Sensex falls 0.51%, Nifty closes below 24,300 on risk aversion amid rising India-Pakistan tensions

The India VIX, an indicator of the market’s expectation of volatility over the near term, surged 10.21 per cent to 21.01 per cent, indicating growing investor anxiety.

Growing uncertainty

On Wednesday, the Indian armed forces launched “Operation Sindoor” to hit nine sites in Pakistan and Pakistan-occupied Kashmir, to avenge the Pahalgam terror attack. On Thursday, the Indian government said an “Air Defence system at Lahore” is “reliably learnt” to have been “neutralised” after Pakistan “attempted to engage a number of military targets in Northern and Western India”.

“There is growing uncertainty in the markets as investors are worried that the ongoing tension resulting in a major conflict between the two nuclear-powered nations going ahead could spark a major sell-off in equities, and hence profit-taking was seen in almost all the sectors barring select IT counters,” said Prashanth Tapse, senior VP (research), Mehta Equities Ltd.

Markets remained choppy on the weekly expiry day and ended with a loss of half a per cent. After a flat start, the Nifty traded sideways before a sharp sell-off in the latter half wiped out the gains from the previous session, said Ajit Mishra – SVP, research, Religare Broking Ltd.

According to Tapse, with the local currency (rupee) depreciating sharply amid the ongoing stand-off, foreign investors could flee domestic equities to park their funds in overseas safe-haven assets. The rupee depreciated 89 paise lower at close at 85.72 against the US dollar.

Most sectoral indices under selling pressure

Foreign portfolio investors (FPIs) net bought Rs 2,007.96 crore of local shares on Thursday. On the other hand, domestic institutional investors (DIIs) who purchased equities worth Rs 2,378.49 crore on Wednesday, were net sellers of Rs 596.25 crore on Thursday, according to the BSE’s provisional data.

“Ongoing uncertainty continues to make traders cautious, potentially clouding the prevailing trend amid lingering geopolitical tensions. Until the volatility, as indicated by the elevated India VIX, subsides, we recommend maintaining a hedged strategy to navigate the current environment, with focus on stock selection,” said Mishra.

Broader market indices witnessed selling pressure, with the Nifty Midcap100 falling 1.95 per cent and Nifty Smallcap100 plunging 1.43 per cent.

Barring Nifty IT and Media, all the sectoral indices ended in the red. The Nifty Realty, Metals, and Auto sectors were the major losers, bearing the brunt of the negative sentiment.

The NSE companies that declined the most included, Shriram Finance (4.48 per cent), Eternal Ltd (4.18 per cent), Mahindra & Mahindra (3.55 per cent), Adani Enterprises (3.53 per cent) and Hindalco Industries (3.19 per cent).