Stock market, India-Pak tensions: Sensex, Nifty stare at selloff; defence shares in focus

Stock market benchmarks Sensex and Nifty are all likely to see a gap-down start on Friday, May 9, thanks to a sharp escalation in the India-Pakistan tensions. Defence stocks such as Bharat Forge, Bharat Dynamics Ltd, Bharat Electronics Ltd and Hindustan Aeronautics Ltd will be in focus.  

Investor sentiment appears to have weakened amid reports that Pakistan attempted to target military installations in Jammu, Pathankot, and Udhampur using missiles and drones. These attacks reportedly failed.

In response, India is said to have launched retaliatory missile strikes targeting key Pakistani cities, including Lahore, Islamabad, Sialkot, and Karachi. A total blackout has reportedly been observed across Pakistan-occupied Kashmir (PoK).

Additionally, there are reports that the Indian Navy carried out missile strikes on strategic Pakistani naval bases in Karachi, resulting in significant damage and widespread panic along the country's coastline. This marks the first reported naval offensive by India against Pakistan since the 1971 war.

Sensex and Nifty had witnessed some fad-end selling on Thursday and Gift Nifty at last count was quoting at a sub-24,000 level. 

"Investors are advised to stay cautious, avoid aggressive positions, and focus on fundamentally strong stocks with limited near-term exposure to geopolitical risks. Defensive sectors and quality large caps may offer better stability in the current environment,” said Vikram Kasat, Head - Advisory at PL Capital.

Anand Rathi in a note said while short-term volatility is always a possibility, it does not expect a structural impact on Indian equities. The broader market narrative continues to be shaped by India's domestic macro strength, and not by its external fault lines, it said.

Defence stocks in focus

Defence stocks are in focus today after the Modi government reportedly asked defence makers for a meeting as early as next week. In response to a question on whether the government had asked the defence industry participants to ramp up production amid deepening of India Pakistan tensions, CMD at Bharat Forge Baba Kalyani told CNBC TV18: "We’ve been called to Delhi next week. Our team is going. I can’t say more.”

Anand Rathi is positive on defence platform companies such as Bharat Forge from a long-term perspective. It also likes defence consumable companies such as Solar Industries and Bharat Dynamics.

For FY2626, the defence Budget for India stood at Rs 6.81 lakh crore, with Rs 1.8 lakh crore allocated for capital expenditure.