India-Pakistan ceasefire: Will Nifty50 recover 2-day Rs 7.1 crore m-cap loss soon?

Indian stock market outlook for May 12, 2025: After both India and Pakistan have agreed to a full and immediate ceasefire on the request of the neighbouring nation following around 100-hours of border tensions, Indian equities are likely to see a positive impact when trading resumes on May 12, 2025.

Escalating India-Pakistan tensions and India equities m-cap loss over past two trading sessions

After the India-Pakistan tensions escalated post Operation Sindoor by India as a retaliation to the Pahalgam attack, Indian equities witnessed high volalitity with a market capitalization (m-cap) loss to the tune of Rs 7.1 lak crore over the last two trading sessions.

On Friday (May 9, 2025), Indian equities after sharp sell-off intraday ended off day’s low, with the broader Nifty50 and Sensex indices both ending 1.1 per cent lower. Nifty50 held on to 24,000 levels with a cut of 265.8 points, while the BSE 30-share Sensex ended with a fall of 880 points at 79,454.47.

Meanwhile, the volatility index, India VIX- also a metric of market fear- ended higher by 2.97 per cent at 21.63, surging to its highest level in a month’s time.

Both the indices saw a drag reflecting investor sentiment who preferred to remain on the sidelines anticipating further escalation in the war.

Sectoral indices ended mixed, with PSU Banks outperforming, followed by consumer durables, while the laggards were realty and financial services.

Likely impact of Ceasefire on Indian equities

While Gift Nifty Futures in early trade on Monday will signal the likely direction for markets post the big ceasefire move, there is likely to be a turnaround in the investor sentiment who chose to avoid risky bets amid escalation of the war. Historically de-escalation of geo-political tension has led to relief rally in the Indian stock market.