Geopolitical Jitters Trim Gains in Indian Equities: A Week of Volatility Amid Kashmir Tensions

The Indian equity market faced a tug-of-war between optimism and anxiety last week, as geopolitical risks stemming from a deadly militant attack in Kashmir overshadowed positive earnings and foreign inflows. While benchmarks like the NIFTY 50 and BSE Sensex eked out modest weekly gains of 0.8%, their trajectories were clouded by investor caution, sectoral divergence, and technical vulnerabilities.

Market Performance: A Fragile Rally
The NIFTY 50 ended at 24,039.35, a 0.8% weekly gain despite a 0.86% drop on the final trading day. The Sensex closed at 79,212.53, up 0.8% for the week but down 0.74% on Friday. The indices’ resilience was tested as markets reacted to the Pahalgam attack, which killed 26 tourists and reignited India-Pakistan tensions.

Geopolitical Overhang Dominates Sentiment
The attack triggered a sharp escalation in cross-border tensions. India downgraded diplomatic ties with Pakistan and suspended the Indus Water Treaty—a move analysts warned could disrupt agricultural stability and amplify regional instability. These developments fueled a “risk-off” environment, driving investors away from domestic equities and small/mid-cap stocks.

The NIFTY Smallcap 100 and Midcap 100 indices fell ~2.5% each for the week, while financial stocks like Axis Bank (down 3.4–3.7%) and Maruti Suzuki (down 1.7%) underperformed amid profit warnings and weak loan growth.

Sectoral Winners and Losers: IT Shines, Banks Struggle
The IT sector was a rare bright spot, surging 6.6%—its best weekly performance since June 2024—as companies like Tata Consultancy Services and Infosys reported upbeat earnings outlooks.

However, the financial sector faced headwinds. Axis Bank’s weak loan growth and Maruti’s profit miss highlighted vulnerabilities in sectors tied to domestic demand. Even Reliance Industries, a bellwether for the broader market, traded flat ahead of its Q4 results, underscoring investor hesitancy.

Technical Vulnerabilities and Currency Pressure
Technical indicators painted a cautionary picture. The NIFTY struggled to hold above 24,400, with key support levels at 23,800 and 23,400—where critical moving averages converge. A breakdown below these thresholds could signal further declines.

Meanwhile, the rupee weakened to 85.6550 against the dollar, pressured by equity and bond market sell-offs linked to geopolitical risks.

Notable Stock Moves and Corporate Updates
- SBI Life Insurance surged 5.4% after reporting 10% YoY growth in new business value.
- Cyient fell 9.5% following a 6% drop in Q4 profit.
- Gensol Engineering hit a 52-week low amid corporate governance issues, while IEX (India Energy Exchange) rose 5.5% on record electricity trading volumes.

Expert Insights: Balancing Tailwinds and Headwinds
Analysts highlighted a mix of positives and risks. Geojit Investments noted ~₹29,513 crore in FII inflows over seven days and U.S.-India trade deal optimism as “tailwinds.” However, unresolved tensions over the Kashmir attack and potential military escalation remained critical risks.

Nuvama Research echoed this, anticipating sector rotation during earnings season but warning that geopolitical escalation could cap gains.

Conclusion: A Delicate Balance Ahead
The Indian equity market’s 0.8% weekly gain masks underlying fragility. While FII inflows and IT sector strength provided support, geopolitical risks and weak financial results created headwinds. Key technical levels (23,400 for the NIFTY) and corporate earnings will be pivotal in the coming weeks.

Investors should remain cautious as unresolved tensions between India and Pakistan—potentially leading to diplomatic or military escalation—could amplify volatility. Meanwhile, sectors like IT and healthcare, driven by global demand and domestic growth, may offer resilience.

The path forward hinges on whether geopolitical clouds clear, allowing the market to focus on fundamentals like earnings momentum and FII flows. Until then, Indian equities remain caught in a geopolitical crossfire.

This analysis synthesizes sectoral performance, geopolitical dynamics, and technical indicators to underscore the precarious balance between optimism and uncertainty shaping India’s equity market.