Shrugging off the hostilities and warfare between India and Pakistan on Wednesday, India’s stock market displayed fortitude with benchmark indices ending in the green. Both the Nifty 50 and Sensex closed 0.1% higher at 24,414.4 and 80,746.78, respectively, although they were in the red in early trade.
Investors showed little signs of nervousness as reflected in the gains posted by the broader small-cap and mid-cap indices which put on 1.4% and 1.6%, respectively. Eleven of the 13 major sectors posted gains and the breadth of the market was positive with 2,206 gainers versus 1,683 losers. By the end of the day, investor wealth had increased by Rs 2.19 lakh crore to Rs 423.50 lakh crore.
At the same time, volatility, which has risen in eight out of the 10 trading sessions since the terrorist attack in Pahalgam, Kashmir, was hovering near a three-week high.
The country’s top two bourses, the National Stock Exchange and the BSE temporarily restricted overseas users from accessing their websites, news agency Reuters reported, citing sources. However, the overseas investors were able to trade in the markets.
Foreign portfolio investors appeared unperturbed by the geopolitical tensions as they continued on their buying spree. In May so far, FPIs have purchased $ 1.3 billion worth of shares on the back of purchases of $530 million in April.
Stocks and sectors that are expected to benefit from India’s Free Trade Agreement (FTA) were among the big gainers. Stocks in the automobiles and textiles sectors rose on prospects of stronger export growth to the UK. Tata Motors jumped 5% as the trade deal with Britain is seen benefitting the auto maker’s UK-subsidiary JLR. Interestingly, while defence stocks put on fairly sizeable gains, they gave up much of these towards the end of a volatile session.
Market watchers observed that investors remained unfazed by the military action between India and Pakistan focusing more on corporate earnings, the India-UK FTA. “They are also watching out for the US Federal Reserve’s policy decision and commentary,” said the CEO of a domestic brokerage. He added that the decisions of the Fed on interest rates and its impact on the US dollar and Treasuries would have a bearing on foreign flows into the stock markets.
Some traders pointed out that some investors had taken short positions in anticipation of a retaliation by India against Pakistan and probably resorted to short-covering as the sentiment was reasonably strong.