Sensex crashes nearly 900 pts, Nifty below 24,050: Escalating India-Pak tensions, other key factors behind market decline

Markets in red for second straight session as India-Pak tensions intensify; sectorally, capital goods and PSU Banks in green

Indian benchmark indices Sensex and Nifty faced their most volatile session in a month on May 9 after border tensions between India and Pakistan led to bearish investor sentiment.

At close, the Sensex was down 880.34 points or 1.10 percent at 79,454.47, and the Nifty was down 265.80 points or 1.10 percent at 24,008.00. About 1,333 shares advanced, 2,378 shares declined, and 145 shares were unchanged. Investor wealth to the tune of Rs 5 lakh crore got eroded as the India-Pakistan tensions rattled investor sentiment. 10 out of 13 sectors closed in red.

Here are the key factors behind market decline:

1) Escalating India-Pak tensions

According to reports, Pakistan launched missile attacks across multiple regions along the Indian border, including Jammu & Kashmir, Punjab, Rajasthan, and Gujarat. All missiles and drones were successfully intercepted or neutralised by the Indian Armed Forces.

Amid the attacks, several cities, including Jammu, Jalandhar, Hoshiarpur, and Jaisalme,r observed complete blackouts. Delhi has also been placed on high alert as a precautionary measure.

Enhanced security measures have been put in place at airports and some flights have been impacted due to airspace curbs, officials said on Friday.

Amid escalating tensions between India and Pakistan, the Bureau of Civil Aviation Security (BCAS) has made secondary ladder point checking compulsory for all flights, banned visitors at terminal buildings of airports and enhanced overall security.

Around 27 airports in various parts of the country are closed in the wake of Operation Sindoor, under which armed forces carried out strikes on terror targets in Pakistan and Pakistan Occupied Kashmir on Wednesday in retaliation against the Pahalgam terror attack that had killed at least 26 people last month.

"A prolonged conflict will definitely impact capital inflows and hurt the Indian economy," Vineet Arora, managing director at NAV Capital told Reuters.

"Conflict is a reminder of geopolitical risks inherent in the subcontinent and could temper market momentum in near term," he said.

2) Rising India VIX

The volatility index, often called the "fear" gauge, jumped to 21.01, its highest closing level since April 9. A rising VIX suggests increased volatility and can usually have a negative impact on the markets.

"These ups and downs will happen. The tensions are not completely out of the way," Arun Malhotra, fund manager at CapGrow Capital told Reuters.

3) Weak rupee

Indian Rupee extended its decline on Friday, a day after logging the worst session in over two years, as hostilities on the border escalated.

The domestic currency opened 12 paise lower at 85.84 after ending at 84.72 against the greenback on Thursday, according to Bloomberg data. The currency has fallen by 1.47 per cent this month, after posting two consecutive months of depreciation.

"Developments like these invariably create an environment of uncertainty which will prompt some investors to wait and see how events unfold," Peeyush Mittal, portfolio manager at Matthews Asia told Reuters.

Technical expert speak

After a negative opening, Nifty can find support at 24,000 followed by 23,800 and 23,700. On the higher side, 24,300 can be an immediate resistance, followed by 24,400 and 24,500.

The charts of Bank Nifty indicate that it may get support at 54,000 followed by 53,700 and 53,400. If the index advances further, 54,600 would be the initial key resistance, followed by 54,900 and 55,300.

The Foreign institutional investors (FIIs) continued their buying for the 16th consecutive session on May 8 as they bought equities of Rs 2,007 crore. On the other hand, Domestic institutional investors (DIIs) sold equities of Rs 596 crore on the same day.

With inputs from Reuters