Can Sensex, Nifty crash and hit lower circuit as India, Pak tensions rise?

Indian markets are set to witness a gap-down opening on Friday as geopolitical tensions between India and Pakistan escalated post market hours on Thursday. 

 

The developments, analysts believe, can take the markets sharply lower on Friday, but they rule out the possibility of Sensex and the Nifty 50 indices hitting their respective lower circuit filters.

 

“The markets will see a major dent on Friday though a lower circuit at this stage is ruled out. The Nifty, in my opinion, will see a cut of over 500 points, and the Sensex could crash 1,600 - 1,700 points in case the geopolitical tension escalates with Pakistan. What can save the day for the markets is a formal statement from the authorities on the ground situation about the damage, which can possibly assuage investors. The uncertainty is creating more panic in the markets,” said Ambareesh Baliga, an independent market expert. 

 

 

On the geopolitical front, Jammu saw a complete blackout on Thursday, according to reports, after two powerful explosions were heard near the airport. A PTI news report added that the security forces had detected Pakistani drones near the airport and counter-measures had been initiated. READ ABOUT IT HERE

 

Pakistan, the reports suggest, attempted to engage military sites in northern and western India — including Awantipura, Srinagar, Jammu, Amritsar, Ludhiana, and Bhuj — between May 7 and 8. The Pakistani offensive, involving drones and missiles, was thwarted.

 

The geopolitical development took Gift Nifty lower by 1.3 per cent, or nearly 300 points at 10PM IST on Thursday to 23,900 levels. 

Circuit filter levels; Source: NSE

 

"What happens from here on the geopolitical front between India and Pakistan is anybody's guess. This uncertainty will keep the markets on tenterhooks and can take the Nifty down by another 5 per cent from the current levels despite what is happening in the global markets. India, Pakistan is a localised event as far as the other global cues are concerned," said U R Bhat, co-founder & director, Alphaniti Fintech.  

For the Nifty 50 index to hit the lower circuit, it has to fall 10 per cent to 21.846.20 levels on Friday. If this becomes a reality before 1 PM, then the trading will be halted for 45 minutes. 

 

If the 10 per cent lower circuit is hit between 1 PM and 2.30 PM, the trading will then be halted for 15 mins, and if the 10 per cent circuit is hit after 2.30 PM, it will not impact trading, as per the exchange rules.

 

Key Nifty and Sensex levels to watch

 

Nifty 15 per cent lower circuit at 20632.73

 

If the Nifty hits 15 per cent lower circuit before 1 PM then the trading will be halted for 1 hour & 45 mins.

 

If 15 per cent circuit is hit between 1 PM - 2 PM, trading will be halted for 45 mins

 

If 15 per cent circuit is hit after 2 PM, trading will be suspended for the remainder of the day.

 

In case the Nifty hits the 20 per cent lower circuit (19419.04 levels) anytime during the day, trading will be suspended for the remainder of the day, stock exchange rules say. 

Nifty lower circuit levels; Source: NSE

 

    Similarly, for the Sensex, here are the key levels to track:

 

10 per cent - 72301.329

15 per cent - 68284.5885

20 per cent - 64267.848

 

"I do not think that the markets (Sensex and the Nifty 50) will hit their respective lower circuits tomorrow, but a sharp fall is expected. Among the lot, I expect the mid-and small-cap segments to be impacted the most. At an index level, both midcap and smallcap indexes can slip by around 5 per cent each, with select stocks from these segments suffering much deeper cuts of over 10 per cent," said G Chokkalingam, founder and head of research at Equinomics Research.