Indian benchmark equity indices reversed early gains to trade in the red for the second straight session on Friday, as investor sentiment turned cautious after a deadly terrorist attack on tourists in Kashmir heightened geopolitical risks.
The BSE Sensex slumped over 1,000 points to trade below 78,800, while the Nifty50 dropped below 23,900 around 11:28 am. Earlier in the session, the Sensex had climbed to 80,130 and the Nifty had crossed the 24,350 mark.
The market capitalisation of all listed companies on BSE declined by Rs 9.7 lakh crore to Rs 419.86 lakh crore.
Why is the stock market falling?
1) Rising India-Pakistan Tensions
Market sentiment turned risk-averse amid escalating tensions between India and Pakistan following the deadly Pahalgam terror attack, which claimed the lives of 26 civilians earlier this week. Analysts noted that India's decision to downgrade diplomatic ties and suspend the Indus Water Treaty could further dampen investor confidence.
"Sentiment remains cautious as geopolitical tensions between India and Pakistan show signs of escalation after the Pahalgam terror attack," said Devarsh Vakil, Head of Prime Research at HDFC Securities.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, added "The potential headwind looming large on the horizon is the uncertainty regarding India’s response to the terror attack and its consequences,"
2) Valuation Concerns After Sharp Rally
The Nifty had gained about 8.6% over seven consecutive sessions before the rally stalled on Thursday due to rising geopolitical tensions. While the index is still up approximately 1.7% for the week, the sharp rally has raised concerns over valuations, prompting investors to book profits and adopt a more cautious approach.
3) Sharp Decline in Financial Stocks
Axis Bank, SBI, and Bajaj Finance were the leading contributors to the Sensex decline today. Other banking stocks, including Kotak Bank, HDFC Bank, and ICICI Bank, also traded in the red. Combined, these stocks accounted for over 360 points of the overall Sensex drop.
Axis Bank was the biggest laggard in the Sensex pack after reporting a marginal decline in March quarter profit, which fell to Rs 7,117 crore from Rs 7,130 crore in the same period last year.
4) Technical Indicators
Following non-stop rally for seven consecutive days, Nifty bulls started showing fatigue signs on Thursday, which was also the April month's monthly expiry. Technical analysts say a correction was due amid overbought conditions. In the previous session a small bearish candle was formed, indicating a lack of directional conviction among market participants.
"With a sharp rally already behind it, the index now appears to be entering a time-wise corrective phase. Broadly, the Nifty has carved out a defined range between 24,500 and 24,000, which could serve as a critical decision zone in the coming sessions," said Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities.
5) Muted Earnings Season
The ongoing earnings season has been muted, with many companies reporting lower-than-expected earnings, further contributing to the market’s cautious stance. Hindustan Unilever ( HUL) reported a 2% revenue growth but missed profit expectations due to weaker urban demand. Similarly, Axis Bank's Q4 FY25 net profit saw a marginal decline of 0.2% year-on-year, attributed to muted business growth and lower treasury gains.
The IT sector also faced challenges, with companies like Infosys and Wipro issuing weak guidance and reporting subdued revenues, leading to downgrades in earnings estimates for FY26 and FY27.
The BSE Sensex slumped over 1,000 points to trade below 78,800, while the Nifty50 dropped below 23,900 around 11:28 am. Earlier in the session, the Sensex had climbed to 80,130 and the Nifty had crossed the 24,350 mark.
The market capitalisation of all listed companies on BSE declined by Rs 9.7 lakh crore to Rs 419.86 lakh crore.
Why is the stock market falling?
1) Rising India-Pakistan Tensions
Market sentiment turned risk-averse amid escalating tensions between India and Pakistan following the deadly Pahalgam terror attack, which claimed the lives of 26 civilians earlier this week. Analysts noted that India's decision to downgrade diplomatic ties and suspend the Indus Water Treaty could further dampen investor confidence.
"Sentiment remains cautious as geopolitical tensions between India and Pakistan show signs of escalation after the Pahalgam terror attack," said Devarsh Vakil, Head of Prime Research at HDFC Securities.
Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments Limited, added "The potential headwind looming large on the horizon is the uncertainty regarding India’s response to the terror attack and its consequences,"
2) Valuation Concerns After Sharp Rally
The Nifty had gained about 8.6% over seven consecutive sessions before the rally stalled on Thursday due to rising geopolitical tensions. While the index is still up approximately 1.7% for the week, the sharp rally has raised concerns over valuations, prompting investors to book profits and adopt a more cautious approach.
3) Sharp Decline in Financial Stocks
Axis Bank, SBI, and Bajaj Finance were the leading contributors to the Sensex decline today. Other banking stocks, including Kotak Bank, HDFC Bank, and ICICI Bank, also traded in the red. Combined, these stocks accounted for over 360 points of the overall Sensex drop.
Axis Bank was the biggest laggard in the Sensex pack after reporting a marginal decline in March quarter profit, which fell to Rs 7,117 crore from Rs 7,130 crore in the same period last year.
4) Technical Indicators
Following non-stop rally for seven consecutive days, Nifty bulls started showing fatigue signs on Thursday, which was also the April month's monthly expiry. Technical analysts say a correction was due amid overbought conditions. In the previous session a small bearish candle was formed, indicating a lack of directional conviction among market participants.
"With a sharp rally already behind it, the index now appears to be entering a time-wise corrective phase. Broadly, the Nifty has carved out a defined range between 24,500 and 24,000, which could serve as a critical decision zone in the coming sessions," said Dhupesh Dhameja, Derivatives Research Analyst, SAMCO Securities.
5) Muted Earnings Season
The ongoing earnings season has been muted, with many companies reporting lower-than-expected earnings, further contributing to the market’s cautious stance. Hindustan Unilever ( HUL) reported a 2% revenue growth but missed profit expectations due to weaker urban demand. Similarly, Axis Bank's Q4 FY25 net profit saw a marginal decline of 0.2% year-on-year, attributed to muted business growth and lower treasury gains.
The IT sector also faced challenges, with companies like Infosys and Wipro issuing weak guidance and reporting subdued revenues, leading to downgrades in earnings estimates for FY26 and FY27.
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