Indian equity markets extended losses into a second consecutive session on Friday, erasing around $83 billion in market capitalization amid escalating military tensions with Pakistan, sending shockwaves through investor sentiment.
The conflict between the nuclear-armed neighbors intensified after India struck alleged “terrorist infrastructure” targets in Pakistan on Wednesday in retaliation for a deadly attack in Indian-administered Kashmir last month. Pakistan responded with cross-border assaults, and hostilities have continued since.
The benchmark Nifty 50 index dropped 1.1%, though it managed to close above the critical 24,000 mark. The BSE Sensex also declined 1.1%, slipping below the 80,000 level it had maintained a day earlier. At one point during the session, losses were on track to hit $108 billion before moderating slightly.
Markets had already slipped 0.5% on Thursday, and with Friday’s drop, key indexes recorded a 1.3% weekly loss — ending their longest weekly winning run of 2025.
“Sentiment is overriding fundamentals right now,” said Avinash Gorakshaka, research head at Profitmart Securities. “If hostilities escalate further, the markets could face extended volatility and weakness.”
India’s volatility index (.NIFVIX), often referred to as the ‘fear gauge’, surged for an eighth straight session to a level not seen in over a month. Meanwhile, the central bank had to intervene to manage a sharp slide in the rupee.
Losses were widespread, with 12 out of 13 major sectoral indices in the red. Small-cap and mid-cap indexes were also hit hard, losing 1.9% and 0.8% respectively.
One rare bright spot was the auto sector, buoyed by Tata Motors’ 8.7% rally on optimism that the UK-US trade agreement would benefit its British subsidiary, Jaguar Land Rover. Tata Motors emerged as the top performer among the 11 Nifty 50 gainers this week.
The turmoil extended beyond the markets: the Indian Premier League’s ongoing T20 cricket tournament was suspended after one match was halted mid-game on Thursday.
Despite the volatility, analysts believe long-term optimism remains, supported by hopes for a potential U.S.-India trade agreement and India’s strong economic fundamentals.
