By Jiahui Huang
Indian defense stocks rose at the start of trading on Friday, outperforming the broader market as investors watched developments in the clash with Pakistan.
State-owned ammunition and missile maker Bharat Dynamics gained 5.6%, Bharat Forge was up 3.8% and Bharat Electronics gained 3.0%. Hindustan Aeronautics, another state-owned defense company, rose 2.3%, while Paras Defence & Space Technologies advanced 4.65%.
The benchmark Sensex was down 1.0% in late-morning trading.
Despite supportive global cues, markets in India have underperformed, weighed by concerns surrounding India-Pakistan tensions, Sameet Chavan at Angel One wrote in a commentary.
The two nuclear-armed states accused each other of drone attacks on Thursday against military targets. India said it conducted military strikes on nine sites in Pakistan in retaliation for a deadly militant attack on tourists in Kashmir, and Islamabad has threatened to hit back.
The rupee also weakened against the dollar, prompting speculation about potential central bank intervention. India's currency has lost about 1.4% of its value against its U.S. counterpart so far this week.
Given the rupee's relatively sharp moves due to escalating India-Pakistan tensions, there could be a case for the Reserve Bank of India to lean against excessive depreciation pressures, DBS FX & credit strategist Chang Wei Liang said in a note.
The tense situation is potentially negative for tourism, high-beta stocks and industrial sectors in particular, Jefferies analysts wrote in a note. The brokerage has cut exposure to India tourism and property sector stocks in its model portfolio but said any potential market correction could be short-lived.
S&P Global Ratings analysts said in a note that they expect tensions to remain high over the next two to three weeks, with significant further military action on both sides. The situation will likely de-escalate after that, they said.
Write to Jiahui Huang at jiahui.huang@wsj.com
(END) Dow Jones Newswires
05-09-25 0217ET
