Benchmark stock indices Sensex and Nifty saw deep cuts on Friday morning, as India-Pakistan tensions escalated, hurting investor sentiment. Marketmen do not rule out short-term volatility, but insisted investors should not panic, as India’s macro economy stays strong. History suggests such India-Pakistan escalations in the past ended in a couple of days, analysts said.
To be sure, Pakistan Armed Forces launched multiple attacks using drones and other munitions along India’s entire Western Border overnight. They also resorted to numerous ceasefire violations along the Line of Control in Jammu and Kashmir.
“When you are in a middle of situation like that, it really does look scary,” Arora told Business Today’s Group Editor Siddharth Zarabi in an interview.
The BSE Sensex fell 425 points, or 0.53 per cent, to 79,909.37. Nifty was trading at 24,101.70, down 172.10 points or 0.71 per cent. Arora said in the previous such India-Pak tensions, India recovered after 1-2 days, may be thinking it is as bad as it gets. As a fund manager, he believes the market would soon discount this event as well.
VK Vijayakumar, Chief Investment Strategist, Geojit Investments sees two reasons why investors should not panic. He said the conflict so far has demonstrated India’s clear superiority in conventional war fare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan.
Besides, he said the market is inherently resilient supported by global and domestic macros. “Weak dollar and potentially weakening US and Chinese economies are good for the Indian market. The domestic macros construct is further rendered stronger by the high GDP growth expected this year and the declining interest rate environment. These are the reasons why FIIs have been on a buying spree in the Indian market during the last sixteen trading sessions, he said.
Vijayakumar advised investors not to panic and exit from the market now. Remain invested, monitor the developments and wait for the dust to settle, he said.
Domestic factors are likely to have a bearing on local equities as a pick-up in war activity between India and Pakistan could unnerve investors in early trades. Profit-taking is likely to continue as investors fearing worse going ahead could trim their equity holdings despite the global mood remaining optimistic. Technically, Nifty’s biggest support could be seen only at the 23,501 mark, said Prashanth Tapse, Senior VP (Research) at Mehta Equities.
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