The Indian stock market experienced a particularly turbulent week from Monday, 5 May to Friday, 9 May 2025. What began with a semblance of optimism, even pushing key indices to new highs for the year, quickly transformed into a period of significant selling pressure.
By the close of trading on Friday, both the BSE Sensex and the NSE Nifty 50 had registered notable declines, marking their second consecutive week in the red and snapping previous winning streaks.
- Early Week Optimism: The week commenced with the Sensex and Nifty scaling new 2025 highs on Monday, 5 May.
- Sharp Reversal: However, this positive momentum was short-lived, with both benchmark indices tumbling over 1% by the week's end on 9 May.
The primary factor unsettling the markets was the sharp escalation in geopolitical tensions between India and Pakistan, particularly following reports of "Operation Sindoor". This development cast a long shadow over investor sentiment, leading to widespread caution and a palpable sense of fear.
Consequently, many investors chose to book profits and reduce their exposure to risk. The financial impact was considerable, with investor wealth eroding by nearly ₹5 lakh crore in a single trading session on 8 May, and by over ₹7 lakh crore over just a few sessions during the week.
Indian Stock Market Performance This Week: How Nifty and Sensex Fared
The benchmark indices reflected the week's nervousness through significant declines.
Nifty 50 Weekly Performance: Key Levels Breached
The Nifty 50 index, a barometer of the top 50 companies listed on the National Stock Exchange, saw a considerable fall.
- The index began the trading week, based on its closing value from Friday, 2 May, at 24,346.70 points.
- By the close of trading on Friday, 9 May, the Nifty 50 had fallen to 24,008.00 points.
- This constituted a weekly decline of approximately 338.7 points, translating to a fall of about 1.39% to 1.40%.
- Significantly, the Nifty 50 dipped below the psychologically important 24,050 mark by the end of the week.
BSE Sensex Weekly Performance: Sharp Declines Recorded
The BSE Sensex, comprising 30 of the largest and most actively traded stocks on the Bombay Stock Exchange, mirrored the Nifty's trajectory.
- The Sensex commenced the week from its 2 May closing figure of 80,501.99 points.
- It concluded the week on Friday, 9 May, at 79,454.47 points.
- This represented a weekly drop of approximately 1047.52 points, or about 1.30%.
- The Sensex witnessed sharp single-day erosions, including a dip of 412 points on 8 May and a more substantial plunge of 880 points on 9 May.
Broader Market Trends: Midcaps and Smallcaps Under Pressure
The selling pressure was not confined to the large-cap stocks. In fact, mid-cap and small-cap segments of the market faced even more pronounced declines during the week.
- On Friday, 9 May, small-cap and mid-cap indices fell by 1.8% and 1.2%, respectively. Earlier in the week, on Tuesday, 6 May, PSU Banks and Midcaps had already plunged.
- The BSE Mid Cap index ended 0.1% lower and the BSE Small Cap index finished 0.3% down on 9 May, indicating a slightly better performance than earlier in the day but still reflecting the overall negative sentiment.
The sharper fall observed in mid-cap and small-cap stocks relative to their large-cap counterparts is a characteristic feature of a "risk-off" market environment. During periods of heightened uncertainty and fear, investors tend to liquidate their positions in smaller companies first.
Deciphering the Market Fall: Why Did Indian Shares Drop This Week?
Several interconnected factors contributed to the sharp decline in Indian share prices over the week, with geopolitical tensions being the dominant theme.
The "Operation Sindoor" Effect
The most significant catalyst for the week's downturn was the alarming escalation of geopolitical tensions between India and Pakistan. This followed India's "Operation Sindoor" on Thursday, 8 May, which reportedly targeted terrorist infrastructure, and subsequent retaliatory drone and missile strikes by Pakistan across several Indian cities.
- Media reports detailed multiple overnight drone and munition attacks by Pakistani forces along the western border.
- The Indian government later confirmed that its armed forces had neutralised Pakistani air defence systems in response.
Fear of Escalation
These military actions fuelled grave concerns among investors about the possibility of a prolonged conflict, or even a more serious, full-blown confrontation between the two nuclear-armed nations. This prospect injected a high degree of uncertainty into the market.
