Indian and Pakistani markets exhibited heightened volatility in response to the Pahalgam terror attack and subsequent military tensions. While India's markets showed resilience with a relatively moderate decline, Pakistan's markets experienced more pronounced losses, reflecting greater investor apprehension. The ongoing geopolitical situation continues to influence market dynamics in both countries.
Over the two-week period, India's stock market demonstrated resilience, with moderate gains driven by positive sectoral performances and investor optimism. In contrast, Pakistan's market experienced significant declines, primarily due to escalating geopolitical tensions and economic concerns. This divergence highlights the varying investor sentiments and market dynamics in the two countries during this timeframe. The net change in key indices in India and Pakistan during this period were +218.81 (+0.27%) and -5,154.83 (-4.55%) respectively.
Indian markets
On April 23, following the attack in Pahalgam that resulted in at least 26 fatalities, Indian financial markets experienced a downturn. The Sensex opened at 80116, and on May 8 -- the latest closure-- the key index was at 80334.81.
In between, the major fall was on April 30, when the Sensex fell by 588.90 points (0.74%), closing at 79,212.53, while the Nifty 50 declined by 207.35 points (0.86%) to 24,039.35. The volatility index (VIX) surged, indicating heightened investor apprehension. and on May 8, when the reports of military tensions, including drone and missile attacks by India near Kashmir, led to a significant market reaction. The Sensex dropped by 411.97 points (0.51%), closing at 80,334.81, and the Nifty 50 declined by 140.60 points (0.58%) to 24,273.80. The Indian rupee depreciated by 1%, marking its worst single-day decline in over two years.
However, shares of defense companies like Bharat Electronics and Hindustan Aeronautics saw gains, reflecting increased demand for defense-related products, though most sectors, including mid-cap and small-cap indices, experienced declines due to profit-taking and heightened geopolitical risks.
Pakistan markets
At the same time, the Pakistan Stock Exchange (PSX) witnessed a sharp decline on April 30. The KSE-100 index fell by 1,717.35 points (1.5%), closing at 113,154.83. This drop was attributed to fears of potential military retaliation from India following the Pahalgam attack. And on May 8, when further escalation in tensions led to continued market volatility, the KSE-100 index experienced additional losses, reflecting investor concerns over the deteriorating security situation.
In Pakistan, banking and financial stocks were among the hardest hit, with significant sell-offs observed. Shares in energy and infrastructure sectors also declined sharply, indicating widespread market apprehension.