Sensex, Nifty50 slip below previous close as LoC tensions and global uncertainty weigh on sentiment

Indian benchmark indices, the Sensex and the Nifty50, opened higher on Wednesday but soon slipped below the previous day's close, weighed down by weak domestic sentiment amid rising geopolitical tensions between India and Pakistan.

The Sensex opened slightly higher at 80,912.34, gaining 165.56 points, but quickly slipped below the previous close of 80,746.78, and is currently trading at 80,738.32, down 8.46 points. Meanwhile, the Nifty50 opened at 24,431.50, up 17.1 points from its previous close of 24,414.40, but has since declined to 24,390.60, down 23.8 points.

"A breakdown was averted, which encouraged a quick bounce and positive close, with more than 50% of Nifty50 constituents closing above the previous day's VWAP. But with only 20% of them pushing above the previous day's high, the momentum is clearly missing. A 'buy on dips' approach is preferred today, but with cautious eyes on 24,280, below which vulnerability is expected to set in. In the event of a sharp crackdown, we expect 24,050-23,930 to provide a window for Nifty to consolidate and avoid a collapse to the 23,670-460 region. Alternatively, direct rise past 24,600 would clear the path for 24,770-850," said Anand James, chief market strategist, Geojit Investments Ltd, in a research note.

Despite the ongoing tensions along the Line of Control (LoC), the Indian markets closed higher on Tuesday. The BSE Sensex gained 105.71 points to end at 80,746.78, while the NSE Nifty 50 added 34.80 points to settle at 24,414.40. However, heightened uncertainty due to Operation Sindoor and rising cross-border unease may weigh on investor sentiment today.

“Indian markets ended slightly higher on May 7, as investor sentiment remained cautious amid escalating geopolitical tensions and anticipation surrounding the U.S. Federal Reserve’s policy decision. Among sectoral performers, the Nifty Auto index led the gains with a 1.66% rise, followed by Consumer Durables and Media, which advanced 1.18% and 1.06%, respectively. Metals, Energy, Realty, and Banking stocks also saw moderate gains. On the flip side, FMCG and Pharma were the only major laggards, declining 0.52%,” said Bajaj Broking Research in a note.

On the global front, cues remain mixed. The US Federal Reserve left its benchmark interest rates unchanged in the 4.25-4.5% range, citing economic sluggishness, unstable inflation, and uncertainty due to the ongoing trade war. Nonetheless, US equity markets ended higher, with the Dow Jones gaining 284.97 points to close at 41,114, while the S&P 500 and Nasdaq also posted modest gains.

The Asian markets opened on a firm footing, reflecting optimism from the US Fed’s status quo on rates. Japan’s Nikkei 225 was up 0.13%, Hong Kong’s Hang Seng rose 0.22%, and Korea’s Kospi added 0.20%. The Taiwan and Shanghai indices also traded in the green, showing resilience despite global headwinds.

In commodities, crude oil prices edged up, with WTI at $58.32 and Brent at $61.30. Meanwhile, gold prices surged, driven by geopolitical concerns. The 24-carat gold rate touched ₹97,380 per 10 gm.

Foreign and domestic institutional investors remained net buyers on Tuesday, injecting confidence into the market. However, rising geopolitical risks may keep the near-term outlook cautious.

“Despite the cautious environment, foreign institutional investors (FIIs) continued their bullish stance, injecting over ₹43,900 crore into Indian equities over the past 14 consecutive sessions,” said the Geojit note.

The brokerage expects the Nifty50 to remain in a consolidation phase, trading within the 24,000-24,600 range, which it has maintained for the past eight sessions.

“Only a sustained close above the resistance zone of 24,550–24,600 could pave the way for an upward move towards the December 2024 high of 24,850 in the near term,” said the Bajaj Broking note.

However, market volatility is likely to stay high amid ongoing geopolitical tensions, updates on trade tariffs, and the ongoing Q4 earnings season.