Nifty Gives Up 24,000, Sensex Falls Over 1,200 Points: Indo-Pak Tension Following Pahalgam Attacks Dragging Market Down?

Dalal Street opened on a weak note on April 25 as the escalating tensions between India and Pakistan weighed on investor sentiments. The headline index Sensex fell as much as 1,195.62 points, or 1.5 per cent, to hit the day’s low at 78,605.81. Similarly, the Nifty 50 index tumbled up to 398.85 points, or 1.64 per cent, to touch the day’s low at 23,847.85.

On April 23, a group of Islamic terrorists opened fire on tourists in Pahalgam, Kashmir, who were on vacation with their families, killing at least 26 innocent people. After the terrorist attack, India suspended the Indus Waters Treaty with Pakistan, a decades-old agreement, as part of efforts to downgrade diplomatic ties with its neighbour.

Pakistan, terming India's suspension of Indus Waters Treaty an act of "water warfare" and an illegal move, launched a series of retaliatory measures on India, including putting on hold the 1972 Simla Agreement and closing its airspace for Indian airlines.

All Major Sectors In Red, IT Bucks Trend

All the major sectoral indices traded in deep red as of noon, except the Nifty IT index. Realty, Healthcare and Pharma indices dragged the most, falling between 2.2-2.5 per cent. Metals, PSU Bank, and Consumer Durables also tumbled more than 2 per cent. Nifty Media also saw a fall of 3 per cent. Auto, Financial Services, FMCG, Private Bank, Oil & Gas slid in the range 1-2 per cent.

Broader market indices saw more intense sell-offs as Nifty Smallcap 100 and Nifty Midcap 100 fell up to 3 per cent each in early trade.

Why Is Market Down Today

India-Pakistan Tensions: Manasvi Garg, Sebi-registered investment advisor, CFA, Founder and Chief Wealth Manager, Moneyvesta, told Outlook Money: “Markets are reacting sharply to escalating tensions between India and Pakistan, following India's suspension of the Indus Waters Treaty and the downgrading of diplomatic ties after a terrorist attack in Kashmir. Pakistan has retaliated, and ceasefire violations along the Line of Control (LoC) have been reported.”

Investors are staying on the sidelines for now, waiting to see how the India-Pakistan situation unfolds.

Ajit Mishra – SVP, Research, Religare Broking, said, "This rising uncertainty has prompted investors to shift to a risk-off mode, leading to profit-booking following the recent sharp rally."

Profit-Booking: Mishra noted, "The markets appeared slightly overstretched after the vertical up move, providing traders with a reason to pare down exposure amid the prevailing uncertainty."

Over the past two weeks, the benchmark Nifty 50 saw a sharp rally, rising nearly 12 per cent in a short span of two weeks.

Caution Amid Q4 Earnings Season: As the Q4 earnings season is underway, Garg stressed that investors are cautious amid concerns over corporate performance and guidance. He also explained that smallcap and midcap indoices are falling more as several of the stocks from this space still have stretched valuations, leaving room for further correction.

Garg said, “Short-term volatility may persist. Watch for further geopolitical developments and corporate earnings results to gauge market direction.”

Mishra, too, added that, considering the current situation, it is best to stay cautious and use a hedged strategy to protect existing investments.