Indian Markets Slide Amid Rising Cross-Border Tensions; Defence Stocks Buck the Trend

By 11:45 a.m. IST, the Nifty 50 was down 0.86 per cent at 24,063, while the BSE Sensex had slipped 1.12 per cent to 79,748.

Market Update at 12:00 PM: Indian equities continued their downward trend on Friday during a session marked by high volatility, following overnight drone and ammunition strikes by Pakistani forces. These developments heightened concerns of military escalation, which markets had previously underestimated.

By 11:45 a.m. IST, the Nifty 50 was down 0.86 per cent at 24,063, while the BSE Sensex had slipped 1.12 per cent to 79,748. Losses were widespread, with 14 out of the 17 key sectoral indices in the red. Broader indices, including the more domestic-focused Small-Cap and Mid-Cap segments, dropped 0.56 per cent and 1.08 per cent, respectively.

Market fear indicators also climbed, with the India VIX often seen as a barometer of investor nervousness rising for the eighth consecutive session and reaching its highest point in more than a month.

The situation intensified after explosions were reported in Jammu late Thursday amid Pakistani drone and missile attacks on Indian military posts near Kashmir, resulting in nearly four dozen casualties over two days of clashes.

Meanwhile, the Indian rupee edged lower by 0.1 per cent, and government bond yields moved higher in early trading. Despite the sell-off, foreign investors are unlikely to exit Indian markets entirely, citing optimism around an upcoming trade deal and India’s strong economic fundamentals.

In global developments, the U.S. announced plans for multiple tariff-reduction agreements in the coming weeks, following a landmark bilateral deal with the UK.

Market Update at 10:00 AM: Benchmark indices Sensex and Nifty slipped over 0.5 per cent each in early trade on Friday. At 9:23 am, Sensex was at 79,811.57, down 523.24 points or 0.65 per cent lower. Nifty was at 24,083.95, down 189.85 points or 0.78 per cent weaker. As Operation Sindoor continues, the market to remain on edge.

Selling pressure was broad-based, with power and realty sectors leading the losses, reflecting investor caution amid geopolitical tensions and global cues. The India VIX surged by 8 per cent, signaling heightened volatility as India-Pakistan tensions escalated, prompting defensive bets.

Despite the bearish tone, defence stocks such as HAL and BEL rose by 2 per cent, supported by safe-haven interest. Tata Motors extended its rally for the third straight session, gaining 3 per cent on the back of a UK-US trade deal, providing a positive trigger for export-linked optimism.

On the corporate front, L&T shares jumped 4 per cent following strong Q4 results, prompting investor deliberation on whether to buy, hold, or book profits. Broader sentiment remained weak, as highlighted by Infosys trainee layoffs and global tax pressures on Big Tech. IPO momentum continued with Urban Company and Sedemac pushing forward, indicating selective primary market interest.

Pre-Market Update at 8:00 AM: Indian equity benchmarks Sensex and Nifty 50 are expected to start Friday’s session on a weaker note, as geopolitical tensions escalate between India and Pakistan. This comes as Asian equities show a mixed performance and Wall Street ended on a positive note following a trade agreement between the US and the UK.

On Thursday, domestic markets slipped towards the end of the trading day due to rising border tensions. Reports confirmed that India targeted Pakistani air defence systems at several locations, leading to investor caution. The Sensex declined 411.97 points (0.51 per cent) to settle at 80,334.81, while the Nifty 50 dropped 140.60 points (0.58 per cent) to close at 24,273.80.

Asian indices posted a mixed performance on Friday ahead of China’s trade data and unresolved US-China trade concerns. Japan’s Nikkei 225 rose by 1.17 per cent, Topix gained 1.06 per cent, while South Korea’s Kospi edged up 0.3 per cent. However, the Kosdaq slipped 0.59 per cent.

The Gift Nifty was trading around 23,976 about 295 points below Thursday's Nifty futures close hinting at a gap-down opening for Indian equities.

American indices gained after a limited trade deal was reached between the US and the UK. The Dow Jones advanced 254.48 points (0.62 per cent) to 41,368.45, the S&P 500 rose 32.66 points (0.58 per cent) to 5,663.94, and the Nasdaq climbed 189.98 points (1.07 per cent) to 17,928.14.

India-Pakistan border tensions intensified after Pakistani-origin drones and missiles targeted Jammu, Udhampur, and Pathankot. The Indian military confirmed it had neutralized these threats using a mix of kinetic and non-kinetic methods. Additionally, two Pakistani drones were reportedly shot down in J&K’s Naushera sector, with artillery exchanges continuing in the area.

Other Key Updates

• US-UK Trade Pact: The newly announced trade agreement retains a 10 per cent US tariff on British exports while modestly increasing agricultural trade and reducing auto duties.
• US Jobless Claims: New jobless claims fell to 228,000—lower than the 230,000 expected—indicating resilience in the labour market.
• BoE Rate Cut: The Bank of England reduced interest rates to 4.25 per cent. However, a split vote among policymakers suggests no immediate rush for more cuts.
• Gold and Crude: Spot gold edged up 0.1 per cent to USD 3,309.39/oz, while US gold futures rose 0.3 per cent. Brent crude climbed 0.17 per cent to USD 62.95 per barrel, and WTI crude followed closely at USD 60.01.
• Currency Watch: The US dollar gained across major currencies post the US-UK deal. The dollar index rose to 100.66, with the euro and pound slipping and the yen weakening to 145.92 per dollar.

On May 08, Foreign Institutional Investors (FIIs) were net buyers, purchasing Rs 2,007.96 crore worth of shares. Domestic Institutional Investors (DIIs) sold shares worth Rs 596.25 crore during the same period. 

For today, CDSL, RBL Bank and Mannapuram Finance continue to remain under the F&O ban list.

Disclaimer: The article is for informational purposes only and not investment advice.