Nifty, Sensex settle with sharp cuts as volatility spikes amid geopolitical uncertainties, weekly expiry

Broader markets and sectors like auto, FMCG, and banking led the decline.

After a range-bound session, Nifty 50 and Sensex saw deepening losses towards the closing bell on Thursday, May 8, as investors rushed to offload their equity holdings amid rising geopolitical tensions, while uncertainty spiked as a result of the weekly expiry session.

At close, the Sensex was down 411.97 points or 0.51 percent at 80,334.81, and the Nifty was down 140.60 points or 0.58 percent at 24,273.80. About 1,229 shares advanced, while 2463 shares declined, indicating that the market breadth was in favour of the bears,  and 123 shares remained unchanged.

The broader markets saw sharper cuts, with the Nifty Smallcap 100 and the Nifty Midcap 100 indices tumbling up to 1.5 percent.

On the sectoral front, the indices painted a mixed picture. Auto, FMCG, banking and pharma stocks were among the top losers, with the indices slipping nearly two percent. On the flip side, IT and media stocks managed to eke out some gains, despite a turbulent session.

The fear gauge, India VIX, that measures market volatility through options trading soared 10 percent to 21.01, as uncertainty dictated the market sentiment. Further, the weekly index expiry also led to volatility spiking.

"The Indian equity market experienced profit booking by the end of the trading day due to escalating tensions between India and Pakistan, marked by increased cross-border exchanges. The FOMC policy meeting provided little reassurance, as the Fed expressed concerns that aggressive U.S. tariffs could fuel inflation and raise unemployment," said Vinod Nair, Head of Research, Geojit Investments.

He added, "However, the global market remains stable and positive, buoyed by expectations of an imminent U.S. trade deal with the UK and preliminary indications of trade talks with China. Historically, the domestic volatility is expected to neutralize as cross border issue de-escalates."

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Further, the Indian Armed Forces this morning targeted air defence radars and systems at multiple locations inside Pakistan. One of the significant targets — an air defence system positioned in Lahore — was successfully neutralised, according to a press release by PIB.

With markets currently in a wait-and-watch mode due to rising geopolitical tensions, Jefferies analysts cautioned that a further escalation along the borders cannot be ruled out.

“Any potential escalation would be negative for tourism, high-beta stocks, and industrials in particular. However, any consequent market correction would likely be short-lived,” they said in their India strategy note, where they have reduced weightage on tourism and real estate sectors in their model portfolio.

Devarsh Vakil, Head of Prime Research, HDFC Securities said, "The 24,300 level, where substantial Put options have been written, is anticipated to be strong support. Conversely, a decisive move by the Nifty above the 24,500 resistance level could trigger sharp short covering."

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