Nifty, Sensex Fall Over 1% As India-Pakistan Cross-Border Tension Spooks Dalal Street

The Indian stock markets gave up initial gains on Friday as cross-border tensions between India and Pakistan escalated after the Pahalgam attacks in Kashmir in which terrorists gunned down 26 people.

The Nifty 50 fell 1.52% to hit 23,879.20, while the Sensex was down 1.35% to 78,726.39. The market volatility gauge, VIX, rose nearly 6% in the early hours of trade.

The Indian markets opened in the green taking cues from the global market. While Nifty rose 0.49% to 24,365.45, Sensex rose 0.41% to 80,130.66.

Most sectors turned negative as fear of escalating tensions between the two countries gripped Dalal Street. Nifty Defence was worse hit and declined nearly 3% with Garden Reach Shipbuilder leading the decline.

In addition, broader markets fell over 2% and underperformed the benchmarks.

Cross-Border Tension Flares Up

The Indian Army has retaliated after Pakistani troops fired on several posts along the Line of Control, NDTV reported, citing sources. No casualties have been reported.

Tensions have been India and Pakistan after the Pahalgam attack. The Indian government has announced strict countermeasures like holding the Indus water treaty in abeyance and cancelling visas of Pakistani nationals. Pakistan on its part has shut its airspace for Indian carriers.

Profit Booking

"This market correction is primarily attributed to profit booking after a sustained uptrend, mixed global cues, and cautious investor sentiment amidst ongoing corporate earnings announcements," said Mandar Bhojane, equity research analyst.

Investors seem to be reacting to a mix of domestic and global developments, leading to a broad-based pullback. Axis Bank has significantly impacted the banking index, he added.

Contrast To Global Markets

The fall witnessed on Dalal Street is in contrast with the global markets. The Asian markets have been trading positively in Friday morning trade. Over night, the US stocks rose for a third consecutive session driven by tech sector gains as investors weighed mixed earnings and US-China trade developments.

Global markets have also been fueled by expectations of potential US , Federal Reserve rate cuts and strong results from Google parent, Alphabet Inc.

In addition, Foreign Institutional Investors have also been net buyers and bought equities worth Rs 8,250.53 crore on Thursday.

Crude And Gold Shares Rise

Global oil benchmark Brent crude climbed 0.53% to $66.90 a barrel. Domestic gold prices gained on Friday as they surged Rs 2,000 to trade at Rs 96,190 as of 07:14 a.m., according to the India Bullion Association.

The futures prices for the yellow metal on the Multi Commodity Exchange were trading 1.31% higher at Rs 95,962 for the June 5 futures.