For investors, this escalation never came at a bad time. Indian stocks were driven by a strong 10% rally from the lows in March, as global trade tensions eased, domestic currencies stabilized and FII purchases resumed, and the year became positive.
Sentiment has deteriorated again, just as markets are beginning to reversal in valuation-driven revisions and Trump’s policies. The headline index hit sharply, with the nifty ones below the 24,000 mark and Sensex surged over 850 points in the Japan-China trade.
Expanding geopolitical tensions, including recent Pahargam terrorist attacks and subsequent developments along the line of control, primarily encourages a sudden decline.
Pakistan’s response to India’s strong response has increased the risk of potential military positions, including halting the Indus Water Treaty. Reports of cross-border shootings have led investors to choose to avoid long positions amidst uncertainty, especially ahead of the weekend.
Small and intermediate stock inventory was exposed to sharper pressures, with sharp declines of 2.6% and 2.3%, respectively. Despite the revisions, analysts note that many of these stocks continue to trade at above average valuations.
Will Pakistan’s problem threaten recovery in the Indian market?
Like the Indian-Pakistan conflict, the biggest risk for the Indian market is that participants choose to remain on the sidelines.
“The potential headwinds looming on the horizon are uncertainties about India’s response to terrorist attacks and their consequences,” said Vijayakumar, chief investment strategist at Geojit Financial Services.
Analysts noted that while the current situation has caused temporary distress, it is emotionally driven and appears to be related to short-term geopolitical risks, especially in the wider market.
“We’ve been working hard to get the most out of our business,” said Swapnil Aggarwal, director of VSRK Capital.
The incredible stock noted in its strategic report that recent policy actions by the government and the RBI aim to boost GDP growth momentum. However, global trade tensions and geopolitical developments could offset short-term interests.
The revenue momentum is weak
Despite the seasonally strong March quarter, Q4 consensus revenue growth expectations remained sluggish at just 8%, 8% year-on-year, and the ongoing EPS downgrade cycle is never over.
The results of IT and FMCG majors failed to stimulate confidence. If Pakistan’s geopolitical situation gets worse, it could take a double blow to market sentiment in the short term.
The NIFTY50’s forward P/E is currently below the 10-year average, offering rating comfort.
“It rolls the NIFTY50 target to the FY27F EPS, increasing the bull case odds to 25%, reflecting the potential benefits of easing rainfall and oil prices beyond expectations.
In the mid- and small spaces, recent incisive gatherings have resulted in a premium rating of 20-35% over the NIFTY50, analysts believe it is the source of concern.
“Stock market volatility will continue to rise as policy uncertainty is likely to continue in the coming months,” the report added.
(Disclaimer: recommendations, suggestions, opinions and opinions given by experts are unique. These do not represent views of the economic era.)
