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The equity benchmarks gave up early gains and reversed sharply in afternoon trade on Friday as concerns over a possible US recession and tensions along the India-Pakistan border hit the investor sentiment.

After opening with strong gains, the BSE Sensex soared 917.17 points or 1.14 percent to an intraday high of 81,159.41. However, the index later slipped into the red and was trading over 900 points lower from the day's peak, down 80,233.08 around 12:30 PM.

The NSE Nifty also fell sharply, down more than 300 points from its high to 24,287.70 — a drop of 0.33 percent.

Key factors behind market volatility:

1) Profit Booking: Domestic markets witnessed heavy profit booking after the early morning rally. With key US economic data due for release, traders chose to lock in gains amid uncertainty over the global outlook.

2. Rising Crude Prices: Crude oil prices jumped nearly 2 percent overnight after US President Donald Trump threatened secondary sanctions on Iran, following a delay in talks between Washington and Tehran. Further upside in prices is expected as OPEC+ prepares for its next meeting, where more output increases are likely. Rising oil prices pose a negative for India, which imports over 80 percent of its crude needs.

3. US Recession Fears: Fresh worries about the health of the US economy also played spoilsport. The Commerce Department’s initial estimate showed the American economy shrank at an annualised rate of 0.3 percent in Q1 2025, after a 2.4 percent expansion in the previous quarter. Any slowdown in the world’s largest economy is seen as a risk for global trade and investor appetite, especially for emerging markets like India.

4. India-Pakistan Border Tensions: Rising tensions along the Line of Control (LoC) also kept markets on edge. The Pakistan Army resorted to unprovoked firing on Thursday night across multiple sectors in Jammu and Kashmir for the eighth night in a row. The Indian Army responded strongly. Any escalation could weigh on risk sentiment and trigger flight to safety among investors.

"Valuations are already stretched with the Nifty trading above 20 times estimated FY26 earnings. Add to that the rising geopolitical risk and global growth concerns — it is a recipe for short-term caution," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services. "Investors may consider raising cash levels while staying invested."

What technical analysts say

Anand James, Chief Market Strategist at Geojit, said the Nifty’s repeated failure to close above the 24,359 level is a warning sign. However, the presence of long lower wicks on recent candles indicates that buyers are still active at lower levels.

"While standard deviation models point to the possibility of a move beyond 25,000, the softening of momentum indicators suggests weakness. We see immediate support in the 24,190–24,119 zone, followed by 24,070–23,950, and then 23,670," James added.

Overall, analysts advise a cautious approach in the near term with selective buying and a focus on risk management amid global and geopolitical uncertainty.

Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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