Sensex, Nifty Fall On May 7: How Will Operation Sindoor Impact the Indian Stock Market? Strategy For Investors

Stock Market Update: Indian stock market traded volatile on Wednesday after India conducted 'Operation Sindoor', hitting terrorist infrastructure in Pakistan in the early hours of May 7th. Sensex and Nifty opened in red but witnessed mild gains before entering back into the bearish zone. In the early trade, the Sensex dropped by at least 704 points and the Nifty 50 plunged by nearly 169 points. As per experts, historically, geopolitical tensions trigger short-term volatility, however, markets have consistently rebounded over the long term. Hence, experts do not predict a major impact on the domestic market.

Sensex, Nifty:

Sensex opened at 79,948.80, lower from its previous closing price of 80,641.07. A few minutes after the opening bell, the benchmark climbed to hit an intraday high of 80,844.63 before correcting. Sensex dropped as much as 703.59 points to hit an intraday low of 79,937.48.

Similarly, Nifty opened at a gap-down to 24,233.30, compared to a previous closing price of 24,379.60. After hitting an intraday high of 24,449.60, the benchmark also tumbled by 159.6 points to hit an intraday low of 24,220.00 from the previous day.

Both benchmarks traded bearish! India's volatility index climbed nearly 4% before correcting.

Stocks like Tata Motors, Power Grid, Titan, SBI and M&M were top gainers. While stocks like Asian Paint, Sun Pharma, Ultratech Cement, Bajaj Finserv, and Nestle were top bears.

How Will Operation Sindoor Impact the Indian Stock Market?

The reason behind the volatility in the market is Operation Sindoor. Pankaj Singh, small case manager and Founder and Principle Researcher at SmartWealth.ai said, "Geopolitical tensions like the ongoing Indo-Pak standoff under Operation Sindoor tend to cause immediate market volatility, as seen with the Nifty and Sensex dropping 0.6-0.8% recently."

However, going back to similar historical events, the impact is expected to be temporary.

Historically, such episodes trigger short-term dips-Kargil War (-4%), Parliament Attack (-3%), Mumbai Attacks (-4%), and Balakot Airstrike (-3%). Singh added, however, "markets have consistently rebounded in the long term. After the Kargil War, the Sensex surged 63% within a year. Post-Parliament Attack, it rose over 20% the following year. Following the Mumbai Attacks, it gained 60% within 12 months, and after Balakot, it climbed 15% by year-end."

Notably, what stands out in "Operation Sindoor" from the market perspective is its focused and non-escalatory nature. Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments believes the market will have to wait and watch how the enemy reacts to these precision strikes by India.

This analyst believes the market is unlikely to be impacted by the retaliatory strike by India since that was known and discounted by the market.

In the current scenario, the key catalyst for the market resilience in India is the sustained FII buying of the last 14 trading days which has touched a cumulative figure of Rs 43940 crores in the cash market.

In less than 7 days of May, foreign institutional investors (FIIs) have outperformed domestic institutional investors, with inflow of Rs 7,062.12 in Indian equities, compared to DIIs buying of Rs 4,681.47 crore. Also, FPIs have bought up to Rs 4776 crore in May so far.

FIIs are focused on the global macros like weak dollar, slower growth in US and China in 2025 and India's potential outperformance in growth. This can keep the market resilient, said Vijayakumar in his note.

While India-Pakistan tension brings uncertainty, Ankur Sharma, Market Analyst, VT Markets on Operation Sindoor Sparks Market Volatility, said the UK-India FTA deal brings long term opportunity.

Amidst geopolitical tensions, India and the United Kingdom officially signed a significant Free Trade Agreement (FTA) on May 6, 2025. This accord aims to increase bilateral trade by £25.5 billion annually by 2040. Some of key highlights are --- 90% Tariff Reduction on British Goods including automobiles, whisky, and machinery.

UK based service companies can have more access to Indian Markets making the legal formalities easy for setup which result in more jobs for Indians and the UK is expecting it's GDP increase by by £4.8 billion yearly. This agreement is anticipated for India to boost exports-particularly in textiles and food goods-and draw more foreign capital, as per the analyst.

Concluding, Sharma said, "While the War situation brings uncertainty to the Indian Stock Market the UK-India FTA presents a promising avenue for economic growth. Investors and market participants will closely monitor these developments."

What Should Investors Do?

In Geojit analyst's opinion, investors have to watch the developments in the border. He said, "The big shift in market preference in favor of largecaps away from overvalued segments of mid and small caps is significant. FIIs, as always, are mainly buying largecaps. This trend can continue."

While short-term caution is reasonable, history shows that Indian markets demonstrate strong resilience once clarity returns, adding, Singh said, "Unless accompanied by broader economic or global shocks, Indo-Pak tensions have not had a lasting negative impact. Investors should focus on fundamentals, not fear."

Operation Sindoor 2025:

In the early hours of May 7, the Indian Armed Forces launched 'OPERATION SINDOOR', hitting terrorist infrastructure in Pakistan and Pakistan-occupied Jammu and Kashmir from where terrorist attacks against India have been planned and directed. Overall, nine sites have been targeted.

These steps come in the wake of the barbaric Pahalgam terrorist attack in which 25 Indians and one Nepali citizen were murdered. The Defence Ministry said, "We are living up to the commitment that those responsible for this attack will be held accountable."

However, the Indian defence ministry emphasized that their actions have been focused, measured and non-escalatory in nature. In short, bo Pakistani military facilities have been targeted. India has demonstrated considerable restraint in selection of targets and method of execution.

The Pakistan Prime Minister Shehbaz Sharif called India's action as 'act of war'. In a statement, he said, Pakistani nation and the Pakistani armed forces know how to deal with the enemy very well.

As per Radio Pakistan, the UNSC has been informed that Pakistan reserves the right to respond appropriately to this aggression at a time and place of its choosing, in accordance with its right to self-defence as enshrined in Article 51 of the United Nations Charter.

What will be Pakistan's retaliation will be keenly watched.