Sensex, Nifty slip 1%, extend loss to 2nd straight day as border tensions mount

The domestic equity indices have declined about 1.5 percent and the exchange rate has weakened by a similar margin.

Indian benchmark indices, Sensex and Nifty, remained under pressure for the second consecutive day on May 9, weighed down by rising tensions along the Line of Control (LoC). Even though Indian forces successfully intercepted and neutralised Pakistan’s aerial attempts targeting military installations in the northern and western parts of the country the previous day, the markets remained uneasy throughout the session. Investor sentiment was clearly impacted by growing concerns about the possible escalation of the conflict.

On May 9, the Sensex was down 880 points or 1 percent at 79,454, and the Nifty was down 265 points or 1 percent at 24,008. The market breadth was negative as around 1,285 shares advanced, 2,258 shares declined, and 133 shares unchanged.

The India VIX, which serves as the market’s fear gauge, climbed by 2.5 percent, indicating heightened caution among participants.

This caution was reflected across broader markets as well. Both midcap and smallcap indices slipped into negative territory, declining by up to 0.6 percent.

Sector-wise, the weakness was widespread. Except for the Nifty PSU Bank index—which stayed afloat thanks to Union Bank of India and Canara Bank reporting strong March quarter numbers—all other sectoral indices ended in the red. Bank Nifty and Nifty Realty were among the worst-performing sectors, falling between 1 percent and 2 percent.

In the midst of this downturn, defence and drone-related stocks stood out as clear beneficiaries. The market saw strong interest in these segments after a swarm of Pakistani drones entered Indian airspace and were taken down by Indian armed forces.

As a result, investors turned to companies in the drone and defence sector, sending shares of Ideaforge Technology, Zen Technologies, and Droneacharya Aerial Innovations up by as much as 17 percent on May 9. Big defence players like Hindustan Aeronautics, Bharat Dynamics, and Bharat Electronics also attracted steady buying interest despite the broader market weakness.

“We expect defence spending to increase this year,” said Madhavi Arora, Chief Economist at Emkay Global, in a conversation with CNBC-TV18. “While any kind of war is a concern for inflation, we expect India’s inflation to remain contained at 3.4 percent this year.”

Market experts also weighed in, saying that while geopolitical concerns are likely to have a short-term sentimental impact on the markets, steady buying from Foreign Institutional Investors (FIIs) and Domestic Institutional Investors (DIIs) could help support the indices.

In the current situation, investors are advised to cut down exposure to high-beta stocks and avoid speculative positions, said Prasanna Pathak, Managing Partner at The Wealth Company.

On the technical front, analysts at ICICI Securities noted that the Nifty has a strong support zone between 23,500 and 23,200. This range is reinforced by the 200-day exponential moving average (EMA) and also coincides with the 50 percent retracement of the recent rally that began from the April lows of 21,743.