Indian benchmark stock indices closed lower Tuesday as investors reacted to increased geopolitical tensions between India and Pakistan. The decline marked a pause in a recent market rally.
The BSE Sensex fell 155.7 points, or 0.2%, to end at 80,641. The NSE Nifty-50 slipped 81.55 points, or 0.3%, closing at 24,379.
The market reaction followed India's announcement early Wednesday that it had conducted "Operation Sindoor," targeting terrorist infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir. The Indian Army stated the operation aimed at facilities used for planning and directing attacks against India.
Broader market indices saw sharper drops. The Nifty Midcap 150 index dropped 2%, while the Nifty Smallcap 250 index declined 2.2%. Out of 4,072 shares traded on BSE, 3,209 shares declined while 742 advanced.
Analysts pointed to the geopolitical tensions as the main factor halting the strong market advance observed over the previous two weeks.
Shrikant Chouhan, Head - Equity Research at Kotak Securities, indicated the uncertainty could lead to the Nifty 50 falling further by 200-400 points. He added a significantly sharper decline is improbable unless conditions worsen considerably, such as a full-scale conflict.
Investors are also monitoring international events, including the outcome of the US Federal Reserve's rate-setting meeting scheduled for May 7. While interest rates are expected to remain unchanged, commentary from Fed leadership on inflation and growth could influence near-term market direction.
Shares of state-run banks were among the biggest decliners Tuesday. The Nifty PSU Bank index plunged 4.8%. Bank of Baroda fell 10.9% after reporting fourth quarter results below market expectations. Other state-owned lenders including Bank of India, Union Bank, Indian Overseas Bank, and Canara Bank saw declines ranging from 5% to 7%.
Foreign portfolio investors were net buyers worth ₹3,795 crore on Tuesday. Domestic institutional investors were net sellers, offloading equities worth ₹1,398 crore.
"The geopolitical tensions between India and Pakistan have put a halt to the strong market rally seen in the past 15-16 days," Shrikant Chouhan said.
