SENSEX down 900 pts, NIFTY50 tests 24K as India-Pakistan conflict escalates, INDIA VIX spikes over 10%; top factors you need to know

The sentiment is fragile given the escalating tensions between India and Pakistan.

On May 7, India launched Operation Sindoor, targeting terror infrastructure in Pakistan and Pakistan-occupied Kashmir, in response to the terrorist attacks in Pahalgam, in which 26 tourists were killed.

On May 8, India neutralised the Pakistan army's attempt to hit military stations in Jammu, Pathankot, Udhampur, and some other locations with missiles and drones as tensions soared between the two countries amid fears of a wider military conflict.

At 10:04 AM, the BSE SENSEX was trading at 79,424.5, down 910.28 points, or 1.13%, while the NSE's NIFTY50 index was trading at 23,973.85, down 299.95 points, or1.24%.

The market breadth in the opening trade was in favour of declines, as out of 2,217 stocks being traded on the NSE, 1,983 stocks were declining, and 194 stocks were advancing.

On the SENSEX, only four stocks were trading in the green and the rest, 26, in the red. Titan Company was the top gainer, followed by L&T. Both stocks were up around 4% following their Q4 results.

India VIX, the volatility index, spiked over 10% to 21 levels in the early trade.

Volatility Index is a measure of market’s expectation of volatility over the near term. Volatility is often described as the “rate and magnitude of changes in prices" and in finance often referred to as risk.

"Volatility Index is a measure of the amount by which an underlying Index is expected to fluctuate, in the near term, (calculated as annualised volatility, denoted in percentage, e.g.,20%) based on the order book of the underlying index options," explains NSE.

Other factors that weighed on investor sentiment are as below.

Rupee falls

The rupee depreciated 30 paise to 85.88 against the US dollar in early trade, weighed down by intensifying geopolitical tensions between India and Pakistan.

Forex traders said geopolitical tensions between India and Pakistan have sparked risk-off sentiment in the market, leading to the rupee weakness. Besides, increased demand for the US dollar further dented investor sentiments.

At the interbank foreign exchange, the domestic unit opened at 85.88 against the greenback, registering a fall of 30 paise over its previous close.

The rupee saw its steepest single-day fall in more than two-and-a-half years and settled 81 paise lower at 85.58 against the US dollar on Thursday.

Apart from heightened geopolitical risks, positive US dollar index and a rise in crude oil prices also weighed on the rupee.

S&P Ratings says hostilities between India-Pakistan heighten credit risks

S&P Global Ratings on Thursday said the hostilities between India and Pakistan heighten risks to the credit metrics of both countries, and any escalation in clashes would put downward pressure on sovereign credit support.

Moody's cuts India's GDP growth forecast to 6.3%

Moody's Ratings on Tuesday, May 6, cut India's GDP growth projections for 2025 to 6.3 per cent, from 6.5 per cent, saying economies globally will see a slowdown on account of heightened US policy uncertainty and trade restrictions.

In its Global Macro Outlook 2025-26 (May update), Moody's said geopolitical stresses, like tension between India and Pakistan, also have a potential downside risk to its baseline growth forecasts. Costs to investors and businesses are likely to rise as they factor in new geopolitical configurations when deciding where to invest, expand, and/or source goods, Moody's said.