Tale of the Tape 

Good evening everyone.

Nifty and Sensex ended with minor gains after India-Pak tensions were offset by bullishness over the UK free trade deal. Midcaps (+1.6%) and Smallcaps (+1.4%) recovered after yesterday’s ugly fall. The advance-decline ratio was in favor of the bulls (4:1). Here’s the Nifty500 heatmap:

Except FMCG (-0.5%) and Pharma (-0.3%), all other sectors ended in the green. Auto (+1.7%) was the top gainer, followed by Real Estate (+1.1%).

Operation Sindoor crushed terrorist camps in Pakistan! Read our top story on how markets may react in the weeks ahead.

Wondering who are the top sectoral winners & losers after the India-UK FTA? Get all the deets below.

Paytm, BSE and MRF saw big moves today. Check out their charts below to find out why.

Tata Motors (+5%) was the top Nifty gainer after getting shareholder approval to demerge its CV business.

Indigo and SpiceJet ended with minor cuts after they cancelled hundreds of flights due to airport closures in North India.

Avenue Supermarts was in focus after HSBC downgraded the stock and cut its target price to Rs 3,500 p/sh vs Rs 4,500 p/sh earlier.

Results reaction. Aarti Drugs was locked in a 20% upper circuit. Piramal Enterprises rallied +8%.

Navin Fluorine will invest Rs 120 cr to manufacture cooling fluids used in data centers.

KPIT Tech will acquire Caresoft’s Global Engineering Solutions business for $166 million

Geopolitics
How’s The Josh? High Sir!

India has responded to the terror attacks in Pahalgam with ‘Operation Sindoor’ aka missile strikes at 9 terrorist camps in Pakistan. Reports say the GOI has destroyed terrorist infra, staging camps and even killed a bunch of militants.  

Despite the escalation in Indo-Pak tensions, markets have remained relatively quiet. There’s two big reasons for that. Firstly, Indian markets have gotten pretty good at not overreacting to all this sabre-rattling. In the aftermath of most Indo-Pak conflicts since 1999, markets haven’t corrected more than 2%:

• During the Kargil War (May 99 - July 99), the maximum correction was just -0.8%.

• After Uri & Pathankot, markets dropped -2.1%

• And during Pulwama and Balakot, we saw a -1.8% drawdown.

The big outlier is the 2001 Parliament attack which saw a nearly ~14% correction. Despite all this though, markets tend to bounce back pretty quickly, with losses being erased usually within one month of a serious episode. PS - Bernstein says buying the dip is the “best strategy”. 

Finally, it’s possible that things are quiet because this isn’t over yet. During Uri or Balakot, India responded to an attack and that ended things quickly. This time though, we’ve already seen over 20 people dead in firing across the LoC today. Additionally, Pakistan has promised to retaliate even more. So escalation is a concern and needs to be monitored. FYI - Anand Rathi believes that even if there is serious escalation, Nifty is unlikely to correct more than 5%-10%.

TL;DR: Indian markets have held up fine in the past. Stocks in general react far more to fundamentals & macros than border issues. Watch out for more escalation but don’t really panic either way.

Specials
Buy The Dip In Zomato!

Eternal aka Zomato is down -20% from its all-time highs. Is the worst priced in or should you expect further pain? Check out our latest YouTube video for all the answers and bonus trade ideas by SEBI registered experts.