Indian assets underperform as geopolitical worries hit sentiment

Stocks and bonds tumbled in India, as traders braced for a potential worsening of the geopolitical situation with neighbouring Pakistan, reports Bloomberg.

Indian shares were the worst performers in Asia on Friday, while the rupee and the nation’s bonds also slid, indicating growing angst among traders over any further ramping up of tensions between the two nuclear-armed nations.

Tensions flared after gunmen killed dozens in the Indian territory of Kashmir earlier this week. India has accused Pakistan of being involved in Tuesday’s attacks, a claim Pakistan has denied.

“Markets are falling as traders are fearful of Indian retaliation, and are booking profits ahead of the weekend,” said Sharmila Joshi, an independent market strategist.

The equity benchmark NSE Nifty 50 Index fell 1.5 per cent in Mumbai, the most since April 7. The selloff follows recent sharp stock gains on hopes for India to be relatively better placed amid the global tariff tumult due to the nation’s domestic-driven economy.

The rupee fell as much as 0.5 per cent to 85.66 per dollar, its worst drop in two weeks. Bonds also slid, with the 10-year yield rising five basis points to 6.37 per cent. Friday’s losses wiped out weekly gains in the currency and bonds.

“The bond market has rallied significantly over the past month and a degree of consolidation is necessary,” said Ashhish Vaidya, head of treasury at DBS Bank Ltd. “There are geopolitical factors that are playing out right now while clarity on global tariffs is also pending. There is scope for the 10-year yield to rise 10 basis points to around 6.45-46 per cent in the current environment.”

Foreign institutional investors have turned buyers of local stocks in recent sessions. Global funds bought more than $3.5 billion of Indian shares in seven sessions through Thursday, on a net basis, provisional data shows. Meanwhile domestic funds that had been a key support to markets in previous bouts of global uncertainty have begun to take profit.

Losses in the stock market were broad on Friday, with gauges of small and mid-cap shares falling more than 3.0 per cent each. Banks were the biggest drags on the Nifty 50. Axis Bank Ltd slid more than 4.0 per cent as analysts trimmed their earnings estimates following the lender’s latest results. Key firms including Reliance Industries Ltd and Maruti Suzuki India Ltd will be reporting results later in the day.