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The Indian stock market experienced a significant downturn on Friday, emerging as the worst performer among Asian equity markets. This decline was primarily attributed to heightened geopolitical tensions, specifically the terror attack in Pahalgam and reports of cross-border firing along the Line of Control, coupled with widespread profit-booking activities after a recent rally. The Sensex, after briefly surpassing the 80,000 mark, faced intense selling pressure, plummeting by as much as 1,200 points (1.5%) to an intraday low of 78,605.81 before partially recovering to close at 79,212.53, down 588.90 points or 0.74%. Similarly, the Nifty fell nearly 400 points (1.64%) to a low of 23,847.85, eventually settling above the 24,000 mark at 24,039.35, down 207.35 points or 0.86%. The market breadth was overwhelmingly negative, with losers significantly outnumbering gainers. This widespread sell-off reflected investor unease and a shift towards a risk-off approach, driven by the prevailing geopolitical uncertainty and the perception that the market had become overstretched following its recent upward trajectory. The decline in benchmark indices highlights the vulnerability of the Indian stock market to both domestic and international events and the importance of considering geopolitical risks when evaluating investment strategies. The sharp intraday sell-off serves as a reminder of the potential for volatility in the market, especially in times of heightened uncertainty. Furthermore, the profit-booking activity suggests that investors were seeking to capitalize on recent gains, which contributed to the downward pressure on stock prices. The overall market sentiment was clearly affected by the external factors, leading to a broad-based decline across various sectors and market segments. This event underscores the interconnectedness of the Indian market with global events and the sensitivity of investor sentiment to geopolitical developments.
The broader market experienced even more significant losses than the benchmark indices, with the BSE Midcap and Smallcap indices falling by 2.44% and 2.56% respectively. This indicates that the selling pressure was not limited to large-cap stocks but extended to smaller and mid-sized companies as well. Consequently, investor wealth eroded significantly, with the total BSE market capitalization falling below the $5 trillion mark, settling at $4.93 trillion (₹421.6 lakh crore). This substantial decrease in market capitalization reflects the magnitude of the losses incurred by investors across the board. The India VIX index, a measure of market volatility, surged by 5.58% to 17.16, indicating rising fear and potential for further volatility in the near term. This increase in the VIX suggests that investors are anticipating continued uncertainty and potential downward pressure on stock prices. The sectoral performance was also largely negative, with almost all sectoral indices on the BSE and NSE ending in the red. Services, utilities, realty, power, and telecom sectors were the top laggards, declining by as much as 3.11% on the BSE. This widespread decline across sectors indicates that the negative sentiment affected a broad range of industries. However, IT majors like TCS, Infosys, and Tech Mahindra emerged as top gainers, bucking the overall trend and rising up to 1.36%. This suggests that the IT sector may have been perceived as relatively safer or more resilient during this period of market weakness.
Interestingly, despite the overall market weakness, both foreign portfolio investors (FPIs) and domestic institutional investors (DIIs) were net buyers, with net purchases of ₹2,952.33 crore and ₹3,539.85 crore, respectively, according to provisional BSE data. This counterintuitive behavior suggests that these institutional investors may have viewed the market decline as a buying opportunity, potentially due to long-term investment horizons or a belief that the market would eventually recover. On a weekly basis, despite the Friday's losses, the benchmark indices managed to close in the green. The Sensex and Nifty rose up to 0.79%, while the broader indices gained up to 1.31%. This indicates that the overall trend for the week was still positive, even though the market experienced a significant setback on Friday. The performance of Asian equity markets was mixed, with some markets outperforming while others underperformed. Japan, Taiwan, the Philippines, Thailand, Indonesia, and South Korea outperformed, rising up to 2.02%. Meanwhile, China and Singapore closed slightly lower, while Hong Kong posted marginal gains. This mixed performance suggests that regional factors may have played a role in the differing outcomes across Asian markets. In conclusion, the Indian stock market experienced a significant decline on Friday, driven by geopolitical tensions and profit-booking activity. However, the market managed to close in the green on a weekly basis, and institutional investors remained net buyers, suggesting that the long-term outlook may still be positive. Investors should closely monitor geopolitical developments and market volatility in the near term and consider the potential risks and opportunities when making investment decisions.