Market Plunges as Indo-Pak Tensions Rise: Good Time to Buy Stocks?

The BSE Sensex dropped as much as 2 percent, while the NSE Nifty fell as much as 2.1 percent by noon on Thursday.

The Indian rupee fell 0.7 percent, the most since June, to 66.91 per dollar. (Photo: iStock)

Indian equities plunged while the bond and rupee extended losses after the Indian government said that it has conducted surgical strikes on Wednesday night on terrorist launch pads in Pakistan.

The S&P BSE Sensex dropped as much as 2 percent to 28,719, while the NSE Nifty fell as much as 2.1 percent to 8,558 by 12.47pm on Thursday. This was the benchmarks’ biggest single-day fall since the 24 June Brexit vote.

The Indian rupee fell 0.7 percent, the most since June, to 66.91 per dollar. The yield on sovereign notes due September 2026 surged 8 basis points to 6.86 percent and are set for the biggest jump for a benchmark 10-year security since August 2015.

Investors were sitting on profits and therefore chose to take them off the table in the backdrop of fresh tensions between the India and Pakistan. While I don’t see the issue escalating further, it would be advisable for investors to wait for a week or so before making a move.

G Chokkalingam, Founder, Equinomics Research & Advisory

While the initial fall has been severe, the market has managed to bounce back a bit after reaching the low of 8,558, Heman Kapadia of KR Choksey Securities said.

We were in a corrective phase and this news has just provided the excuse to fall further. The Nifty support levels to watch out for are 8,620 and then 8,530. A close above 8,620 will be crucial for our market.

Hemen Kapadia, Senior VP-Institutional Equities, KR Choksey Securities

Dipan Mehta, member of the BSE said there could be an impact on the price to earnings multiple of the market.

This is definitely a knee-jerk reaction but a lot of uncertainty has crept into the market. What you need to understand is that things like these are difficult to predict, we need to gauge the mood of the FIIs. So my sense is that we are in the middle of a highly fluid, uncertain situation. What a situation like this will do is that it will impact the price-to-earnings multiple that has risen significantly over the last few months. Technically too, we have breached many key levels so this is a wait and watch situation.

Dipan Mehta, Member, BSE

For Jay Thakkar, senior technical analyst, Sharekhan the fall presents a good opportunity for long-term investors to buy good quality stocks.

This is clearly a panic reaction. Long-term investors need not panic over this situation. Nifty has seen strong support around 8,500 levels and it reversed from 8,558 on Thursday as well. Any event-based high or low is very significant. Historically too, any war-like situation sees a major long-term bottom for any market. So to get an indication that the market has bottomed out, it will have to close above the 8,800 mark. So the range for the market remains between 8,800-8,500.

Jay Thakkar, Senior Technical Analyst, Sharekhan

All said and done, there is no reason to panic unless Pakistan escalates matters, said Deven Choksey, MD, KR Choksey Investment, adding the long-term fundamentals of our markets remain intact.

Normally, this would be a great time to buy stocks but I would advise caution. More importantly, investors need to be very stock-specific and only stick to good quality names.

Deven Choksey, MD, KRChoksey Investment Managers

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