‘Operation Sindoor’ jitters fade: Nifty, Sensex rebound from opening losses

At 9.23 am, the Nifty was down by about 16 points at 24,363.50, while the Sensex fell about 58 points to 80,583.18, signaling underlying market resilience. Pre-market cues had suggested a 1% gap-down for Indian benchmark indices.

The India VIX index, also known as the fear gauge, was up 2%.

The SGX Nifty fell 1.2% early Wednesday but pared some of its losses and was down just 0.2% later as investors priced in geopolitical risks. The SGX Nifty—Nifty 50 index futures traded on the Singapore Exchange—is widely seen as an early indicator of how Indian equities might perform at the opening bell.

India launched ‘Operation Sindoor’ early Wednesday targeting Pakistani terror sites, including some linked to the attack on tourists in Kashmir’s Pahalgam area two weeks ago that killed 26 people.

Although the market is bracing for the fallout of escalating tensions between the two nuclear-armed neighbours, historical data from the past two decades indicate India’s equity markets typically rebound swiftly, often showing little lasting impact from such events in the long run.

On 26 February 2019, when the Indian Air Force struck terror camps in Balakot, the Sensex fell 239 points and the Nifty 50 shed 44 points. But the markets bounced back the very next day, with the Sensex opening 165 points higher and closing flat.

The Pulwama terror attack on 15 February 2019 that had triggered the Balakot strikes had a muted impact on the markets, with the benchmark indices edging down just 0.2% that day.

In contrast, India’s 2016 surgical strikes on Pakistani terror camps after the Uri attack had rattled investors, dragging the Sensex down by over 400 points and the Nifty 50 by 156 in a single session.

According to Kranthi Bathini, director of equity strategy at WealthMills Securities, Indian equities are likely to witness an initial knee-jerk reaction, followed by a gradual recovery.

“The key question is whether this turns into a full-fledged conflict or remains a limited defence strike,” he said, adding that a wider escalation could dent investor sentiment while a contained response may barely leave a mark on the markets.

“The geopolitical risk that was hanging over the Indian markets has crystallized today with the Indian strikes on POK and Pakistan-based terror camps,” market expert Ajay Bagga said, adding that the impact of such events on the markets tends to be sharp but short-lived. “The future impact on the market will depend on whether this strike remains contained to today or if it expands.”

India’s economic resilience

Aniruddha Sarkar, chief investment officer and portfolio manager at Quest Investment Advisors, said that despite geopolitical tensions the past two weeks following the Pahalgam terror attack, foreign inflows have continued, reflecting confidence in India’s economic resilience.

Moody’s said in a recent report titled ‘Sovereign–South Asia’ thatIndia’s economic fundamentals remained solid, underpinned by robust public investment and resilient private consumption.

“With FII (foreign institutional investors) flows continuing to be strong on the back of trade deals with the US in advanced stages and with India-UK FTA (free trade agreement) already signed, I see Indian rupee remaining strong in the near term,” said Sarkar.

“Beyond the war rhetoric, investors should stay focused on corporate earnings trajectories, which ultimately determine stock prices,” he said, adding that recent market corrections, coupled with encouraging quarterly results, presented attractive investment opportunities.

The rupee is holding steady at around 85, supported by a weakening dollar index at a three-month low. With foreign investors recently turning net buyers, Bathini of WealthMills Securities said the trajectory of the rupee would depend on how the India-Pakistan tension evolves.