The Indian stock market is bracing for a potentially turbulent day as tensions between India and Pakistan escalate. GIFT Nifty futures are indicating a gap-down opening for the Indian benchmark indices.
GIFT Nifty Signals a Weak Start
The GIFT Nifty, a derivative contract linked to India's Nifty 50 index that trades on the NSE International Exchange (NSE IX) in Gandhinagar, is a key indicator of how the Indian market might open. On May 9, 2025, the GIFT Nifty was trading around the 23,974 level, a discount of nearly 298 points from the Nifty futures' previous close. This significant discount suggests a weak opening for the Indian stock market.
Geopolitical Tensions Weighing on Sentiment
The primary driver of this expected downturn is the escalating tension between India and Pakistan. Following a terror attack in Jammu & Kashmir's Pahalgam, India conducted what it called a "precise and restrained response," targeting terror camps. Reports suggest that Pakistani forces attempted to engage military sites in northern and western India using drones and missiles, but these were thwarted. These events have heightened geopolitical uncertainty, making traders cautious.
Market Analysts' Outlook
Market analysts anticipate a significant dip in the market on Friday, May 9, 2025. While they do not foresee the Sensex and Nifty 50 hitting their lower circuit filters, a substantial correction is expected. According to Ambareesh Baliga, an independent market expert, the Nifty may see a cut of over 500 points, and the Sensex could crash by 1,600 to 1,700 points if geopolitical tensions escalate further.
Shrikant Chouhan, Head of Equity Research at Kotak Securities, suggests that as long as the Sensex trades below 80,900, the weak sentiment is likely to continue, potentially retesting levels of 80,000 to 79,700. Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, noted that the underlying trend of Nifty 50 is weak with high volatility due to the rising geopolitical tensions. He added that a fall below 24,200 could open the next lower support level of 23,850.
Historical Trends and Market Resilience
Despite the immediate negative sentiment, historical data suggests that Indian markets have often shown resilience in the face of Indo-Pak tensions. Anand Rathi Research's analysis indicates that the average Sensex correction during such episodes has been around 7.5% at its lowest point, with a median of 3.5%. In many cases, declines have been short-lived, driven by sentiment rather than fundamental economic factors.
Trivesh D, COO of Tradejini, pointed out that during the Kargil War in 1999, the Sensex actually surged 37%. Similarly, after the Uri attack in 2016, the market was down only 1.76% following surgical strikes. This historical resilience suggests that any volatility may be temporary.
Global Market Reaction
Global markets, particularly in the US and Europe, have so far shown no direct impact from the ongoing India-Pakistan tensions. Major stock indices in these regions have not reacted broadly to the conflict, as their primary focus remains on other pressing global issues such as US-China trade relations, domestic economic indicators like inflation and employment, and monetary policy decisions by central banks.
Investor Strategy
Given the current uncertainty, analysts recommend a cautious approach. Ajit Mishra, SVP of Research at Religare Broking Ltd, advises maintaining a hedged strategy and focusing on stock selection until volatility subsides. Investors should focus on fundamental analysis and avoid panicking. While the immediate market reaction may be negative, India's strong economic indicators and historical market resilience suggest that any downturn may be short-lived.
