Indian equity markets opened sharply lower on Friday, weighed down by investor concerns following a series of drone and missile attacks launched by Pakistan on the evening of May 8.
The benchmark BSE Sensex fell 765.80 points or 0.95% to 79,569.01, while the NSE Nifty50 Index dropped 245.20 points or 1.01% to 24,028.60 by 10:45 AM.
The sell-off came despite a continued flow of foreign institutional investments into the Indian equity market.
Analysts noted that the sudden rise in geopolitical tensions had injected short-term uncertainty into otherwise strong domestic and global fundamentals.
Defence ministry confirms drone, missile strikes along western border
According to the Ministry of Defence, Pakistan Armed Forces targeted military installations using drones and other munitions along the Western border and carried out multiple ceasefire violations (CFVs) along the Line of Control in Jammu and Kashmir.
Key military stations including Jammu, Pathankot, and Udhampur came under attack from Pakistani-origin drones and missiles.
However, all threats were neutralised without any casualties or material loss, with the Indian response deploying both kinetic and non-kinetic countermeasures in line with standard operating procedures.
However, it has marked a significant escalation in tensions between the two nations.
Broader markets reel, but defence stocks gain ground
Across the board, sectoral indices were under pressure.
Nifty Bank, FMCG, Media, Metal, and Realty indices declined by 1–2%.
Mid and small-cap indices were not spared either, with the Nifty Midcap100 falling 1% and the Smallcap100 shedding 2%.
However, defence-related stocks saw sharp gains, driven by expectations of increased defence spending and faster order execution.
Shares of Bharat Electronics surged 3.41%, Bharat Dynamics gained 3.31%, and Astra Microwave climbed 3.21%.
Other gainers included Hindustan Aeronautics (2.34%), Paras Defence (2.08%), and Mazagon Dock Shipbuilders (1.56%).
“The attack has drawn attention to the defence sector’s strategic importance. With large order books already in place, these companies could benefit from accelerated execution timelines,” said Dr. Vikas Gupta, CEO of OmniScience Capital.
“That said, investors should remain cautious and invest based on valuation and scientific frameworks.”
Why market reaction is still subdued?
Despite the short-term decline, analysts remain optimistic about the broader outlook for Indian markets.
They pointed out that foreign institutional investors (FIIs) are continuing to invest in Indian equities, reflecting their sustained confidence in the country’s long-term economic growth prospects, even amid rising geopolitical tensions.
FIIs have poured in over Rs 47,000 crore ($5.5 billion) into Indian equities over the past 16 sessions.
This marks one of the longest buying streaks since December 2020 and underscores investor confidence in India’s long-term growth trajectory.
“Under normal circumstances, on a day like this, the market would have suffered deep cuts. But this is unlikely due to two reasons. One, the conflict, so far, has demonstrated India’s clear superiority in conventional warfare, and therefore, further escalation of the conflict will inflict huge damage to Pakistan. Two, 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,” said Dr VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited.
Vijayakumar added that the domestic macros are further bolstered by high GDP growth expected this year, and the declining interest rate environment which is why FIIs are on a buying spree.
“Investors should not panic and exit from the market now. Remain invested, monitor the developments and wait for the dust to settle,” Vijayakumar added.
Technical outlook by analysts
On the technical front, analysts flagged a shift in short-term trend after the Nifty closed below its 5-day exponential moving average (EMA) placed at 24,340.
“Immediate resistance is seen between 24,340–24,500, while support lies in the 23,978–23,800 band,” said Devarsh Vakil, Head of Prime Research at HDFC Securities.
Rajesh Palviya, SVP – Technical and Derivatives Research, Axis Securities, said over the past three weeks, the Nifty 50 has been consolidating within the 24,000 to 24,600 range, suggesting a short-term sideways trend.
However, the index remains well above its 20-, 50-, 100-, and 200-day simple moving averages, which points to sustained bullish sentiment over the longer term.
“On the upside, the Nifty is likely to build on this strength and may advance toward the 24,800 to 25,000 levels. The key support area lies between 24,000 and 23,800, making any dip toward this zone a potential buying opportunity for traders. The weekly Relative Strength Index (RSI) remains in positive territory, indicating continued upward momentum.”
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