Indian equity markets witnessed a sharp reversal on Tuesday, May 13, 2025, as benchmark indices tumbled following one of their strongest sessions in years. The Sensex crashed 1,259 points or 1.5 percent, hitting an intraday low of 81,170.99. The Nifty also declined sharply, falling 327 points or 1.3 percent to touch a day’s low of 24,597.60. The market selloff has come as a jolt to investors, especially after the previous day’s euphoria when the Sensex had rallied 2,975 points and the Nifty surged nearly 917 points, registering their best gains in over four years.
Border Tensions and Strategic Uncertainty Shake Confidence
The primary driver behind the sudden reversal is mounting anxiety over India-Pakistan border tensions. Just three days ago, a ceasefire was announced after a four-day military escalation triggered by the brutal Pahalgam terror attack, in which 27 civilians were killed. In response, India launched ‘Operation Sindoor’, targeting and neutralizing nine terror camps across Pakistan and Pakistan-occupied Kashmir. Although hostilities have temporarily paused, investors fear renewed retaliation from Pakistan. Prime Minister Narendra Modi’s address to the nation after the operation praised India’s military and scientific prowess and emphasized the country’s dominance in new-age warfare. Despite this, the geopolitical backdrop remains uncertain, injecting volatility into financial markets.
Global Trade Truce Adds Competitive Pressure on India
Adding to investor anxiety is the recently announced US-China trade truce. The agreement, which reduces tariffs on both sides, has been interpreted as a potential setback for India. China’s increased access to US markets, especially at lower tariffs, could marginalize Indian exporters and tilt the balance of trade competition. G Chokkalingam of Equinomics Research stated that the deal could heighten pressure on Indian industries as China regains a competitive edge in global trade, especially in technology and manufacturing sectors where India has been trying to gain traction.
Subdued Institutional Participation Fuels Market Weakness
Market experts believe Monday’s sharp rally was largely driven by short-covering and aggressive retail and HNI buying, rather than institutional inflows. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that combined net buying by foreign and domestic institutional investors was only ₹2,694 crore during Monday’s session. The lack of strong institutional participation raises doubts about the sustainability of the rally and implies that institutional players may continue to remain cautious amid geopolitical and global economic uncertainties.
Pharma and Defence Stocks Offer Resilience Amid Selloff
While frontline indices reeled under pressure, certain pockets of the market showed resilience. The Nifty Pharma index outperformed all others, with stocks like Dr. Reddy’s, Glenmark, Divi’s Lab, and Aurobindo Pharma registering gains of 3 to 4 percent. This uptick was partly due to expectations that President Trump’s recent executive order would have minimal impact on US generic drug imports. Defence-related stocks also attracted significant buying interest. Hindustan Aeronautics, Bharat Electronics, and Bharat Dynamics surged between 4 to 7 percent, buoyed by PM Modi’s emphasis on self-reliance in defence manufacturing following Operation Sindoor.
On the technical front, analysts at ICICI Securities pointed out that despite the dip, broader market structure remains intact. They identified 24,400 as a key support level for the Nifty, corresponding to the 50 percent retracement of the recent rally from 21,743 to 24,944. Aishvarya Dadheech, CIO at Fident Asset Management, added that although the global risk of recession seems diminished, market volatility will persist as domestic geopolitical uncertainty has not entirely dissipated. He emphasized that fundamentally, the Indian economy is stronger than it was two quarters ago, supported by decent earnings growth across sectors.
Despite Tuesday’s bloodbath, analysts remain cautiously optimistic about medium-term prospects. However, the near-term may remain turbulent as geopolitical developments, global trade dynamics, and institutional flows continue to shape market direction.
