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Sensex, Nifty fall on worsening India-Pakistan conflict; volatility index breaches 21

Markets closed sharply lower on Thursday as heightened geopolitical tensions between India and Pakistan triggered widespread selling pressure, especially in the mid-cap and small-cap space. The India VIX, the country’s volatility index, jumped 10.21 per cent to 21.01, reflecting growing investor anxiety amid the escalating cross-border conflict.

The Indian rupee weakened significantly, falling 89 paise against the US dollar to close at 85.71, marking its largest single-day fall since February 6, 2023

The stock market was in positive zone till afternoon, bur reports of the Defence Minister, Rajnath Singh, told in an all-party meeting that the “Operation Sindoor is an ongoing operation”, changed market sentiment negative.

The benchmark Sensex fell 411.97 points or 0.51 per cent to close at 80,334.81, while the Nifty declined 140.60 points or 0.58 per cent to end at 24,273.80. Market breadth was decisively negative with 2,548 stocks declining against 1,349 advances on the BSE. Till mid-noon, the breadth was positive.

The broader indices suffered steeper losses, with the Nifty Midcap 100 falling 1.95 per cent to 53,229.30 and the Nifty Next 50 dropping 2.14 per cent to 62,760.25. Sectoral performance was predominantly negative, with realty, metals, and auto sectors facing the brunt of the selling pressure.

“Markets fell on escalating tensions between India and Pakistan. Indian equity markets closed sharply lower on Thursday following a volatile session,” said Devarsh Vakil, Head of Prime Research, HDFC Securities.

After opening with modest gains, indices traded in a narrow range during the morning session before plunging in the afternoon as news of heightened tensions emerged. The market’s weakness was further compounded by weekly derivatives expiry.

Among individual stocks, Shriram Finance was the top loser on the Nifty, dropping 4.48 per cent to ₹608.10, followed by Eternal (-4.18 per cent to ₹227.00), Mahindra & Mahindra (-3.55 per cent to ₹3,009.00), Adani Enterprises (-3.53 per cent to ₹2,270.00), and Hindalco (-3.19 per cent to ₹616.00).

On the positive side, Axis Bank led the gainers, rising 0.75 per cent to ₹1,170.00, followed by HCL Tech (+0.56 per cent to ₹1,572.10), Kotak Mahindra Bank (+0.54 per cent to ₹2,106.20), Titan (+0.18 per cent to ₹3,345.00), and Tata Motors (+0.01 per cent to ₹680.40).

“The sharp rise in the so-called ‘fear gauge’ was driven by escalating market uncertainty, compounded by volatility typically associated with the weekly index expiry,” Vakil noted.

Technical analysts pointed to concerning chart patterns emerging from Thursday’s session. “A long bear candle was formed on the daily chart beside the long bull candle of Wednesday. This market action signals sharp reversal in the market on the downside,” said Nagaraj Shetti, Senior Technical Research Analyst at HDFC Securities.

The market has been consolidating for the past ten sessions, according to Bajaj Broking Research, which noted: “Nifty is expected to continue its consolidation within the 24,000–24,600 zone — a range it has held over the past eight sessions. Strong support lies between 24,000 and 23,800.”

Shrikant Chouhan, Head of Equity Research at Kotak Securities, identified key levels to watch: “As long as the market is trading below 24,450/80900, the weak sentiment is likely to continue. On the downside, it could retest the levels of 24,150-24,100/80000-79700.”

Looking ahead, volatility is expected to remain elevated as investors closely monitor the geopolitical situation. “The rising geo-political tension is weighing high on the market and leading to nervousness. Further fall below 24,200 could open the next lower support of 23,850 levels,” warned Shetti.

Market experts suggest that only a sustained close above the resistance zone of 24,550–24,600 could pave the way for an upward move towards December 2024’s high of 24,850 in the near term. However, the immediate focus remains on the unfolding geopolitical developments that could dictate market direction in the coming sessions.

“The Nifty’s short-term trend turned weak as it closed below its 5-day EMA, which was placed at 24,340 levels. On the higher side, the 24,340-24,500 band is likely to act as immediate resistance, while the 24,000-24,100 band could provide immediate support on the downside as markets digest the unfolding geopolitical situation,” concluded Vakil.