Investor Reaction: Caution and Profit Booking
Faced with this heightened uncertainty, investors reacted predictably by unwinding riskier positions and booking profits. There was a notable urgency to sell, particularly towards the end of the week, as many feared further negative developments over the weekend. This was clearly reflected in the sharp market falls observed on Thursday and Friday.
Rupee Depreciation
Adding to the bearish sentiment, the Indian Rupee also came under pressure, weakening significantly against the US dollar and hitting a 2-year low on 8 May. A falling currency can often exacerbate negative market sentiment.
Which Indian Sectors Gained?
Despite the pervasive negativity, some sectors and specific stocks managed to shine, largely driven by the week's unique circumstances or strong company-specific news.
Defence Sector on the Rise
The standout performers of the week were undoubtedly defence-related stocks. These shares experienced a significant boom, driven by expectations of increased government defence spending and a surge in orders amidst the heightened border tensions.
- Companies such as Bharat Electronics saw its stock gain 3.4%, while Hindustan Aeronautics rose by 2.1%.
- Paras Defence was another company noted to be a likely beneficiary of the increased focus on the defence sector.
Read more in detail about which stocks are rising in our blog.
Drone Stocks Soar
Closely linked to the defence sector's rally, drone manufacturing stocks also experienced a sharp ascent. Some of these stocks rallied significantly, with IdeaForge Technology reportedly surging up to 18%. This was attributed to the prominent role drones played in the reported military actions.
- News of India deploying advanced assets like SkyStriker kamikaze drones in precision strikes further fuelled positive sentiment in this niche sector.
Select Stock-Specific Gains Driven by Earnings/News
Beyond the defence theme, several individual companies saw their share prices rise due to positive earnings reports or other significant corporate developments:
- Tata Motors: The automotive giant's shares were a notable gainer. The stock initially soared by 5% on 7 May and was among the top gainers on 9 May. This positive momentum was largely attributed to a demerger vote that confirmed the creation of two new auto giants, a move seen as value-accretive by investors.
- Larsen & Toubro (L&T): The engineering and construction conglomerate's stock jumped 4% after it reported a 25% rise in its fourth-quarter profit and was also a top gainer on 9 May. For the quarter ending March 2025, L&T's consolidated sales grew by 17.28% and net profit increased by 13.96% year-on-year.
- Titan Company: Shares of the lifestyle products company surged over 4% on 9 May. This followed news of a 13% increase in its consolidated profit for the March quarter, although another source indicated a slight year-on-year dip in consolidated net profit for Q4 FY25 despite a strong 24.53% sales growth. The market, however, clearly reacted positively to the overall performance.
- Yes Bank: The private sector lender's stock surged by 8% to 10% during the week on the back of reports that Japan's SMBC (Sumitomo Mitsui Banking Corporation) was considering acquiring a controlling stake.
- Union Bank of India: The public sector bank's share price jumped 6% following a strong surge in its Q4 net profit.
- PSU Banks and Consumer Durables: These broader sectors displayed some resilience, managing to trade in positive territory on Friday, 9 May, even as the wider market experienced a significant sell-off.
The rally in defence and drone stocks is a direct and immediate consequence of the conflict situation, a classic example of a "conflict premium" being priced into specific stocks as investors anticipate increased government expenditure in these areas.
Simultaneously, while the overall market sentiment was decidedly bearish, strong company-specific news, such as robust earnings from L&T and Titan or positive corporate restructuring at Tata Motors, enabled these individual stocks to defy the negative trend. This underscores the enduring importance of individual stock fundamentals, even when broader market conditions are challenging.
Sectors Under Siege: Which Parts of the Market Were Hit Hardest?
The selling pressure during the week was widespread, affecting numerous sectors as investor confidence waned.
- Broad Sectoral Pullback: The extent of the negative sentiment was evident on Friday, 9 May, when all 13 major sectoral indices were reported to be trading in the red during morning hours. A day earlier, on 8 May, all sectoral indices except for Nifty IT and Media had ended with losses.
Realty Sector Bleeds
The real estate sector was particularly hard hit, experiencing significant losses.
- The Nifty Realty index, a key indicator for this sector, fell by nearly 4% on 9 May and had already declined by 2.47% on 8 May.
