Operation Sindoor: Limited impact on D-St? stocks & sectors in focus as India strikes Pak terror bases

As a retaliation to the terror attack in Pahalgam in April, India has conducted a military precision strike, named ‘Operation Sindoor’ and targeted terrorist camps in Pakistan as well as Pakistan-occupied-Kashmir in the early morning on Wednesday, May 7. Amid the rise in volatility, Indian equity markets have remained resilient so far.

After the immediate diplomatic response to the terror attacks on April 22, 2025, Indian military took action after several days of planning and brainstorming. Global organisations including the UN and major economies like the US, UK and others condemned the attacks.

Since the 1990s, several high-stake India–Pakistan episodes including Kargil war, Parliament attacks, Uri and Pulwama- have tested the nerves of markets. A glance at history offers perspective for the India stock markets.

The Sensex has consistently demonstrated a remarkable immunity to sabre-rattling, said domestic brokerage firm Anand Rathi Shares & Stock Brokers, which does not expect a correction beyond 5-10 per cent. "Market corrections, if any, have been modest, short-lived and largely sentiment-driven. Fundamentals have prevailed," it said analyzing data from 11 instances from the past.

The brokerage noted the Indian markets have remained resilient because the probability of full-scale conflict remains low, investors adept at distinguishing noise and fundamentals and the market rebounded swiftly from the crisis jitters. "While short-term volatility is always a possibility, we do not expect a structural impact on Indian equities," said the brokerage firm.

The recent terror attack in Jammu and Kashmir is likely to negatively impact the region’s tourism-driven economy, with trip cancellations already underway. However, the direct impact on listed companies appears limited. Similarly, the impact on defence-related companies is likely to be positive, it said.

Trip cancellation post these terror attacks are not much negative for hotels and aviation companies like Indian Hotels Company and InterGlobe Aviation (IndiGo). On the face of it, defence platform companies like Bharat Forge and defence consumable companies like Solar Industries and Bharat Dynamics may be benefitted. Anand Rathi has a target price of Rs 800 on Indian Hotels, while others remain unrated.

Since the 1990s, full-scale India–Pakistan wars were deterred despite repeated provocation, mainly due to international diplomacy, India’s nuclear risks, economic self-interest, public mood, and evolved strategic doctrines focused on controlled escalation rather than an uncontrolled, full fledged war, noted Anand Rathi.

"Post the Parliament Attack in 2001, India’s response to a flare-up in tensions with Pakistan never escalated beyond high military alert, crossborder tactical strikes and limited air/artillery action. Given the historical precedence and India’s anti-war stance, a full-scale war in response to the Pahalgam Terrorist attack looks unlikely," it said.

 

The brokerage noted that Sensex has seen a highest correction of 13.5 per cent during 2001 Parliament attacks, if we exclude 2020-21 ceasefire violation during the covid-19 pandemic periods. Following that, Sensex dropped 9.5 per cent during Kaluchak Massacre, 8.4 per cent during Pathankot attacks and 6.3 per cent on Mumbai Train blasts.

Of the 11 episodes in the past, two resulted in a war-like situation- Kargil War and the Parliament Attack. There was no market correction during Kargil, and even during the Parliament Attack, India outperformed S&P 500 by a large margin. FPI flows were positive during both episodes.

"The average (mean) Sensex correction at lowest points during Indo-Pak tensions was 7.5 per cent and the median, 3.5 per cent. In relative terms, both mean and median were positive, indicating outperformance by India during these periods. FPI flows, also, for the balance, remained positive and turned substantially negative during only two of the 10 episodes," it said.