Escalating tensions between India and Pakistan have cast a shadow over the Indian stock market, with analysts predicting a volatile trading session for the Nifty 50 and Sensex on May 9.
Market Performance and Expert Opinions
On May 8, the Sensex fell by 411.97 points (0.51%) to close at 80,334.81, while the Nifty 50 dropped 140.60 points (0.58%) to end at 24,273.80. The Nifty Bank index also slipped, declining 245.25 points (0.45%) to settle at 54,365.65. This downturn erased ₹5 lakh crore of investor wealth.
Experts attribute the market's decline to escalating border tensions following India's military actions in Pakistan and PoK, which targeted terror camps in response to the Pahalgam terror attack. Vinod Nair, Head of Research at Geojit Investments, anticipates continued market volatility and potential profit-booking due to these developments.
Rupak De, Senior Technical Analyst at LKP Securities, noted that the Nifty 50 chart displays a "Dark Cloud Cover" candlestick pattern, signaling increased fear among traders and a potentially weak near-term sentiment. He identifies immediate support for the Nifty at 23,950, with further correction possible towards 23,450 if this level is breached. Resistance is expected at 24,400 and 24,550.
Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities, pointed out the formation of a long bear candle on the Nifty 50 daily chart, suggesting a sharp market reversal on the downside. He indicated that the Nifty is positioned at the edge of a decisive downside breakout of immediate support at the 24,250 level.
Geopolitical Impact and Market Volatility
Pakistan's recent drone strikes on Jammu and Kashmir, as well as military targets in Punjab, Rajasthan, and Gujarat, have further intensified the situation. These attacks, lasting approximately 35 minutes, caused a sharp increase in India's Volatility Index (VIX), reflecting heightened investor fear.
The GIFT Nifty is trading lower, suggesting a weak start for both the Nifty and Sensex. Analysts caution of further volatility if border tensions continue to escalate.
Technical Levels and Trading Strategy
Nifty's immediate support is placed at 24,152, with a potential fall towards 24,093 or even 24,000 if this level is breached. Resistance is expected at 24,273.80, which coincides with Thursday's closing. Given the lack of directional clarity, market participants are advised to adopt level-based strategies. Shrikant Chouhan, Head-Equity Research at Kotak Securities, suggests that as long as the Sensex trades below 80,900, weakness is likely to persist, with potential retesting of 80,000-79,700 levels. A move above 80,900 could shift the sentiment, potentially leading to an upward movement towards 81,200-81,400.
Global Market Cues
Indian ADRs on U.S. exchanges have experienced significant declines, with MakeMyTrip plummeting 10%, ICICI Bank falling 4.29%, and HDFC Bank down 4.65%. Wipro, Infosys, and Dr. Reddy's have also seen losses, reflecting investor unease regarding a prolonged confrontation. Flight rerouting, airspace restrictions, and potential trade disruptions have further contributed to market concerns.
Historical Trends and Investor Strategy
Despite the current volatility, historical data suggests that the market tends to rebound after geopolitical events. Analysts recommend that investors avoid panic-driven decisions and instead focus on high-quality stocks with strong growth potential. Venugopal Garre of Bernstein noted that the risk of a full-scale war is not factored into their scenarios, and that historically, markets have rebounded after such events, making "buy-the-dip" the best strategy.
Sectoral Impact
On May 8, losses were prominent in tourism, realty, and banking stocks. Sectoral performance was predominantly negative, with realty, metals, and auto sectors facing the brunt of selling pressure.
Rupee Performance
The Indian rupee has weakened significantly, falling 89 paise against the US dollar to close at 85.71, marking its largest single-day fall since February 6, 2023.
