Surgical strike impacts Indian market: What to expect next?

The market posted its biggest decline since the Brexit vote in June, after India said it had conducted "surgical strikes" on suspected militants preparing to infiltrate from Pakistan-occupied Kashmir.

The Nifty ended down 1.76 per cent to 8,591.25, posting its biggest daily percentage fall since June 24, the day after the Brexit vote. Early in the day, the index dropped as much as 2.1 per cent to its lowest intraday level since August 29.

The Sensex closed down 1.64 per cent at 27,827.53.

India carried out 'surgical strikes' on terror launch pads across the LoC in Jammu and Kashmir last night, inflicting "significant casualties" on terrorists and those harbouring them.

The announcement of the sudden action by the army was made today by DGMO Lt Gen Ranbir Singh, 11 days after a terror strike by Pakistan-based terror outfit JeM on an Indian army camp in Uri in Kashmir which left 18 soldiers dead.

After the attack, Prime Minister Narendra Modi had said the attackers will not go "unpunished" and that the sacrifice of 18 jawans will not go in vain.

We look at what experts said on the course of market in the near future.

Dinesh Thakkar (Chairman and Managing Director, Angel Broking)

Markets may remain under pressure over uncertainty about geopolitical situation between two countries and take wait and watch approach in the short term. It is pertinent to note that during 1999 Kargil war, markets eventually bounced back with more than 13 per cent gains between the start to the end of the war. In my view, once the current issue also de-escalates, the markets will revert back to its fundamentals which remain strong for India.

Jimeet Modi, CEO, SAMCO Securities

Indian markets had not witnessed any meaningful correction since last 6 months. The rise of 25% was almost uninterrupted without any significant correction. Often over heated market takes the clue from external events to jumpstart the correction. This time cross border skirmishes seems to be the reason for the bulls to release some pressure in the markets.  

For those investors who are sitting on unrealized gains should book partial profits and raise cash levels, as in any case Indian markets were enjoying premium valuations and it is time to en cash some of them. All the positives are discounted, and therefore in the short term, risk to reward ratio is unfavorable for the bulls. Therefore short term traders and medium term investors should actively consider booking profits and stay on the sidelines.

A fall of 2% in Nifty50 compared to the gains of 25% in previous 6 months should not deter investors to pull the trigger.    

Nitasha Shankar, senior vice president and Head of Research, YES Securities

From a fundamental perspective, markets are still attractive for long term investors. Therefore such dips present a good buying opportunity which is visible in the recovery from the day's lows. Escalation in geo political tensions was the reason behind today's fall in the markets.

Kunj Bansal, ED & CIO - Centrum Wealth Management

After moving up by almost 30% in last six months, market had been looking for some reasons to take a correction. On economic parameters, no negatives had been visible so market seems to have taken recourse to a non-economic reason to take a correction. Today's correction will be followed by RBI's monetary policy review on Tuesday, October 4. Taking these 2 events together, we can witness some kind of consolidation in the market before it takes a fresh direction. Post these events, September quarter results are likely to be good and we should see market sentiment improving accordingly.

Shreyash Devalkar, Fund Manager - Equities, BNP Paribas Mutual Fund

Key benchmark indices traded deep in the red today as geo-political tensions grew due to surgical strikes conducted by the Indian army on terror launch pads last night, 28 September 2016 across the Line of Control (LoC) in Pakistan, killing several terrorists and causing significant casualties to their hideouts. The Sensex hit a one-month low and the Nifty hit more than a one-month low in afternoon trade, after witnessing a steep fall.

Both the benchmark indices closed the day with losses of more than 1.5%. Overseas stock markets on the other hand traded with some strength as investor sentiment was buoyed by a surge in the oil price after major oil producers agreed to cut production levels.

All the sectoral indices on the National Stock Exchange (NSE) traded in negative territory with the metals, healthcare and PSU banks indices losing more than 3% for the day.