Markets React to Indo-Pak Conflict: Here’s Why Investors Are Not Worried

Mumbai: Domestic stock markets began the trading day on a subdued note on Friday, pressured by rising geopolitical tensions between India and Pakistan. Despite the heightened border situation, market analysts noted that the impact on stock prices remained relatively contained, with India maintaining a strong position in the ongoing conflict.

By 9:40 AM IST, the benchmark Sensex had slipped by 0.68%, or 547 points, settling at 79,787.78, while the NSE Nifty Index dropped 0.79%, or 192 points, to 24,081.50. However, the overall market sentiment was bolstered by positive global signals, robust performance in Asian markets, and continued foreign investor inflows.

Analysts pointed out that under typical circumstances, markets could have faced more significant losses. Yet, this was not the case for two main reasons. Firstly, the ongoing conflict has so far highlighted India’s clear dominance in conventional warfare, suggesting that any further escalation would likely hurt Pakistan more. Secondly, the market’s resilience is underpinned by favorable global and domestic economic factors, such as a weak dollar and the potential weakening of the US and Chinese economies, which are seen as positive for India’s market outlook.

Domestic economic fundamentals also remain strong, with high GDP growth projections for the year and a favorable interest rate environment. These factors have contributed to consistent foreign portfolio investor (FPI) interest in Indian stocks, with FPIs buying over Rs 2,007 crore worth of shares on Thursday alone and over Rs 11,500 crore in the five sessions so far this month.