Travel, Tourism, and Airline Stocks Nosedive
Sectors directly impacted by travel and movement faced severe pressure. This was largely due to heightened security concerns and the reported shutdown of 27 airports for civilian flights.
Hospitality Stocks Tumble
Similarly, hospitality stocks also saw their values tumble as the implications of drone strikes and rising regional tensions became apparent.
Banking Sector Pressure
The banking sector, a heavyweight in the Indian market, was generally under pressure, with private banks feeling a significant impact.
- On 9 May, major banking stocks like ICICI Bank and HDFC Bank, along with Reliance Industries, were among the biggest drags on the Sensex.
- ICICI Bank and Power Grid Corporation each saw their stock prices drop by around 3% on that day.
Other Affected Sectors
The risk aversion spread to various other segments of the market:
- Metals: This sector witnessed notable selling pressure.
- Auto: Despite individual stock gains like Tata Motors, the broader Nifty Auto index ended with hefty losses on 8 May.
- Healthcare & Pharma: These defensive sectors also saw losses.
- FMCG (Fast Moving Consumer Goods): Stocks in this sector traded in the red.
- Companies with Border Exposure: Specific companies with significant operations or exposure to states bordering Pakistan, such as Adani Ports, Reliance Industries, NHPC, and Vedanta, saw their stocks trade lower due to the direct implications of the escalating tensions.
The reasons for these sectoral declines varied. Sectors like airlines, tourism, and hospitality suffered direct operational impacts from events like airport closures and the general discouragement of travel.
For sectors such as realty and banking (particularly private banks), the sell-off likely stemmed from broader economic uncertainty and fears of a slowdown or increased financial stress if tensions were to persist.
Big Money Moves: What FIIs and DIIs Did This Week
Despite the market turmoil, the investment patterns of large institutional investors, both foreign and domestic, presented an interesting picture.
Foreign Institutional Investors (FIIs): Consistent Buyers Despite Turmoil
Foreign Institutional Investors, or FIIs, largely continued their buying streak in Indian equities for the week of 5 May to 9 May 2025, before turning net sellers on the final day.
- For the week, FIIs made net purchases in the cash segment amounting to approximately ₹5,087.5 crore. This was calculated from daily figures: net buying of ₹497.8 crore on 5 May, ₹3,794.5 crore on 6 May, ₹2,585.9 crore on 7 May, and ₹2,008.0 crore on 8 May, followed by net selling of ₹3,798.7 crore on 9 May.
- As of 7 May, this pattern had marked the 15th consecutive session of net FII inflows, indicating a persistent buying interest.
- It was also noted that FIIs showed particular interest in acquiring defence-related stocks during this period.
Domestic Institutional Investors (DIIs): Providing Crucial Support
Domestic Institutional Investors, which include entities like mutual funds and insurance companies, also emerged as strong net buyers, injecting substantial capital into the market.
- DIIs' net purchases in the cash segment for the week totalled approximately ₹10,451 crore. This was derived from daily data: net buying of ₹2,788.7 crore on 5 May, net selling of ₹1,397.7 crore on 6 May, net buying of ₹2,378.5 crore on 7 May, net selling of ₹596.2 crore on 8 May, and strong net buying of ₹7,277.7 crore on 9 May.
- DIIs often act as a counterbalancing force to FII activity, and their buying during the week helped to provide some support to the market and absorb some of the selling pressure.
The continued net buying by both FIIs (for most of the week) and DIIs amidst a sharp market correction driven by geopolitical fears is a significant observation.
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Rupee Under Pressure: Indian Currency's Weekly Performance Against USD
The Indian Rupee (INR) had a volatile week and depreciated against the US Dollar (USD) as geopolitical concerns weighed on currency markets.
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Rupee Weakens: The Rupee experienced downward pressure, hitting a 2-year low on 8 May. On one of the trading days during the week, it dipped to a session low of 85.8425 against the US dollar before recovering slightly to 85.50. This recovery was likely aided by intervention from the Reserve Bank of India.
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Exchange Rate Fluctuation: Over the course of the week, the USD/INR exchange rate saw notable movement. The US dollar reached a high of 86.083 against the Rupee on Friday, 9 May. This was in contrast to a low point for the USD (and thus a stronger Rupee) of 84.197 on Tuesday, 6 May.
