Indian Markets on Edge: Geopolitics & Earnings Shake Sentiment

Stock Market News | The Indian stock market witnessed a dramatic sell-off on Friday, April 25, wiping out over Rs 10 lakh crore in market capitalization within just two hours of trading.

The trigger? Rising geopolitical tensions between India and Pakistan following the Pahalgam terror attack. While there was a slight bounce-back in the second half, caution is clearly the dominant mood across Dalal Street.

Consolidation, Not a Crash

Despite the early morning plunge, the broader trend this week has been one of consolidation. The Nifty 50 has been largely flat to negative over the last couple of sessions — a clear signal that investors are choosing to ‘wait and watch’.

Corporate earnings have also begun trickling in and the early numbers aren’t inspiring confidence. IT majors have failed to excite, FMCG players are showing cost pressures and investors are wondering if other sectors will show similar weakness or provide some much-needed relief.

Foreign Flows Add a Twist

One surprising factor? Foreign institutional investors (FIIs) have been pumping money into Indian equities recently. This influx, however, is likely due to a tactical shift from the US to emerging markets amidst rising uncertainty around US trade policies under President Trump.

That said, it’s important not to read too much into this. Fund flows can be unpredictable. What really drives markets are earnings and valuations. Right now, the biggest risk for Indian markets is the mix of sluggish earnings growth and already stretched valuations.

US-China Trade Noise Keeps Markets on Their Toes

Adding fuel to the fire is the ever-evolving saga of the US-China trade war. Just this week, we’ve heard everything from tariffs on China being lower than expected, to claims that the trade war is unsustainable, to the possibility of a major deal between the US and China.

Then, Trump turned around and said the EU and China are ripping off the US, followed by a comment about no clear time frame for trade talks and even suggested that a full deal with China could take 2-3 years. And just recently, he declared he’s going to get along great with China, no doubt.

These back-and-forths have left global investors scratching their heads. Markets now seem to react more to Trump’s tweets than actual trends. Still, the general belief is that if markets — particularly bonds — take a hit, Trump might walk back his stance, just like he did earlier this month with the 90-day tariff pause.

India: Still a Bright Spot in the Global Growth Story

Despite the noise, there are reasons for optimism. MSCI India is up 4.2% this month, showing renewed investor interest. Yes, the IMF cut India’s GDP growth forecast to 6.2% — but that’s still better than most major economies.

India’s Flash Composite PMI stands at a strong 60, way ahead of the US (51.2), Eurozone (50.1), or Japan (51.1).

RBI Governor Sanjay Malhotra remains confident that strong domestic demand will help cushion external shocks. And with global businesses increasingly looking for China-plus-one manufacturing strategies, India may very well be a long-term beneficiary.

What Lies Ahead? Key Triggers to Watch

In summary, here’s what will drive the market next:

• Geopolitical stability: If India-Pakistan tensions stay contained, expect consolidation. If not, expect volatility.
• Corporate earnings: With early results underwhelming, all eyes are on sectors like banking, auto and manufacturing.
• Foreign flows: Useful, but not reliable. Watch how active managers shift in response to global uncertainty.
• US trade policy: Any clarity (or chaos) from Washington will continue to impact emerging market sentiment.

Final Thoughts

The Indian stock market is walking a tightrope — balancing global uncertainty, domestic earnings pressure and geopolitical jitters. 2025 is shaping up to be a stock-picker’s market, with volatility creating opportunities for those with a long-term perspective.

While geopolitical tensions continue to stir the pot, the key is focusing on businesses with solid fundamentals, clean balance sheets and sustainable growth trajectories. Now is the time to assess your portfolio, stay focused on long-term goals and be ready for volatility. The stakes are high, but for disciplined, strategic investors, the rewards could be even higher.

For now, market sentiment hinges on two critical forces: geopolitical developments and corporate earnings.

Stay Sharp While the Market Sways

Volatility isn’t new—but knowing how to respond is what sets smart investors apart. At times like this, having a trusted advisor or a data-backed investing platform can help you navigate uncertainty with more confidence.

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