Fears of US Recession and India-Pakistan Border Tensions Rattle Investors
Indian equity markets witnessed a dramatic intraday reversal on Friday, with benchmark indices plunging sharply after opening with strong gains. The BSE Sensex surged 935.69 points or 1.16 percent in early trade to hit an intraday high of 81,177.93. However, a wave of selling gripped the markets post-noon, dragging the index down by 1,009.34 points to 80,168.59 by 12:30 PM. The NSE Nifty also declined significantly, losing 254.95 points from its peak to trade at 24,238.50, weighed down by broad-based profit booking and growing global headwinds.
Highlights:
Sensex plunges 1,009 points from day’s high: From 81,177.93 to 80,168.59 intraday.
Nifty drops 254.95 points from session high: Slipping below the crucial 24,250 level.
Sharp reversal after morning rally: Selling triggered by global and geopolitical risk factors.
Drivers Behind Market Volatility
Profit Booking, Oil Surge, and US Economic Data Weigh Heavily
One of the foremost factors contributing to Friday’s volatility was widespread profit booking by traders ahead of critical US economic data releases. The highly anticipated non-farm payrolls report is due later today, and investors opted to lock in gains given the uncertain macroeconomic outlook. With markets already trading near record highs, traders chose caution, fearing a potential negative surprise in global indicators.
Simultaneously, rising crude oil prices added another layer of pressure on Indian equities. Brent crude surged nearly 2 percent overnight after US President Donald Trump threatened to impose secondary sanctions on Iran, citing a stalemate in US-Iran nuclear talks. The oil rally is expected to continue with OPEC+ preparing for a potential output hike in the upcoming meeting. For India, which imports over 80 percent of its crude oil, rising prices elevate fiscal risks and inflationary pressures.
Adding to investor anxiety was fresh evidence pointing toward a potential economic slowdown in the United States. The US Commerce Department’s initial estimate indicated that the economy contracted at an annualised rate of 0.3 percent in Q1 2025, following a 2.4 percent expansion in Q4 2024. A prolonged slowdown in the world’s largest economy is a red flag for global markets, especially for export-heavy and emerging economies like India.
Further intensifying the selloff were geopolitical tensions between India and Pakistan. For the eighth consecutive night, the Pakistan Army reportedly engaged in unprovoked firing across multiple sectors along the Line of Control (LoC) in Jammu and Kashmir. The Indian Army responded in kind, raising fears of escalation in a region already fraught with volatility. Heightened tensions at the border tend to spook foreign investors and trigger risk aversion, leading to a flight to safety.
Highlights:
Heavy profit booking ahead of US non-farm payrolls: Investors chose to reduce risk amid global uncertainty.
Crude oil prices surged nearly 2% overnight: Driven by US threats of secondary sanctions on Iran.
US economy shrank 0.3% in Q1 2025: First contraction since the pandemic rebound, raising recession concerns.
India-Pakistan tensions rise: Unprovoked firing reported for eight consecutive nights across LoC sectors.
Valuations Stretched, Time for Caution
Analysts Warn Against Chasing Highs Amid Global Risks
VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that Indian equities are trading at elevated valuations, with the Nifty priced at over 20 times projected FY26 earnings. He highlighted that such stretched valuations, when combined with rising geopolitical tensions and concerns about global growth, create a fragile environment for sustained rallies. Vijayakumar suggested that investors consider raising their cash allocation to weather potential market swings, while maintaining exposure to fundamentally strong holdings.
Anand James, Chief Market Strategist at Geojit, added a technical perspective, pointing out that the Nifty’s inability to close above 24,359 remains a concern. Despite occasional rallies, the index has struggled to sustain upward momentum. However, the presence of long lower wicks on recent candlesticks suggests that buyers are active at lower support levels, indicating demand during dips. According to James, immediate support zones lie in the 24,190–24,119 range, followed by 24,070–23,950, and eventually 23,670, should selling intensify.
He further cautioned that although certain models still project the possibility of a rally toward 25,000, the softening of momentum indicators indicates potential weakness in the near term. Analysts broadly agree that the current environment warrants a cautious approach, with a preference for selective buying and active risk management strategies.
Highlights:
Nifty trading at over 20x FY26 earnings: Valuations are seen as stretched, limiting near-term upside.
Nifty struggling to break past 24,359: Indicates resistance and lack of strong momentum.
Technical support seen at 24,190–24,119 and lower: Buyers active at dips, but caution is advised.
Analysts urge caution and risk management: Focus remains on quality stocks and preservation of capital.
