India-Pakistan Ceasefire: What It Means for the Indian Stock Market on Monday

The Indian stock market faces a crucial test on Monday following a significant diplomatic breakthrough—a ceasefire between India and Pakistan. The ceasefire, which aims to de-escalate tensions along the volatile border, comes after a week of heightened geopolitical concerns that rattled investor confidence.

Markets Struggle Amid Rising Geopolitical Tensions

The Indian stock market saw a rare dip this week, ending its longest winning streak of 2025. The Sensex and Nifty 50 experienced significant volatility, driven by escalating border hostilities between India and Pakistan. The tensions began on Wednesday when India conducted strikes on terrorist camps in Pakistan and Pakistan-occupied Kashmir (PoK) in retaliation for a deadly attack in Kashmir last month. In response, Pakistan launched counterattacks, leading to intense cross-border exchanges between the two nuclear-powered nations.

The turbulence deepened as the week progressed, with investors reacting negatively to reports of drone and missile strikes. On the final trading day, concerns about further escalation were amplified when the Indian Army reported overnight drone and missile attacks by Pakistani forces.

A Turnaround for Investor Sentiment

Despite the market’s volatility, experts believe that a ceasefire agreement could shift the momentum positively. The announcement of a “full and immediate ceasefire” between India and Pakistan is being viewed as a significant strategic victory for India in its ongoing battle against terrorism.

"This de-escalation removes a key overhang on investor sentiment and is likely to be seen as a major positive development by financial markets," said Prashanth Tapsi, AVP - Research at Mehta Equities.

Resilience Amid Geopolitical Tensions

Historically, Indian markets have demonstrated resilience during periods of geopolitical uncertainty, with a tendency to recover quickly after such de-escalations. Investors are advised to maintain a broader outlook, as the Indian equity market continues to rest on strong fundamentals.

“The Indian markets have shown resilience over the years, despite similar situations. Investors should look at the bigger picture. Indian equities are backed by solid fundamentals, and diversified portfolios will likely weather this storm,” said Vaibhav Porwal, Co-Founder of Dezerv.

What to Expect on Monday?

With the ceasefire in place, markets are expected to react positively, as investor sentiment improves. Tapsi forecasts a “gap-up” opening of 200-300 points on key indices like the Sensex and Nifty, as the immediate geopolitical risks subside. However, he cautioned that volatility could persist, driven by factors such as the ongoing earnings season and global uncertainties, including potential tariff developments.

On the technical front, the Nifty is likely to hold above the 24,000 mark, with the 23,500 level now becoming a crucial support point. Any breach below this could trigger further selling, while resistance levels are expected around 24,275 and 24,401.

Sectoral Outlook

With geopolitical risks easing, sectors such as defense and banking may see renewed buying interest. Broader indices are also likely to recover from recent losses as investor sentiment improves. All eyes will be on Foreign Institutional Investors (FIIs), who turned negative in Friday's trading session after being consistent net buyers in the past two weeks.

Conclusion

The ceasefire between India and Pakistan could offer a much-needed boost to investor confidence, leading to a positive start for the Indian stock market on Monday. While volatility may persist, especially due to external factors, the de-escalation of tensions presents a strong case for market recovery in the short term.