market experts and fund managers suggested that while the conflict has led to short-term caution, most investors are not showing signs of panic or exiting the markets in large numbers.

“Geopolitical tensions naturally create knee-jerk reactions in the markets, but history tells us that such dips are often short-lived,” said Nikhil Mehta, a Mumbai-based equity strategist. “There is no broad-based panic selling, and the corrections we’re seeing are relatively measured. Investors are clearly distinguishing between temporary risk and fundamental weakness.”

Defence and energy-related stocks emerged as rare gainers during the session. Shares of Bharat Electronics Limited (BEL) rose by over 3%, while Hindustan Aeronautics Ltd (HAL) gained 2.1%, as traders speculated about increased defense expenditure in light of the ongoing military activity. Oil and gas stocks also saw modest gains due to global crude volatility.

On the other hand, banking, IT, and FMCG stocks dragged the indices down, reflecting concerns that prolonged tensions could hurt corporate sentiment and delay capex plans in sensitive sectors.

The rupee also showed signs of stress, falling to its weakest level in over two years and closing at 85.71 against the U.S. dollar. Bond yields moved higher as well, with the 10-year benchmark yield touching 7.24%, up from Thursday’s close of 7.18%, as investors sought safe-haven assets.

Despite these indicators, foreign institutional investors (FIIs) remained net buyers in the equities segment, infusing $349 million into the market on May 7. Analysts see this as a positive sign that global investors are not pulling out of India, reaffirming confidence in the country’s long-term economic trajectory.

“While markets are sensitive to headlines, they’re also resilient when it comes to India’s fundamentals,” said Priya Khanna, portfolio manager at an international investment firm. “As long as the situation doesn’t escalate into a full-scale conflict, we expect the markets to stabilize and recover.”

In terms of investor strategy, most experts are advising caution but not exit. “Don’t let fear drive your decisions,” said Arvind Joshi, a certified financial planner. “Maintain your long-term investment goals and keep an eye on the situation, but don’t react emotionally to short-term market noise.”

As the geopolitical situation continues to evolve, investors are expected to remain watchful but measured. The consensus remains that unless tensions escalate drastically, the market’s underlying strength will help weather this temporary storm.