Impact of Operation Sindoor on Today’s Stock Market: What to Expect

Indian equity markets are bracing for a challenging day as tensions between India and Pakistan escalate. The benchmark indices, Nifty50 and BSE Sensex, are projected to open lower on Friday. Despite the ongoing geopolitical unrest, the Indian stock market has shown resilience, with both indices remaining relatively stable since the Pahalgam terror attack in April. Market experts suggest that while volatility may persist, the underlying fundamentals of the Indian economy could provide a buffer against significant downturns.

Market Reaction to Geopolitical Tensions

The Indian stock market’s response to the rising tensions with Pakistan has been notably subdued, especially in comparison to the sharp declines seen in the Pakistani stock market. Analysts attribute this resilience to India’s strong position in conventional warfare and the overall robustness of its economic fundamentals. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, emphasized that the market’s inherent strength, supported by favorable global and domestic economic conditions, is likely to mitigate severe losses. He noted that the ongoing conflict has highlighted India’s military superiority, which could deter further escalation and protect investor interests.

Despite the current market volatility, which saw a significant drop in investor wealth amounting to Rs 5 lakh crore on Thursday, experts advise against panic selling. They recommend that investors remain vigilant and stay invested, as the market is expected to stabilize once the geopolitical situation becomes clearer. The anticipation of upcoming US trade announcements also adds to the uncertainty, making it crucial for investors to monitor developments closely.

Foreign Investment Trends

Foreign portfolio investors have been actively buying into the Indian market, with net purchases amounting to Rs 2,008 crore on Thursday. This influx of foreign capital is seen as a vote of confidence in the Indian economy, despite the geopolitical tensions. In contrast, domestic institutional investors sold shares worth Rs 596 crore, indicating a cautious approach among local investors. The divergence in investment behavior highlights the differing perspectives on the market’s potential amidst ongoing uncertainties.

The resilience of the Indian market is further supported by favorable macroeconomic indicators, including high GDP growth projections and a declining interest rate environment. These factors are attracting foreign investors, who are capitalizing on the opportunities presented by the current market conditions. Analysts suggest that the continued inflow of foreign investments could provide much-needed support to the Indian rupee, which has recently experienced its most significant decline in over 30 months.

Currency Market Developments

The Indian rupee faced a substantial decline, dropping by 81 paise to close at 85.58 against the US dollar on Thursday. This decline is primarily attributed to the escalating geopolitical tensions between India and Pakistan. Anuj Choudhary, a Research Analyst at Mirae Asset Sharekhan, indicated that the rupee is likely to trade with a negative bias due to the strong dollar and ongoing geopolitical uncertainties. He cautioned that any further escalation in tensions could exert additional pressure on the rupee.

Despite the challenges, Choudhary noted that foreign institutional investor inflows might provide some support to the rupee at lower levels. Traders are advised to keep an eye on weekly unemployment claims data from the US, which could influence market sentiment. The USD-INR spot price is expected to fluctuate within the range of 85.20 to 86, reflecting the ongoing volatility in both domestic and international markets.

Global Market Influences

On the global front, US stocks showed positive movement on Thursday, buoyed by encouraging developments in US-UK trade relations. President Trump’s remarks regarding potential comprehensive discussions with China also contributed to a more optimistic outlook. Asian equities followed suit, gaining traction after the announcement of a UK trade agreement and hints at possible reductions in Chinese tariffs.

As investors await the outcome of weekend trade discussions between the United States and China, gold prices have strengthened as a safe-haven asset following a previous decline. The interplay of these global factors, combined with local market dynamics, will be crucial in shaping the trajectory of the Indian stock market in the coming days. Investors are urged to remain informed and adaptable as they navigate this complex landscape.

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