For context, the Rupee had closed around 83.96 per US dollar on the preceding Friday, 2 May. Overall, the value of the US dollar increased by approximately 1.038% against the Rupee during the week, signifying a depreciation of the Indian currency.
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RBI Intervention: It is understood that the Reserve Bank of India (RBI) likely intervened in the foreign exchange market by selling US dollars, probably through state-run banks. This action would have been aimed at curbing excessive volatility in the Rupee's value and providing some support to the currency amidst the heightened risk environment.
The Rupee's depreciation serves as a direct reflection of the heightened risk perception and the potential for capital outflows that are often associated with periods of geopolitical instability.
A weaker currency can also have broader economic implications, such as contributing to imported inflation.
Corporate Corner: Key Company News and Q4 Earnings This Week
Amidst the market volatility, several companies were in the news due to quarterly earnings announcements and other corporate developments.
- Tata Motors in the Spotlight:
- The company's share price saw a significant jump following a crucial demerger vote. This vote confirmed the creation of two new, distinct auto giants, a development viewed positively by the market. Tata Motors shares generally showed positive movement throughout the week.
- Read more about Tata Motors Demerger news on our blog.
- Yes Bank Stake Sale Buzz:
- The private lender's stock surged by approximately 10% during the week. This was fuelled by reports that Japan's Sumitomo Mitsui Banking Corporation (SMBC) was seriously considering acquiring a controlling stake in Yes Bank, with discussions reportedly involving the State Bank of India (SBI) and the RBI.
- Read more about the news on our blog.
- State Bank of India (SBI) Q4 FY25 Results:
- Although announced on 3 May, just prior to the week in focus, SBI's results provided important context. The country's largest lender reported a 10% year-on-year decrease in its fourth-quarter profit, but this figure still managed to beat market expectations.
- Furthermore, SBI achieved a record annual profit and announced a record dividend for its shareholders. The bank's stock registered gains on Friday, 9 May.
- For detailed SBI Results Analysis, head to our blog.
- Other Major Earnings & Corporate Updates:
- Larsen & Toubro (L&T): For the fourth quarter of FY25, L&T's consolidated net profit rose by 13.96% to ₹3,358.84 crore, while its sales increased by 17.28%. The stock reacted positively to these strong numbers.
- Titan Company: The company reported a 24.53% increase in consolidated sales for Q4 FY25, reaching ₹18,058 crore. Its net profit for the quarter stood at ₹1,047 crore. Despite one report indicating a slight year-on-year dip in net profit, another highlighted a 13% profit increase which led to a stock surge.
- Adani Enterprises: The company reported a significant surge in its Q4 FY25 net profit, which was primarily attributed to an exceptional gain. Adani group stocks, in general, had surged on Monday, 5 May.
- Urban Company: The home services platform filed its Draft Red Herring Prospectus (DRHP) with market regulators for a proposed public issue aiming to raise ₹1,900 crore.
- BEML: The defence and engineering company declared a second interim dividend of ₹15 per equity share for the financial year 2024-25.
- Shyam Metalics: For Q4, the company's revenue rose by 15%, while its profit after tax (PAT) remained nearly flat compared to the previous year.
- Cholamandalam Financial Holdings: The financial services company reported a 19% growth in its consolidated PAT for the fourth quarter.
- Intellect Design Arena: The fintech company posted a Q4 PAT of ₹135 crore, and its stock rose following the announcement.
- Asian Paints: The paint major reported a 23.29% year-on-year decline in its Q4 net profit. Read full result analysis on our blog.
- Britannia Industries: The FMCG company saw its Q4 net profit increase by 4.55% year-on-year.
While strong individual corporate earnings and positive news from companies like Tata Motors, L&T, and Yes Bank provided some support to their specific stocks, the overwhelming negative macro sentiment, driven by geopolitical concerns, largely dictated the overall market direction for the week.
Nevertheless, these instances show that even within a struggling sector, such as auto which faced headwinds, company-specific catalysts like Tata Motors' demerger can lead to outperformance.
