Dalal Street enters critical week amid India-Pakistan tension, FII inflows, quarterly earnings pressure

Indian stock markets, after a strong weekly performance, now face a turbulent road ahead as a triple threat emerges: escalating geopolitical tensions with Pakistan, volatile foreign institutional investor (FII) flows, and a major earnings season kicking off.

Benchmark indices ended last week with a gain of 0.8%, buoyed by strength in IT, pharma, and auto sectors. However, sentiment turned cautious by Friday, with the Nifty slipping 0.86% to close at 24,039.35, ending a two-day losing streak.

Geopolitical Risk Escalates

As trading resumes Monday, investor nerves are fraying amid growing calls for military action against Pakistan following a militant attack in Kashmir. Demands for a response similar to the 2019 airstrike have raised fears of escalation between the nuclear-armed neighbours, keeping markets on edge.

FII Flows at a Turning Point

Foreign inflows, critical for market momentum, now hang in the balance. After aggressively selling ₹1.22 lakh crore worth of equities earlier this year, FIIs recently turned net buyers, picking up ₹32,466 crore over the past eight sessions, supported by a softer US dollar and easing global trade tensions.

However, Friday saw FIIs again turn sellers, offloading ₹2,952 crore, even as domestic institutional investors (DIIs) absorbed ₹3,539 crore worth of shares. With just a few trading sessions left in April, FII behaviour will be crucial in determining whether India can break its three-month streak of net selling.

Earnings Storm Brewing

Adding to the pressure, over 180 companies are set to release quarterly earnings this week, including heavyweights from banking, energy, cement, and retail sectors. These results could heavily sway market direction.

Global factors, including Wall Street's performance and volatile movements in crude oil and gold prices, will further influence sentiment.

Technical Outlook and Currency Watch

Technical charts suggest heightened volatility ahead. The Nifty has slipped below its 200-day moving average. Failure to breach the resistance at 24,365 could confine the index to a consolidation zone between 23,500 and 24,350.

Meanwhile, the rupee closed weaker at 85.45 against the US dollar on Friday. Analysts warn that any escalation in India-Pakistan tensions could trigger further weakness, compounding pressures on domestic equities.

Disclaimer: This article is intended for informational purposes only and should not be construed as investment advice. Readers are advised to consult certified financial advisors before making investment decisions.