After crossing the 10,850 level on Monday, the Nifty50 slipped below 10,750 on Tuesday after the Indian Air Force carried out an air strike on terror camps in Pakistan. According to analysts, the negative sentiment from the attack might get prolonged.
Confirming the attack, foreign secretary Vijay Gokhale said that India has struck the biggest training camp of JeM and expect Pakistan to dismantle remaining JeM camps. He also added that this attack was a pre-emptive strike on JeM after receiving credible information that the terror outfit was planning more attacks in India.
The benchmark index, S&P BSE Sensex, fell nearly 500 points in the early morning trade while the Nifty50 slipped over 1 percent. The indices, however, recovered in the noon trade after the government confirmed the attacks.
According to Vinod Nair, head of research at Geojit Financial Services, the geopolitical risks have turned for the worse with a possibility that this calamity can get extended.
However, Adrian Mowat contradicts saying that the markets should not react too strong on the India-Pak tensions. "Short-term investors should maintain caution but long-term need not worry as investors have seen such incidents between India and Pakistan before," he said in an exclusive interview to CNBC-TV 18.
G Chokkalingam, founder and managing director at Equinomics Research also believes that the decline was a knee-jerk reaction and the markets are expected to recover fully.
"Any war between these two countries is unlikely at this juncture due to the forthcoming election in India. Any political compulsion from Pakistan will lead to a major reaction from India," Chokkalingam adds.
On the other hand, Ajay Srivastava, MD at Dimensions Corporate Finance, suggests the investors to either stay on sidelines or take off positions in stocks which are likely to see a direct bearing if the situation escalates.