Stock indices in India experience partial losses, driven by escalating tensions in Kashmir and broader geopolitical worries.
Friday's Stock Market Drop in India amid Tensions and Sectoral Losses
India's main stock indexes took a dive on Friday, coincidentally capping their weekly gains, with a broad-based sectoral rout and investor apprehension escalating due to geopolitical flare-ups following a militant attack in Kashmir.
The Nifty 50 dropped 0.86% to close at 24,039.35, while the BSE Sensex slipped 0.74% to 79,212.53. Despite these setbacks, both indexes registered a modest increase of about 0.8% over the past week, with the IT index surging a notable 6.6%—its best run since June 7, 2024.
Analysts attribute the impressive IT index gains to more encouraging earnings projections for software companies and anticipation of easing trade tensions. However, they warned about a looming uncertainty associated with India's reaction to the Kashmir attack, as per VK Vijayakumar, Geojit Investments' chief investment strategist.
The day saw 12 out of 13 major sectors suffering declines. The more domestically-focused small-caps and mid-caps took a significant hit, losing approximately 2.5% each, as investors became increasingly wary following the Kashmir attacks, which killed 26 men and raised geopolitical tensions.
In contrast to domestic equities, the MSCI Asia ex-Japan index made a 0.3% gain, after U.S. President Donald Trump declared that trade talks between the world's largest economies were progressing, countering contradictory Chinese claims.
IT Stocks Shines Amidst 2025's Market Volatility
Though the resurgence of foreign investments and expectations of a bilateral trade deal between India and the U.S. present favorable winds for the market, the disquieting shadow of uncertainty over India's reaction to the terrorist attack looms large. In this turbulent climate, IT stocks continue to play a pivotal role in India's equity market.
The oil-telecom conglomerate Reliance Industries remained steady ahead of announcing its fourth-quarter earnings later in the day. Automaker Maruti Suzuki shed 1.7% following a surprise profit drop in the March quarter. Private bank Axis Bank lost 3.4%, with brokerages flagging concerns about weak loan growth. In contrast, SBI Life climbed a notable 5.4%, reporting a 10% year-on-year growth in the value of new business during the March quarter.
Enrichment Insights
- Ongoing tensions between India and China, influenced by past skirmishes in Ladakh and Arunachal Pradesh, as well as China's expanding presence in the Indian Ocean through ports like Gwadar, continue to destabilize the region.
- The violent attacks by Pakistan-backed militants in Kashmir escalate tensions between India and Pakistan while diverting focus from economic growth to security concerns.
- The Trump administration's proclamation of tariffs on Indian goods and complex trade negotiations pose challenges to India's economic wellbeing and potentially impact IT stocks through changes in trade policies.
- As a result of these geopolitical tensions, global supply chains may experience disruptions, which could affect IT companies reliant on international components or services. Furthermore, India's exchange rate could weaken, increasing costs for IT companies importing technology or components.
- Lower investor confidence, uncertain market dynamics, and supply chain disruptions fueled by global trade tensions negatively affect IT stocks and investor sentiment across various sectors.
- Amidst Friday's market drop and sight of tensions, VK Vijayakumar, Geojit Investments' chief investment strategist, highlighted a looming uncertainty associated with India's reaction to the Kashmir attack.
- Despite a broad-based sectoral rout and investor apprehension, India's main stock indexes, Nifty 50 and BSE Sensex, registered a modest increase over the past week, with the IT index surging notably.
- In this turbulent climate, IT stocks continue to play a pivotal role in India's equity market, with SBI Life reporting a 10% year-on-year growth in the value of new business during the March quarter.
- Analysts attribute the impressive IT index gains to more encouraging earnings projections for software companies and anticipation of easing trade tensions.
- Global supply chains may experience disruptions due to ongoing geopolitical tensions between India and its neighbors, which could affect IT companies reliant on international components or services.
- The disquieting shadow of uncertainty over India's reaction to the terrorist attack looms large amidst the resurgence of foreign investments and expectations of a bilateral trade deal between India and the U.S.
- Environment of lower investor confidence, uncertain market dynamics, and supply chain disruptions fuelled by global trade tensions negatively affect IT stocks and investor sentiment across various sectors.
