How did investor sentiment change in the aftermath of Operation Sindoor

Initial Reaction: Volatility and Caution The immediate aftermath of Operation Sindoor saw a spike in market volatility. The Sensex and Nifty opened sharply lower, and the India VIX (Volatility Index) surged to multi-month highs, reflecting heightened investor anxiety and uncertainty over potential escalation. Despite this initial negative sentiment, the markets quickly stabilized. By the end of the first trading day, both Sensex and Nifty had recovered much of their losses, indicating that investors were reassured by the operation’s focused and restrained nature. Medium-Term Sentiment: Confidence and Resilience Indian investors, especially mutual fund participants, demonstrated notable maturity and discipline. Unlike previous geopolitical shocks, there was no widespread panic selling or large-scale redemptions; most continued their Systematic Investment Plans (SIPs) and held their positions. Domestic Institutional Investors (DIIs) took advantage of the brief dip to increase their exposure, particularly in sectors like defense and energy, while Foreign Institutional Investors (FIIs) returned as stability prevailed. The market’s resilience was underpinned by broad trust in the Indian government’s handling of the crisis, the military’s capabilities, and India’s strong economic fundamentals. Sectoral Shifts and Long-Term Outlook Defense stocks surged as investors anticipated increased government spending on military modernization. There was some rotation out of mid- and small-cap stocks into safer, sectoral, or thematic funds, but overall inflows into the market remained stable. The positive sentiment was further supported by external factors such as robust domestic demand, stable fiscal conditions, and favorable macroeconomic ratings from agencies like Moody’s Key Takeaway Investor sentiment after Operation Sindoor shifted from initial caution and volatility to renewed confidence and resilience. The disciplined response of Indian investors, continued institutional inflows, and a quick market rebound highlighted growing maturity and faith in India’s economic and strategic stability