Domestic stock markets opened on a weak note on Friday, weighed down by escalating geopolitical tensions between India and Pakistan. However, the intense border situation failed to impact the markets in a significant way as India managed to remain superior in the conflict, analysts said.
The benchmark Sensex was trading 0.68 per cent, or 547 points, down at 79,787.78 and the NSE Nifty Index by 0.79 per cent, or 192 points, at 24,081.50 as of 9.40 am IST amid positive global cues, firm Asian markets and inflows by foreign investors.
Why is the market not crashing?
In normal circumstances, on a day like this, the market would have suffered deep cuts. But this did not happen due to two reasons. One, the conflict, so far, has demonstrated India’s clear superiority in conventional war fare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, the market is inherently resilient supported by global and domestic macros. Weak dollar and potentially weakening US and Chinese economies are good for the Indian market, analysts said.
The domestic macros construct is further rendered stronger by the high GDP growth expected this year and the declining interest rate environment. These are the reasons why foreign portfolio investors (FPIs) have been on a buying spree in the Indian market during the last sixteen trading sessions. FPIs were net buyers to the tune of over Rs 2,007 crore on Thursday and bought over Rs 11,500 crore in the five trading sessions so far this month.
Investors should not panic, stay invested
Investors should not panic and exit from the market now if the conflict escalates or it continues for more days, experts said. “Remain invested, monitor the developments and wait for the dust to settle,” said a veteran market analyst.
“As we have been alerting our readers, it is prudent to prepare rather than panic. We advise traders to keep leveraged and speculative positions light and use derivatives to hedge short-term exposures,” said Devarsh Vakil, Head of Prime Research, HDFC Securities.
On Thursday evening, India’s air defence systems intercepted more than 50 missiles fired by Pakistan toward key border regions and also shot down four Pakistani aircraft. This escalation has raised investor concerns and is likely to lead to heightened intraday volatility.
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Traders are advised to stay cautious and refrain from bargain hunting until the market provides a clearer direction and there’s more clarity on the duration of the conflict. Despite the short-term uncertainty, long-term sentiment remains optimistic, backed by strong Q4 earnings, the recently finalized UK-India Free Trade Agreement, consistent foreign institutional investor inflows, and a positive global market trend.
