Stock market: Sensex, Nifty post modest gains amid India-Pakistan tensions

Markets closed higher on Wednesday as India-UK trade deal and strong FPI inflows helped offset concerns from rising India-Pakistan border tensions

Domestic benchmark indices managed to post modest gains on Wednesday, despite escalating geopolitical tensions between India and Pakistan.

 

Experts said investors’ sentiment remained largely positive on account of India’s progress in trade talks with major trading partners, including a free trade agreement with the UK that was sealed on Tuesday.

 

The BSE Sensex rose 0.13 per cent, or 106 points, to end at 80,747, while the Nifty 50 index gained 34.8 points, or 0.14 per cent, to close at 24,414. The broader Nifty Midcap 100 and the Nifty Smallcap 100 indices logged strong gains of 1.6 per cent and 1.4 per cent, respectively. The India VIX, a gauge for market volatility rose just 0.34 per cent to 19.1.

 

 

The Pakistan market, on the other hand, registered a major decline. Benchmark KSE-30 Index, which fell over 6 per cent during the day, ended the session 3 per cent lower than its previous close.

 

Experts said the Indian market reaction didn’t show any signs of anxiety among investors. They said a knee-jerk market reaction wasn’t ruled out, but the market reaction shows investors are pinning hopes on swift de-escalation and no major fallout for the economy.

 

“We believe Indian assets will remain fairly contained despite an increase in geopolitical tensions with Pakistan,” wrote Johanna Chua, global head of Emerging Market Economics at Citi, in a note. 

 

Market players also drew comfort from previous instances of events with Pakistan. “Indian equity markets rebounded on all occasions and hence we believe buy-the-dip is the best strategy in the event the equity market declines,” wrote Bernstein equity strategists Venugopal Garre and Nikhil Arela in a note ahead of the market opening on Wednesday.

 

Past conflicts between the two nuclear-armed neighbours have shown that Indian equities tend to recover quickly from an initial knee-jerk reaction. For instance, in February 2019, the Nifty index rose over 1 per cent a week after India launched targeted strikes in response to a terrorist attack.

 

“The risk of a full-scale war between the two neighbours has not been envisaged in our scenarios, although the Kargil war in 1999 suggests that equity markets tend to move up sharply after a deeper cut. The other angle worth exploring is the influence of ongoing global trade changes after the Trump tariffs,” the note added.

 

Despite the terrorist attack in Pahalgam two weeks ago, foreign flows into India have remained strong.

 

During the past 14 trading sessions (beginning April 15), foreign portfolio investors (FPIs) have been consistent buyers, pumping ₹44,439 crore into domestic stocks — in their longest buying streak since June-July 2023.

 

On Wednesday, FPIs bought shares worth ₹2,586 crore, while domestic institutional investors were buyers to the tune of ₹2,378 crore.

 

FPIs have been net buyers in 15 consecutive sessions and have invested a total of ₹47,025 crore during the period. The overall market breadth was positive, with 2,206 stocks advancing and 1,683 declining on the BSE. Only three (health care, pharma and FMCG) of the 17 sectoral National Stock Exchange indices ended with losses. Meanwhile, the top major sectoral gainers were Nifty Auto and Nifty Financial services.