From the Regulator's Desk: SEBI's Latest Proposals
The Securities and Exchange Board of India (SEBI), the country's market regulator, was active during the week with new proposals aimed at refining market operations.
Flexibility for Investment Advisers and Research Analysts
SEBI put forth a proposal to offer greater flexibility to investment advisers (IAs) and research analysts (RAs) regarding their mandatory deposit requirements.
- The proposal suggests allowing IAs and RAs to use units of liquid mutual funds to meet these deposit norms. These mutual fund units would need to have a lien marked in favour of SEBI.
- This would serve as an alternative to the current option of maintaining the deposit with a bank. The move aims to address certain practical difficulties that IAs and RAs have faced in complying with the existing requirements. SEBI invited public comments on this proposal by 29 May.
New Norms for Index Derivatives Exposure
A SEBI-appointed panel recommended significant changes to how exposure in index derivatives is calculated and managed.
- The key recommendation is to shift towards using "delta-based" position limits. Delta is a risk measure that estimates the change in a derivative's price relative to changes in its underlying security. This approach is intended to better align risk assessment with actual market exposure and to curb excessive speculation.
- The proposed limits under this new methodology are ₹100 billion (approximately $1.2 billion) gross and ₹15 billion net per firm. The overarching goal is to prevent potential market manipulation in India's derivatives market, which is noted to be the world's largest by the number of contracts traded.
SEBI's proposals reflect a proactive stance towards enhancing market infrastructure, addressing stakeholder concerns (as seen with the IA/RA deposit proposal), and mitigating potential risks (particularly concerning derivatives speculation).
The Week Ahead: What Should Investors Keep an Eye On?
As investors look towards the next trading week, several factors will be crucial in shaping market sentiment and direction.
Geopolitical Climate Remains Key
The primary focus for the market will undoubtedly remain the India-Pakistan border situation.
- Any concrete signs of de-escalation could bring significant relief to the markets and potentially trigger a rebound.
- Conversely, any further negative news or an escalation of tensions could extend the current cautious and fearful sentiment. Market participants will be closely monitoring all developments, and global investor sentiment may also shift based on how the regional security situation evolves.
Global Market Cues
Events on the international stage will also play a role:
- Developments in US-China trade talks, which were anticipated over the weekend, could influence global market sentiment at the start of the new week.
- Movements in international crude oil prices will also be watched, as these are often sensitive to geopolitical events in various regions and can impact inflation and import bills.
Domestic Factors
On the domestic front, several elements will be important:
- Continued Q4 Earnings Season: The corporate earnings season for the quarter ended March 2025 is still ongoing. More companies will be announcing their financial results, which will likely lead to stock-specific movements. Some of the companies expected to announce results in the coming days include Apollo Hospitals, Cummins India, IRCTC, and Bata India.
- Economic Data Releases: Any scheduled releases of key economic data could also influence trading patterns.
- Market Holiday Clarification: It is important for investors to note that the stock market will be open for trading on Monday, 12 May 2025. Although Buddha Purnima falls on this day, it is not a designated stock market holiday for the year 2025.
- Technical Levels: From a technical analysis perspective, for the Nifty 50, the range of 24150-24340 is likely to act as an immediate resistance level on any upward move. On the downside, the 23850 level could provide immediate support.
The market outlook remains heavily clouded by the geopolitical overhang. Until there is greater clarity and a significant reduction in tensions, volatility is likely to persist, and investors may continue to adopt a cautious stance.
If the geopolitical situation stabilises, the market's focus could quickly shift back towards corporate earnings, global economic cues, and domestic macroeconomic indicators. However, the shock of the recent sharp fall might make investors more sensitive to various risk factors in the near term.
A Word for Investors
The past week served as a potent reminder that stock markets can be influenced by a multitude of factors, some of which, like geopolitical events, are unpredictable and can emerge suddenly. For investors, such periods of volatility underscore the importance of maintaining a calm and rational approach.
It is crucial to monitor news developments, both domestic and international carefully, but to avoid making panic-driven investment decisions. Diversification across different asset classes and sectors remains a cornerstone of prudent investing, helping to mitigate risks during turbulent times. While short-term fluctuations can be unsettling, focusing on quality investments and maintaining a long-term perspective can help navigate the stock market's inherent uncertainties.