Benchmark stock indices Sensex and Nifty were relatively calm in early trade on Wednesday, following overnight strikes in Pakistan and Pakistan-occupied Kashmir (PoK) by India in retaliation to the Pahalgam terror attack. The losses were largely capped as the operation was focused, measured, and non-escalatory in nature, where no Pakistani military facilities were targeted. Besides, analysts believe the retaliation was all expected and discounted by the market participants.
This was reflected in fear gauge India VIX, which rose a mere 1.73 per cent to 19.33 level. The gauge suggests the likely market volatility over the next 30 days.
The overnight missile attack was the first such move since the 1971 war when India’s Army, Navy, and Air Force launched joint precision strikes on nine terror hubs in Pakistan and PoK, said Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd said.
“Markets now hinge on three catalysts: further military action, global tariff progress, and the US Fed’s policy decision on May 7. Nifty remains volatile with key support at 24,171,” Tapse said.
Sensex was down 30 points, or 0.04 per cent, at 80,610.93. Nifty was flat at 24,377.15. Positive developments such as India-UK trade deal, recent drop in crude oil prices and FPI buying are all positive for the domestic stock market.
“Past geopolitical shocks like the Indo-Pak conflict have shown limited downside (–5.7 pr cent average drawdown) and strong rebound potential, with 6-month forward returns of average 19 per cent,” Bajaj Broking said.
The market is unlikely to be impacted by the retaliatory strike by India since that was known and discounted by the market, said VK Vijayakumar, Chief Investment Strategist, Geojit Investment ahead of the opening bell.
“What stands out in “Operation Sindoor” from the market perspective is its focused and non-escalatory nature. We have to wait and watch how the enemy reacts to this precision strikes by India,” Vijayakumar said.
Tapse said traders should consider selling Nifty near 24,500–24,550 and Bank Nifty near 54,600–54,900.
India-UK free trade agreement
Nirmal Jain, Founder, IIFL Group said the India-UK FTA is a game-changing development. Zero-duty access for 99 per cent of India’s exports, big wins for services, 3-year social security exemption for professionals are boosts for India’s competitiveness and MSMEs. It would deepens global value chain integration, he said.
“A bold leap towards Vikshit Bharat 2047,” Jain said.
FPI buying
Vijayakumar said the main catalyst of the market resilience in India is the sustained FII buying of the last 14 trading days which has touched a cumulative figure of Rs 43,940 crores in the cash market. FIIs are focused on the global macros like weak dollar, slower growth in US and China in 2025 and India’s potential outperformance in growth. This can keep the market resilient, he said.
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