India-Pak conflict weighs on investor sentiment; Sensex, Nifty shed over 1%

Indian markets dropped over 1 per cent on Friday, as rising hostilities between India and Pakistan continued for a third day. After a largely muted reaction during the previous two trading sessions, BSE benchmark Sensex shed 1.1 per cent, or 880 points, to end at 79,454, while the National Stock Exchange (NSE) Nifty 50 fell 1.1 per cent, or 266 points, to 24,008. The Sensex and Nifty fell to lows of 78,968 and 23,936, respectively, during intraday trade.

 

On Friday, foreign portfolio investors (FPIs) sold shares worth almost ₹3,800 crore, snapping their buying streak after 15 sessions. During this time, starting April 15, FPIs had pumped in nearly ₹50,000 crore into Indian equities. This was also the longest investment streak for FPIs since June-July 2023.

 

 

Analysts said that investors were growing increasingly concerned about the potential economic impact of the ongoing border conflict between India and Pakistan following a deadly attack in Jammu & Kashmir’s Pahalgam last month. India on May 7 targeted terrorist infrastructure in Pakistan.

 

“The states of Gujarat, Rajasthan, Punjab and J&K, which border Pakistan, house large strategically important economic assets across sectors. Companies with a large exposure to the border states include Adani Ports, power & new energy sites, Reliance Industries’ refinery & new energy complex, Power Grid’s large sub-stations, NHPC’s hydro projects and industrial facilities for Shree Cement, Tata Chemicals and Vedanta. If the situation lasts longer, capex in the border areas like Power Grid’s $3 billion HVDC (High-Voltage Direct Current) line from J&K could be delayed,” said CLSA in a note.

 

Shares of Power Grid fell 2.7 per cent on Friday, becoming the second-worst performer on the Nifty — next only to ICICI Bank, which fell 3.2 per cent. Ultratech Cement and Grasim also dropped over 2 per cent each.

 

The market value of all BSE-listed firms fell to ₹416.4 trillion, with ₹7.7 trillion shaved off in two sessions. The benchmark indices also snapped their three-week gaining streak — their longest winning run this year. 

 

India Vix, a measure of market volatility, rose 3 per cent to 21.63 after a 10 per cent spike on Thursday. According to Bajaj Broking, this increase reflects growing investor anxiety. With the index above 20, market participants expect stock prices to remain volatile in the near term.

 

Only four of the 17 sectoral indices compiled by the NSE ended with gains. The major losers were Nifty Financials, Nifty FMCG, and Nifty IT.

 

Meanwhile, global markets rose on Friday, buoyed by news of a confirmed UK-US trade agreement and upcoming US-China trade talks. The Indian markets underperformed most global peers amid border tensions.

 

The market fall was contained by liquidity support from domestic institutional investors (DIIs), mainly mutual funds. According to exchange data, DIIs were net buyers to the tune of ₹7,300 crore on Friday.

 

Chokkalingam G, founder of Equinomics Research, noted that while DII flows were holding steady, retail investors were showing concern, with reduced buying activity reflected in the underperformance of small and midcap stocks.