India-Pak tensions: Dalal Street takes a Rs 5-lakh crore market cap hit, how to approach the market and more

Investors lost over Rs 5 lakh crore on Thursday amid rising possibilities of a full-blown conflict between India and Pakistan, which led to panic selling on Dalal Street. Market cap of BSE-listed firms settled at Rs 418.10 lakh crore in the current session against Rs 423.50 lakh crore in the previous session. 

Sensex closed 412 points lower at 80,334 and Nifty slipped 140 pts to 24,273.

Earlier, Sensex and Nifty opened on a positive note. Sensex opened 166 points higher at 80,912 and Nifty rose 17 points to 24,431. 

However, the market was not able to sustain the gains and later shifted into a range-bound action in the mid part of the session. Sharp intraday weakness was witnessed in the second part of the session and Nifty closed near the lows.

Ajit Mishra – SVP, Research, Religare Broking said, "The ongoing uncertainty continues to make traders cautious, potentially clouding the prevailing trend amid lingering geopolitical tensions. Until the volatility, as indicated by the elevated India VIX, subsides, we recommend maintaining a hedged strategy to navigate the current environment, with focus on stock selection."

India VIX, the Indian market's volatility index, rose 10.18%, indicating heightened volatility during today's session. 

Rupak De, Senior Technical Analyst at LKP Securities said, "The near-term sentiment now appears weak, with the potential for further correction in the short term. Immediate support is seen at 23,950; a break below this level could lead the index down towards 23,450. On the upside, resistance is placed at 24,400 and 24,550."

Manoranjan Sharma, Chief Economist, Infomerics Valuation and Ratings advised investors not to resort to panic selling in the current market situation. 

"My advice will be not to panic and sell, but to remain invested. India has weathered many crises in the past, and this too will not be any different. This thesis can be substantiated by the fact that most incidents (except the Parliament attack in 2001) led to positive market returns over the medium to long term, e.g., the Nifty 50 rose nearly 30% after 12 months post-Kargil War in 1999, the market rose 15.6 % after 12 months post-the Uri attack and surgical strikes in 2016, and the Nifty 50 rose 12.7 % post the Pulwama attack. While there may be a reason for concern, there is no reason for any alarm or a sense of trepidation because of the observed process of historical development," said Sharma.

Auto, capital goods, metals, oil and gas and pharma shares were the top sectoral losers with their BSE indices falling 995 points, 563 points, 520 pts, 529 pts and 691 pts, respectively. IT shares were the only gainers with the BSE auto index rising 43 pts to 35,266. The BSE consumer durables index also lost 709 pts, signaling across-the-board correction in the Indian stock market.  

Devarsh Vakil, Head of Prime Research, HDFC Securities is bearish on the market's short-term trend.

"Nifty's short-term trend turned weak as it closed below its 5-day EMA, which was placed at 24340 levels. On the higher side, the 24340-24500 band is likely to act as immediate resistance, while the 24,000-24100 band could provide immediate support on the downside as markets digest the unfolding geopolitical situation."