Operation Sindoor Sparks Volatility In Indian Mkts, Boosts Defence Stocks

Two almost simultaneous major developments have left mixed impacts on the Indian capital market. Operation Sindoor has had its toll on the Indian capital markets. The markets have reacted strongly and sharply, and understandably so. The most obvious has happened.

As obvious, the attack is giving a boost to Indian defense companies such as Hindustan Aeronautics (HAL), Bharat Electronics (BEL), and Bharat Dynamics—which showed an increase. And it does not require any rocket science to understand this. Because conjecture during military operations holds that higher government spending on defense is reflected in the economy.

FII normally plays a vital role in the Indian Market and as we know these players usually pull out if the region experiences some pressure or unrest. Due to this short-term selling pressure can be seen on the Indian equities, market analysts point out.

If "Operation Sindoor" has sparked market volatility, another significant development, which has happened almost simultaneously, has also had its impacts. Actually, the just-signed FTA with the UK promises to offer Long-Term Relief, according to market analysts.

India began "Operation Sindoor" targeting terrorist infrastructure in Pakistan and Pakistan-administered Kashmir. It is retaliation to the Pahalgam attack where 26 Indians and one Nepalese were killed. The announcement caused the Indian Stock market to react strongly.

As anxiety rises and capital shifts into safer assets like gold and the US Dollar, gold price goes up as its nature whenever world sees unrest and the Indian Rupee falls somewhat.

Almost simultaneously, the UK-India Free Trade Agreement has turned out to be a hugely Positive Development. Amidst geopolitical tensions, India and the United Kingdom officially signed a significant Free Trade Agreement (FTA) on May 6, 2025. This accord aims to increase bilateral trade by £25.5 billion annually by 2040. It impacted 90 per cent Tariff Reduction on British Goods including automobiles, whisky, and machinery.

UK-based service companies can have more access to Indian Markets making the legal formalities easy to set up which results in more jobs for Indians and the UK is expecting its GDP to increase by £4.8 billion yearly. This agreement is anticipated for India to boost exports—particularly in textiles and food goods—and draw more foreign capital.

While the war situation brings uncertainty to the Indian stock markets, the UK-India FTA presents a promising avenue for economic growth. Investors and market participants will closely monitor these developments.