Sensex Falls 900 Points, Nifty Below 24,000 as India-Pakistan Tensions Escalate; India VIX Jumps 10%

Mumbai, 9th May: Indian stock markets experienced a sharp decline in early trade on Friday, following heightened tensions between India and Pakistan, which sparked panic among investors. At 10:04 AM, the Sensex dropped 910 points to 79,424.5, a fall of 1.13%, while the Nifty50 fell by 300 points to 23,973.85, down 1.24%.

This market turmoil was compounded by a surge in India VIX, the index measuring market volatility, which spiked over 10% to 21, signalling heightened fears and risk aversion. The market breadth was firmly in favour of declines, with 1,983 stocks in the red compared to just 194 advancing, further contributing to the bearish sentiment.

Geopolitical Tensions Drive Market Volatility
The sharp market decline occurred amid escalating hostilities between India and Pakistan, significantly affecting investor sentiment. On May 7, India launched Operation Sindoor, targeting terror infrastructure in Pakistan and Pakistan-occupied Kashmir in response to the Pahalgam terror attacks, which claimed the lives of 26 tourists.

The situation intensified on May 8 when Pakistan launched missile strikes and drone attacks on several Indian military bases in Jammu, Pathankot, Udhampur, and parts of Punjab and Rajasthan. These developments raised fears of a wider military conflict, leading to widespread selling in the equity markets.

India VIX Soars Amid Market Nervousness
As geopolitical risks mounted, the India VIX surged by 7.52%, reaching 22.6, indicating heightened expectations of market volatility. The volatility index, which gauges market sentiment through options pricing, pointed to increased investor caution and preparations for further fluctuations in the coming days.

Rupee Hits New Lows as Global Risks Mount
Adding to market concerns, the Indian rupee depreciated to ₹85.88 against the US dollar, down 30 paise from the previous day. This was the biggest decline of the rupee in over two and a half years as investors rushed towards safe-haven assets amidst the geopolitical tensions. Rupee’s decline was further fueled by the appreciation in the US currency and an increase in crude prices, both being factors behind rupee’s fall.

Market Outlook:
With India VIX climbing and the rupee under pressure, investor sentiment is likely to remain cautious in the short term. The combination of market volatility and persistent geopolitical risks is expected to keep sentiment weak. Traders are advised to adopt a careful approach, focusing on short-term opportunities and avoiding large overnight positions.

If the geopolitical situation does not ease, the Sensex and Nifty50 may face further downward pressure. Despite the recent erratic movements in the markets, characterised by alternating up and down days, the overall trend remains range-bound for now.