Markets Slip on India-Pakistan War Tensions; Nifty Ends Below 200-DMA, Mutual Fund Inflows Decline in April

The NSE reported a weak market breadth, with 1,738 stocks declining and only 1,065 advancing out of a total of 2,887 traded stocks.

Market Update at 4:15 PM: On Friday, May 9, Indian equity markets closed in the negative, halting their longest winning streak of 2025. The Nifty 50 declined by 1.10 per cent to settle at 24,008, breaking below its 200-day moving average. The Sensex also mirrored the trend, ending the session at 79,454, down by 1.10 per cent, registering losses for the second day in a row.

This week, both indices slipped by approximately 1.4 per cent, after having gained nearly 7 per cent over the last three weeks. Bank Nifty saw the steepest intraday drop in a month, ending below the 53,600 level.

Rising geopolitical risks weighed on sentiment. The Indian Army reported multiple drone and munition attacks by Pakistan’s armed forces near the western border, triggering fears of a broader conflict. This marked the third consecutive day of military escalation, driving up volatility in the markets.

India VIX surged for the eighth session in a row, reaching its highest point in over a month, signaling elevated uncertainty. 

April witnessed a dip in equity mutual fund inflows for the fourth straight month, hitting a 12-month low, as per AMFI data. Net equity inflows stood at Rs 24,269.26 crore, down 3.24 per cent from March. While concerns over possible U.S. tariffs weighed on investor mood, strong domestic growth expectations and favorable valuations helped maintain positive sentiment. April also marked the 50th consecutive month of net positive inflows.

Nifty Realty stood out as the day’s worst-performing sector, dropping 2.38 per cent and hitting a three-week low. Raymond fell over 5 per cent, becoming the biggest drag on the index.

In terms of stock-wise contribution, ICICI Bank (-87.48 points) and HDFC Bank (-45.94 points) exerted the most downward pressure on the Nifty, while Larsen & Toubro (+39.14 points) and Titan (+15.88 points) offered limited support.

Out of 17 key sector indices, 14 closed in the red. Mid-Cap and Small-Cap indices showed mild declines of 0.61 per cent and 0.01 per cent, respectively.

The NSE reported a weak market breadth, with 1,738 stocks declining and only 1,065 advancing out of a total of 2,887 traded stocks. There were 84 unchanged stocks. A total of 16 stocks hit 52-week highs, while 113 reached 52-week lows. Additionally, 28 stocks were locked in upper circuits and 110 in lower circuits.

Market Update at 12:30 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% 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.