Why Dalal Street traders didn't flinch after India's Sindoor Op

On a day when India unleashed a rare tri-service precision assault on terror hubs in Pakistan and Pakistan-occupied Kashmir, the stock market displayed the kind of steely resolve that would make a general proud.

The Sensex and Nifty opened with a wobble, momentarily spooked by the pre-market buzz surrounding the military operation. But the indices clawed back into the green within minutes, turning potential panic into poise.

Foreign Institutional Investors (FIIs) — the power brokers of India’s equity narrative — remain firmly on the buy side. “The main catalyst behind market resilience is the sustained FII buying over the last 14 sessions, totaling Rs 43,940 crore in the cash segment,” said Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial. That, along with global macro tailwinds like a weaker dollar, slower growth in the US and China, and lower crude oil prices, is driving India’s relative outperformance. Operation Sindoor hasn’t changed that.

Now, for the flashpoint: in a rare show of coordinated firepower, India’s armed forces — across the Army, Navy, and Air Force — launched Operation Sindoor, targeting nine terror camps in Pakistan and PoK. The move follows a deadly terror attack in Pahalgam that left 26 civilians dead. This marks the first military retaliation of this scale since the 1971 war and signals a major escalation in India’s strategic posture.

And yet, the markets? Unfazed.

“What stands out in Operation Sindoor from the market’s perspective is its focused and non-escalatory nature. We have to wait and watch how the enemy responds to these precision strikes. The market is unlikely to react significantly since the retaliatory strike was widely expected and already priced in,” Vijayakumar added.

Still, undercurrents remain choppy. “Pakistan has termed the strikes an ‘act of war’ and promised retaliation,” warned Prashanth Tapse, Senior VP (Research) at Mehta Equities Ltd. “Markets now hinge on three key triggers — the next military move, global tariff negotiations, and the US Fed’s May 7 policy decision. Volatility is here, and Nifty’s key support lies at 24,171.”

Also read | Tale of 2 countries: Pakistan stock market down 4% post Pahalgam attack, India’s Sensex gains 1.5%

That said, the market has seen this playbook before — and emerged stronger. “Nifty typically dips around 5% during Indo-Pak conflicts, which implies a move from 24,167 (as on April 22) to around 23,000. However, average 3- to 6-month returns post-event range from 7% to 19%, indicating a strong medium-term recovery,” according to Bajaj Broking.

Institutional flows are also undergoing a shift. “There’s a decisive rotation underway,” noted Vijayakumar. “FIIs are pouring money into largecaps while exiting overvalued mid- and small-cap stocks. That pivot is helping keep the indices grounded.”

Devarsh Vakil, Head of Prime Research at HDFC Securities, highlighted the convergence of global events. “This market isn’t reacting in isolation. It’s absorbing Operation Sindoor while also factoring in the India-UK trade deal and China’s rate cuts,” he said. “The situation remains uncertain, but preparation is key — something we’ve been stressing since April 22. The emerging markets’ currency index has hit an all-time high, drawing substantial inflows. Overseas investors continue to buy in the cash market while steadily covering shorts in index derivatives.”

For now, Dalal Street isn’t trading fear. It’s trading flows.