On Friday April 25, 2025 Indian stock markets took a big hit. The Sensex a major index tracking 30 top companies dropped by 820 points to close at 79009.02. The Nifty which tracks 50 companies fell by 1.09% to 23981.25 slipping below the 24000 mark. This sharp decline worried investors and made headlines. So what caused this sudden fall?
India and Pakistan Geopolitical Tensions
One of the biggest reasons for the market crash was the growing tension between India and Pakistan. Earlier in the week a tragic terror attack in Pahalgam Jammu & Kashmir killed 26 people mostly tourists. India blamed Pakistan for supporting cross border terrorism and took strong steps in response. The most significant action was suspending the Indus Waters Treaty a 1960 agreement that governs how the two countries share river waters.
This suspension was a big deal. Pakistan called it an “act of war” and warned of strong retaliation. They also closed their airspace to Indian flights, stopped trade and suspended other agreements like the Simla Agreement. These moves created a sense of uncertainty and fear among investors. When geopolitical risks rise investors often sell their stocks to avoid losses which leads to market declines.
Pahalgam Terror Attack: A Trigger for Fear
The Pahalgam terror attack on April 22, 2025 was a major trigger for the market’s fall. Terrorists attacked tourists in a popular meadow killing 25 Indian nationals and one Nepali citizen. It was one of the deadliest attacks in Kashmir since the 2019 Pulwama attack. The incident not only sparked anger in India but also led to a diplomatic crisis between the two nations.
India’s response was swift. Besides suspending the Indus Waters Treaty the government closed the Wagah Attari border canceled visas for Pakistani nationals and asked Pakistani military attaches to leave the country. These actions signaled a tough stance but they also raised fears of further conflict. Investors worried about the possibility of war or economic disruptions started selling their shares causing the Sensex and Nifty to plunge.
Mid Cap and Small Cap Stocks: Heavy Losses
While the Sensex and Nifty grabbed attention smaller companies faced even bigger losses. Mid cap and small cap stocks which represent medium and small sized companies fell by up to 3%. These stocks are often more sensitive to market swings because they are less stable than large companies. When investors panic they tend to sell these stocks first.
The Nifty MidCap and Nifty SmallCap indices crashed by 3% and 3.5% respectively. Out of 2816 stocks traded on the National Stock Exchange (NSE) only 279 were in the green (gaining) while 2478 were in the red (losing). This shows how widespread the selling was. Investors were clearly nervous and the heavy selling in mid cap and smallcap stocks added to the overall market decline.
Other Factors: Axis Bank and Market Volatility
Geopolitical tensions were not the only reason for the market’s fall. Axis Bank a major private bank reported disappointing earnings which dragged the banking sector down. The Nifty Bank index fell by 0.40% with Axis Bank being one of the top losers. Since banking stocks are a big part of the Sensex and Nifty their decline had a significant impact.
Market volatility also played a role. The India VIX a measure of market fear jumped by over 6% on Friday and has risen nearly 8% in the last five days. A higher VIX means investors expect more ups and downs which makes them cautious. This increased nervousness led to more selling pushing the markets lower.
Global Markets: A Mixed Picture
Interestingly global markets did not mirror India’s decline. In Asia markets like South Korea’s Kospi, Japan’s Nikkei 225 and Hong Kong’s Hang Seng were in positive territory. In the US the Nasdaq Composite rose by 2.74% the S&P 500 gained 2.03% and the Dow Jones climbed 1.23% on Thursday. These strong global cues initially helped Indian markets open higher with the Sensex briefly crossing 80000 and the Nifty above 24350. However the positive start was quickly wiped out as geopolitical fears took over.
Bright Spots: IT and Insurance Stocks
Not every stock fell on Friday. Some sectors like IT and insurance showed strength. Companies like Infosys, TCS and SBI Life were among the top gainers. For example SBI Life surged by 5.26% and TCS rose by 1.42%. These gains provided some relief but they were not enough to stop the overall market slide. Investors often turn to IT and insurance stocks during uncertain times because they are seen as safer bets.
What’s Next for Indian Markets?
The big question is where do the markets go from here? Analysts warn that the Nifty could fall further if it breaks below 24050 possibly dropping to 23670. The ongoing tensions between India and Pakistan will likely keep investors on edge. Any news of further escalation like military action or more diplomatic moves could lead to more selling.
On the other hand strong global markets and upcoming quarterly results from big companies like Reliance Industries and Maruti Suzuki might provide some support. Investors will also watch how the government handles the situation in Kashmir and its talks on the Indus Waters Treaty. For now the markets remain volatile and caution is the keyword.
Conclusion
Friday’s market crash was a mix of fear uncertainty and disappointment. The Pahalgam terror attack and the suspension of the Indus Waters Treaty created a sense of crisis while Axis Bank’s poor results and heavy selling in mid cap and small cap stocks added to the pain. Though IT and insurance stocks held up the overall mood was bearish. As tensions between India and Pakistan continue investors will need to stay alert. The markets may face more challenges but opportunities could arise for those who stay informed and patient.