Indian Markets Volatile as Operation Sindoor Offsets Global Rate-Cut Optimism

Equities Waver as “Operation Sindoor” Sparks Volatility Amid Global Rate-Cut Optimism

Mumbai, 7th May – The Indian equity market, which had been regaining momentum in recent weeks, is now facing renewed headwinds. This time, the source is not macroeconomic but geopolitical. India’s recent cross-border military operation—dubbed Operation Sindoor—has injected a fresh layer of uncertainty that markets are quick to react to.

Until recently, sentiment had been generally supportive. Rate-sensitive industries were gaining on hopes of an ongoing worldwide rate-cut cycle. The Sensex had been in a steady rise, fueled by domestic fundamentals and relative stability in international markets. With rising geopolitical tensions, however, investor confidence seems more fragile.

What’s Changed?
Markets had been navigating with relative assurance:
– The Sensex is up 1.5% year-to-date, demonstrating resilience amid global volatility.
– Investor attention was firmly on central bank signals and the direction of interest rates.
– A continued, albeit slower, global easing cycle was largely priced in.

Operation Sindoor, however, has shifted the narrative. The concern now extends beyond the immediate event—it is about uncertainty. Even if the economic consequences are limited, the psychological impact on investor behaviour is significant.

Global Rate Path Remains Supportive
Despite the geopolitical overhang, the monetary policy environment remains accommodative:
– The US Federal Reserve is expected to hold rates steady, with no sharp changes anticipated.
– Upcoming meetings of the Bank of England (8 May), Reserve Bank of Australia (19 May), and central banks in Brazil (7 May), Mexico (15 May), and Indonesia (21 May) are also expected to maintain a dovish-to-neutral tone.
– A broader, gradual global rate-cut cycle through 2025 continues to be the baseline expectation.

This environment continues to favour rate-sensitive sectors, particularly in countries with strong domestic demand.

Sectoral Divergence in Focus
In the Indian context, a clearer divergence between externally- and internally-driven sectors may now emerge.

Relatively resilient:
– Consumer goods – buoyed by steady domestic consumption
– Real estate and utilities – largely shielded from global disruptions
– Banking and infrastructure – supported by low interest rates and continued liquidity

Potentially challenged:
– Export-oriented sectors – vulnerable to trade volatility and demand shocks
– Technology and industrials – exposed to global capital flows and shifting risk sentiment

RBI’s Role and Domestic Anchors
The Reserve Bank of India will likely continue its present course—prioritizing liquidity and financial stability. With inflation being well in hand and growth gaining traction, there is room for ongoing policy support.

In addition, government-infused infrastructure spending and attempts to increase domestic manufacturing are serving as a counterweight to external uncertainty.

Bottom Line
Indian equities now stand at a juncture where global monetary support and strong domestic fundamentals provide stability, but geopolitical tensions bring caution.

Until there is more clarity on the fallout of Operation Sindoor, markets can trade sideways—with selective opportunities instead of broad-based gains. Remaining concentrated on domestic-facing and rate-sensitive sectors can provide relative safety in an otherwise cautious environment.