Market jittery following Operation Sindoor: What is the sentiment of investors?

Following India’s air strike under Operation Sindoor in Pakistan and Pakistan-occupied Kashmir on May 7, 2025, the Indian financial market experienced bullish momentum despite initial concerns over the potential fallout of the cross-border military action.

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Indian financial markets are in an initial turmoil following the airstrike by the Indian Armed Forces. GIFT Nifty, a key indicator for Indian equities, started on an upward trend, trading at 24,446.5, marking an increase of 0.91%, trading up by 220 points. This reflects the bullish opening of Indian Equities today. This also implies institutional investors are expecting limited escalation and a swift containment of the conflict.

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It is also to be noted that this resilience comes on the back of strong corporate earnings reported in the previous sessions and sustained FPI inflows in a few select sectors.

The Indian Rupee is facing downward pressure in the non-deliverable forward (NDF) market. It is expected to perform weaker against the US Dollar. This reflected heightened geopolitical tensions following Indian airstrikes under Operation Sindoor.

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Historical Context

The parallel can be drawn with the past events, such as the 2019 Balakot air strikes, where NIFTY 50 experienced a modest 1.8% decline, suggesting that markets often stabilise even after initial volatility if further escalation is avoided. The sharpest market correction was during the Indian Parliament attack on December 13, 2001, by -13.9%.

Investors are eager about statements from the Indian government, military and diplomatic channels to monitor the possibility of further escalation or resolution.

Sectors such as defence, aviation, energy and gold-linked investments are likely to remain in focus.

With trading sentiment delicately balanced between geopolitical developments and economic fundamentals, markets could swing in any direction.

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