Geopolitical tensions stemming from the ongoing India-Pakistan conflict are casting a shadow over the Indian stock market, with technical indicators suggesting continued weakness. Escalating hostilities, triggered by a deadly attack in Kashmir and subsequent retaliatory actions, have unsettled investor confidence and led to increased market volatility.
Several technical indicators point towards a bearish outlook. Nifty's recent correction was broadly anticipated. The index has formed a bearish engulfing pattern on the weekly chart, indicating potential further downside unless it reclaims the 24,500 level. Immediate support is seen at 23,800, with a further cushion at 23,500, aligning with the 200-day Exponential Moving Average (EMA). Breaching these levels could intensify bearish momentum. On the upside, a move above 24,500 for Nifty and 55,000 for Bank Nifty could stabilize the broader trend and offer a short-term relief rally.
Analysts are advising caution, recommending that traders avoid long positions unless Nifty surpasses 24,500 and Bank Nifty reclaims 55,000, and also suggesting protective puts. Short trades may be considered if Nifty breaks below 23,800, targeting 23,500 and lower, while Bank Nifty shorts may eye 52,600 if 53,500 breaks. For investors, staggered accumulation near Nifty at 23,500 and Bank Nifty at 51,800–52,600 is suggested, increasing exposure only upon clear strength above key resistance levels. Some analysts recommend relatively safer bets in quality stocks such as ICICI Bank, Kotak Bank, Home First Finance, SBI, HUL, BEL, SRF, Nykaa, Samvardhana Motherson, and Titan.
The conflict's impact extends beyond market indices. India's IT sector, a significant contributor to the national economy, faces potential disruptions. Operational challenges, including physical risks to infrastructure and reduced employee mobility, could impede business continuity. The rise of cyber warfare poses a threat to client databases, government networks, and critical infrastructure. Investor confidence could erode, leading to a slowdown in venture capital funding and foreign direct investment, particularly affecting tech startups.
Several sectors are particularly vulnerable. The aviation and tourism industries are experiencing widespread disruptions due to airspace closures and travel restrictions. Trade between India and Pakistan has come to a standstill, impacting businesses on both sides of the border. The energy sector is also exposed, with potential for price spikes due to disruptions in supply chains.
Despite the current market weakness, some experts maintain a positive long-term outlook for the Indian market. They emphasize the underlying strength of the Indian economy and its history of resilience in the face of geopolitical events. A ceasefire announcement has been viewed as a major positive development that could restore investor confidence. Historically, markets have shown a tendency to recover following such de-escalations. Sectors like defense and cybersecurity may even see increased demand.
However, the situation remains fluid, and a potential escalation could further weigh on market returns. Investors are advised to monitor developments closely and maintain well-diversified portfolios to mitigate risks.
