Indian equity markets are poised for a turbulent opening on Wednesday, with benchmark indices Sensex and Nifty 50 likely to start significantly lower as investors react to a dramatic escalation in geopolitical tensions.
News of retaliatory precision missile strikes by the Indian Armed Forces against terrorist sites in Pakistan and Pakistan-occupied Kashmir (PoK) is set to dominate market sentiment, overshadowing mixed global cues.
The primary driver for the anticipated negative start is ‘Operation Sindoor’, launched by Indian forces early Wednesday morning.
This strong military response targeted nine specific terrorist infrastructures and was undertaken as a direct consequence of the brutal Pahalgam terror attack that claimed 26 lives.
Such a significant military action inevitably introduces a high degree of uncertainty and risk aversion into financial markets.
This development follows a period where the market was already on edge, awaiting clarity on India’s stance post the terror attack.
On Tuesday, the Nifty 50 index fell close to 100 points, closing below the 24,400 level (at 24,379.60, down 0.33%), while the Sensex dropped 155.77 points (0.19%) to end at 80,641.07.
Broader market weakness was already a concern, particularly in response to some disappointing quarterly results, with PSU Banks notably losing nearly ₹60,000 crore in market capitalization after Bank of Baroda’s results on Tuesday.
Early indicators point sharply lower
Early signals on Wednesday morning reinforced the expectation of a gap-down opening.
Trends on Gift Nifty indicated a negative start, with Gift Nifty trading around the 24,359 level – a substantial discount of nearly 72 points from Nifty futures’ previous close.
The Indian Rupee also opened weaker against the US dollar, commencing trade at 84.63 compared to Tuesday’s close of 84.43.
The India VIX, a measure of market volatility, had already risen 3.60 percent on Tuesday to settle at 19, reflecting increased nervousness.
A further spike in the VIX, particularly above the 21 mark, could signal deeper market declines.
Technical weakness amplified
According to Live Mint, technical analysts had already noted signs of caution emerging in the charts.
Shrikant Chouhan, Head Equity Research at Kotak Securities, observed that the Sensex formed a bearish candle on daily charts and a lower top formation on intraday charts on Tuesday, indicating potential for further weakness.
“We are of the view that as long as Sensex is trading below 81,000, the weak sentiment is likely to continue,” Chouhan stated. He projected potential downside towards 80,300 and possibly 80,000, advising that “levels-based trading would be the ideal strategy for day traders” given the non-directional market texture.
Sectors and stocks in focus amid turmoil
Beyond the immediate geopolitical impact, specific sectors like textiles, apparel, and alcoholic beverages were already in focus due to ongoing developments related to the UK-India Free Trade Agreement.
However, the retaliatory strikes will undoubtedly overshadow these considerations in the immediate term. Investors will be closely watching how various sectors react, particularly those sensitive to geopolitical instability.
As the market digests the implications of ‘Operation Sindoor’ and navigates existing technical pressures, heightened volatility and a risk-off sentiment are likely to characterize Wednesday’s trading session.
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