Markets trim weekly gains on geopolitical concerns; Nifty drops nearly 1%

Benchmark indices fell on Friday, trimming their weekly gains, as escalating tensions between India and Pakistan pushed investors to book profits. The Sensex closed at 79,213, with a decline of 589, or 0.74 per cent, while the 50-share Nifty index ended at 24,039, dropping 207 points, or 0.9 per cent. Domestic indices managed to eke out 0.8 per cent gain for the week. Most global markets rose on Friday as US-China trade tensions eased.

 

Experts said concerns around the economic impact of rising geopolitical tensions between India and Pakistan has led to investors taking money off the table as markets have rebounded close to 10 per cent from this month’s lows. Tensions between India and Pakistan flared up after gunmen killed 26 civilians in Kashmir.

 

“We have rallied quite a bit of late. Even if there was no negative news flow, it was a matter of time before some correction would have happened. A 10 per cent gain was the year’s expectation, and we achieved most of it in the recent rally. This seesawing is going to continue going forward. There is limited upside and downside from these levels,” said Varun Lohchab, head of research-institutional equities of HDFC Securities.

 

“Valuations are still high, and earnings growth is not strong, and that caps the upside. However, domestic flows will be healthy, and foreign portfolio investor outflows will not be steep going forward. And earnings are not going to collapse either, which will limit a steep fall,” Lohchab added.

 

Going forward, the remainder of the quarterly results, trade tariff negotiations, and geopolitical tensions between India and Pakistan will determine the market trajectory. Foreign portfolio investors (FPIs) on Friday were net buyers of ₹2,952 crore, and domestic institutions bought shares worth ₹3,540 crore.

 

“The risk of the correction continuing in the near term is evident as investors adopt a wait-and-watch stance. However, it is a good time for persistent investors to dip into it, given the resilient nature of the Indian stock market during external and geopolitical volatility,” said Vinod Nair, head of research of Geojit Financial Services.

 

The market breadth was weak, with 689 stocks advancing and 3,285 declining. The broader Nifty Midcap 100 and Nifty Smallcap 100 fell by 2.5 per cent each. The Nifty IT index was the standout performer for the week, rising almost 7 per cent, its best weekly gain since June 7. The gains came on the back of better-than-expected earnings outlook by some top-tier companies.