CHENNAI: Investor wealth eroded by over ₹7 lakh crore over the past few sessions, as escalating geopolitical tensions between India and Pakistan triggered sharp volatility in Indian equity markets. Between May 2 and May 9, 2025, the markets witnessed heightened uncertainty, with geopolitical risks dominating investor sentiment.
Market Performance Overview:
The week began with relative stability in the markets on May 2, and it saw even a modest uptick, with the BSE Sensex rising by 0.13% to 80,746.78, and ICICI Bank's stock gaining 0.26% to close at ₹1,435.35.
However, the situation deteriorated sharply the next day. On May 8, India launched "Operation Sindoor," targeting terrorist infrastructure in Pakistan-administered Kashmir. In retaliation, Pakistan launched drone and missile strikes across several Indian cities, including Amritsar. The Indian military successfully intercepted these attacks using the S-400 missile system.
As the situation turned worse, the markets reacted negatively to the heightened tensions on May 9. The Nifty 50 index fell by 1.18% to 23,983.3, and the BSE Sensex dropped 1.12% to 79,443.08. Small- and mid-cap indices declined by 1.8% and 1.2%, respectively. Volatility surged, with the VIX reaching its highest level in over a month, indicating increased investor fear.
Sectoral Impact:
Defence Stocks: Companies like Bharat Electronics and Hindustan Aeronautics saw gains of 3.4% and 2.1%, respectively, due to increased defense spending and demand.
Banking Sector: ICICI Bank's stock edged up by 0.26% on May 7, outperforming some competitors.
Electric Vehicle Sector: Ather Energy's IPO debuted weakly, with shares falling over 4%, reflecting investor skepticism toward the unprofitable e-scooter sector.
Currency and Bond Market:
Rupee: The Indian rupee weakened, prompting the Reserve Bank of India to likely intervene by selling U.S. dollars through state-run banks to stabilize the currency. The rupee dipped to a session low of 85.8425 before rebounding to 85.50 .
Bond Yields: The 10-year government bond yield increased by 3 basis points to 6.42%, indicating broader market concerns linked to regional instability .