Source: Moneycontrol
The Indian stock market seems to have stayed pretty calm amidst the terror attack in J&K and the subsequent military reaction of India in Operation Sindoor. On May 8, the benchmark indices, Nifty50 and BSE Sensex, opened on a green note, with Nifty maintaining above 24,400 and Sensex crossing 80,800, thus suggesting the investors’ confidence in the long-term upward movement of the markets.
On April 22, a dreadful terror strike in Baisaran Valley, Pahalgam, claimed 26 precious lives, including that of a foreign tourist. In response to the terror attack from across the border, India resorted to retaliatory cross-border strikes into Pakistan and PoK, suspended the Indus Water Treaty, and also suspended visa services from Pakistan, thereby causing further deterioration in bilateral relations.
Markets Have Historically Shown Resilience to Indo-Pak Tensions
This apparent divergence between geopolitical risk and market performance is no novelty. According to Anand Rathi Research, the data of 11 major Indo-Pak episodes since 1990 reveal a pattern of rapid recovery by the markets, which in most cases, also recorded outperformance vis-à-vis global indices.
Noteworthy:
- No correction during Kargil War
- Sensex outperformed the S&P 500 post-Parliament Attack, 2001
- Average correction across all events: -7.5%, median: -3.5%
- Average relative outperformance versus the S&P 500: 21.1%
Indian equities bounced back swiftly even from these high-stakes events in Operation Parakram and Balakot, proving that investors treat these conflicts as transient shocks rather than systemic threats.
Why the Market Isn’t Spooked
Experts adduce several reasons in support of the calmer market reaction:
1. Low Probability of Full-Scale War
Despite aggressive rhetoric, historically, both nations have refrained from going to full-scale war. Even after major events such as the 2001 Parliament Attack or Pulwama in 2019, military retaliation has remained measured and tactical.
2. Sectoral Impact Remains Limited
The recent terror attack in Jammu & Kashmir is likely to negatively impact the region’s tourism-driven economy, with trip cancellations already underway. However, the direct impact on listed companies appears limited, said Anand Rathi.
Hotels: Indian Hotels, which owns Taj Srinagar, Tree of Life Lakeside Cottage, and Ginger Srinagar, is, in all likelihood, to detect temporary down periods in occupancy; however, the impact on overall revenues is minuscule.
Aviation:
- IndiGo is negligibly dependent on the Srinagar route.
- The airspace closure of Pakistan may occasion longer routes, but they will hardly be able to hurt their margins.
Defence:
- Solar Industries and Bharat Dynamics (ammunition suppliers) are immediate winners in the increased defence procurements.
- Bharat Forge and other platform providers could possibly get medium-term advantages, but revenue realization could be on an 8–9-month horizon.
Experts point to several reasons for the market’s calm response:
“Geopolitical tensions like the ongoing Indo-Pak standoff under Operation Sindoor tend to cause immediate market volatility, as seen with the Nifty and Sensex dropping 0.6–0.8% recently. Historically, such episodes trigger short-term dips—Kargil War (-4%), Parliament Attack (-3%), Mumbai Attacks (-4%), and Balakot Airstrike (-3%).
However, markets have consistently rebounded in the long term. After the Kargil War, the Sensex surged 63% within a year. Post-Parliament Attack, it rose by over 20% the following year. Following the Mumbai Attacks, it gained 60% within 12 months, and after Balakot, it climbed 15% by year-end,” said Pankaj Singh, smallcase manager and Founder and Principal Researcher at SmartWealth.ai.
“While the immediate market reaction to Operation Sindoor has been muted, investors should remain vigilant. The situation’s evolution, particularly any potential escalation, could impact market sentiment.
However, India’s strong economic indicators and historical market resilience suggest that any volatility may be short-lived. Investors are advised to monitor geopolitical developments closely while maintaining a long-term investment perspective,” said Bazaar Bhardwaj of Value Research
What Should Investors Do?
History suggests panic-selling during such episodes often leads to missed recoveries.
“While short-term caution is reasonable, history shows that Indian markets demonstrate strong resilience once clarity returns. Unless accompanied by broader economic or global shocks, Indo-Pak tensions have not had a lasting negative impact. Investors should focus on fundamentals, not fear,” said Pankaj Singh, smallcase manager and Founder and Principal Researcher at SmartWealth.ai.
“Until there is more clarity on the fallout of Operation Sindoor, markets can trade sideways, with selective opportunities instead of broad-based gains. Remaining concentrated on domestic-facing and rate-sensitive sectors can provide relative safety in an otherwise cautious environment,” said brokerage Prabhudas Liladhar in a note
Investors’ Strategic Considerations:
- Keep holding unless your core thesis changes
- Don’t get overweight travel and tourism aggregators
- Consider the gradual accumulation of defense-based stocks
- Diversification and balanced asset allocation remain the most effective risk mitigators
Conclusion
While Operation Sindoor has raised the geopolitical temperature, India’s equity markets have demonstrated that they can withstand shocks. Historical performance, sector, and investor sentiment show that the market is differentiating between noise and fundamentals.
