In recent times, the Indian stock market has proven to exhibit a strong level of resistance, even amidst whispers of potential conflict between India and Pakistan. However, the last couple of trading sessions in the previous week saw this robust market experience a downtrend. Following a day off on Thursday, the major index benchmarks of Dalal Street experienced a significant amount of selling pressure by Friday. The BSE Sensex faced a decline of 880 points, corresponding to 1.10%, the largest intraday drop since April 7, closing at 79,454.
On the same day, the Nifty 50 also encountered a slump of 265 points, amounting to a 1.1% downfall, culminating the week just above 24,000 at 24,008. Despite this, both indices registered a cumulative loss of over 1.30% for the week, ending their successive four-week victorious run. Revealing a steady stance, the mid-cap index did not buckle under pressure. Although the opening trading hours saw a significant slump, a quick recovery was observed in the hours that followed.
The Nifty Midcap 100 retraced a downwards move of 1,130 points, settling at just a 0.01% loss at 53,223. Similarly, its counterpart, the Nifty Smallcap 100 index, recovered from a drop of 320 points and ended the trading day with a minor decline of 0.61% at 16,085 points, managing to outperform the benchmark indices. Looking at the individual stocks, it was noticed that 39 of the Nifty 50 stocks closed the session in the red, but 11, including notable shares like Titan Company and Tata Motors from the Tata Group, contrarily ended the trading day in green amidst the weakening market conditions.
The consecutive two-day loss in the Indian stock exchange could be attributed to five major contributing factors: escalation beyond anticipated levels in the India-Pakistan conflict, an unfavourable international investment environment, an uptick in the value of the US dollar, value purchases in crude oil, and an inconclusive outcome in the trade negotiations between India and the US.
The recent intensification of the India-Pakistan feud, propagating fear of a potential military confrontation, can be traced back to India’s drone attacks in Pakistani territory. Previously, expectations from the Indian administration were more towards a retaliation matching the scale of a surgical strike. However, the situation currently seems to be stretching longer than anticipated.
The spikes in the India-Pakistan clash in 2025, underscored by occurrences such as the Pahalgam terrorist attack and India’s Operation Sindoor, have consequently introduced a new wave of instability into the Indian stock market. Despite these developments, historical records do indicate that Indian stocks, specifically the Nifty 50, have shown a commendable ability to weather earlier geopolitical storms, with corrections usually capped between 5-10% and recoveries often rapid.
Current claims of imminent breakthroughs from both the Indian and US camp in the ongoing trade negotiations lack tangible proof of a successful conclusion. This persisting uncertainty regarding tariffs is an ongoing concern. Following a slump in international crude oil prices, dropping from roughly $75 per barrel to around $60 per barrel, certain value buyers have begun to show interest in the sector. This is seen as another reason encouraging investors to liquidate their positions in the Indian equity market.
After a three-month hiatus in tariff implementation by the Trump administration, the US currency index experienced a significant downfall, reaching around the 98 mark. The greenback has witnessed a resurgence in recent times and the US dollar index has reclaimed the crucial 100 benchmark. This has been a significant factor in inducing sell-off pressure on Dalal Street.
As Asian markets exhibit a mixed bag of performance with indices like Shanghai and Heng Seng trading in red, Dalal Street investors are also preferring to liquidate their positions. The trajectory of the market in the near future will continue to be sensitive to geopolitical matters.
The bullish rally from the April lows of 21700 has witnessed loss in its momentum, with the index gravitating towards significant moving averages like the 20DEMA and the 200DSMA. However, considering the scale of geopolitical threats, the market has demonstrated resilience as the correction seems relatively contained.
The previous high mark around 23800 now stands as a crucial support zone. The breach of this level could lead to greater losses, with the next major support region estimated between 23600 and 23500, characterized by the convergence of the 50DEMA, 89DEMA, and the 38.2% Fibonacci retracement of the recent upward move.
Looking north, immediate resistance is placed between the 24250 and 24300 mark. A broad recovery may take place only when Nifty 50 successfully crosses a challenging barrier at 24600, which represents the 61.8% retracement of the decline from its highest score. Given the current state of affairs, market volatility is anticipated to remain high.
Due to escalating tensions, loud detonations were reported in Jammu and Kashmir early on Saturday, and approximately 32 airports have suspended civilian flight operations. A total blackout has been implemented in multiple regions, including Punjab’s Jalandhar and certain areas of Jammu and Kashmir, as the tussle between India and Pakistan continues to heat up.