India-Pakistan conflict: Will the escalating India-Pakistan conflict continue to rattle stock market?

Mumbai: India’s Volatility Index, or VIX – the stock market’s fear gauge – spiked over 10% Thursday, the biggest single-day rise in a month, after the late sell-off in equities amid concerns that the military conflict between India and Pakistan might escalate, unnerved traders.

The Sensex and Nifty, which were trading marginally lower for most of the session Thursday, dropped sharply in the last 30 minutes of trading following reports that the ‘Operation Sindoor’-India’s military operation targeting sites in Pakistan and Pakistan-administered Kashmir – will continue. NSE’s Nifty fell 140 points, or 0.6%, to close at 24,273. Sensex declined 412 points, or 0.5%, to end at 80,334. Both indices had fallen as much as almost 1% before cutting a portion of the losses.

“The market dropped, whereas the India VIX spiked late on Thursday after the government notified that Operation Sindoor was still on, which heightened fear and uncertainty among market participants,” said Rajesh Palviya, head of technical and derivatives research at Axis Securities. “We saw some profit-taking as the sentiment turned negative.”

VIX ended at 21 levels, up 10.21% at close, extending its recent run-up. The measure has jumped nearly 40% since April 15, suggesting options traders see near-term risks to the market in the face of the India-Pakistan conflict and tariff worries. VIX surges when market uncertainty increases and vice versa. The index soared 65.7% on April 7 – the biggest ever single-day advance – in response to the global uncertainty around Donald Trump’s reciprocal tariffs.

In Pakistan, trading halted for an hour on Thursday after the benchmark index fell 7.2%.

“Historically, such geopolitical events tend to result in heightened market volatility for 30–40 days,” said Shrikant Chouhan, head of equity research at Kotak Securities. “Consequently, traders with large positions may begin to reduce their exposure, potentially leading to lower volumes.” Foreign portfolio investors (FPIs) were net buyers worth Rs 2,008 crore on Wednesday, while domestic institutional investors (DIIs) sold equities worth Rs 596 crore. Palviya said going ahead, as long as there is uncertainty and fear about a war, sentiment will remain bearish, and if the Nifty sustains below its support level of 24,200, it may fall to the 23,800 level in the short term. “The next 48–72 hours will be the most crucial to see if the tensions escalate to any on-ground movement, or die down, and this will determine the direction of the markets,” said Amit Khurana, head of equities at Dolat Capital Market.