India-Pakistan tension: Here’s how Indian stock market performed after last five conflicts

Stock market today: A day after witnessing heavy bear battering following a flare-up in the India-Pakistan tensions, the Indian stock market rebounded strongly on Monday, April 28. 

Benchmark indices — the Sensex and Nifty 50 — climbed over 1 per cent each in trade today, supported by mostly positive global trends, even as the geopolitical uncertainty in the region persisted.

The Sensex surged over 1,000 points, or 1.36 per cent, to 80,305, while the Nifty 50 advanced nearly 300 points, or 1.25 per cent, to top the 24,350 mark.

While it is anybody's guess how the situation between India and Pakistan will develop in the coming days, experts believe that markets are responding positively to India's diplomatic and strategic handling of the situation, steering clear of an overly aggressive or war-like retaliation.

"The heightened uncertainty relating to Indo-Pak tensions will weigh on the markets. It is very difficult to judge how much the market has discounted. Going by the market's resilience, it can be said that the market has not discounted a scenario of the tensions culminating in a war between the two countries," said VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.

How has Indian market performed in last five conflicts?

Vinod Nair of Geojit Investments Ltd says that the Indian stock market has historically demonstrated strong resilience to geopolitical events, largely due to the strength of its domestic economy.

“Based on the historical performance of India, it has exhibited strong resilience during geopolitical factors, given the buoyant nature of the domestic economy. For long-term investors, it is fair to take this as an opportunity to accumulate quality stocks/sectors during further dips for the long-term gain,” Nair added.

Here's a look at the last five conflicts between India and Pakistan and the stock market reaction:

1. Pulwama Attack 2019

The Indian stock market responded negatively following the Pulwama attack in 2019, with Indian indices dropping more than 1.8 per cent from February 14 to March 1.

2. Uri Attack and Surgical Strikes 2016

The Indian market fell more than 2 per cent between September 18 to September 26. While the terrorists attacked an Indian Army base near Uri in Jammu and Kashmir, the Indian government responded strongly by launching a surgical strike, targeting terrorist launch pads across the Line of Control in Pakistan-occupied Kashmir.

3. Mumbai 26/11 terror attack 2008

The Indian market witnessed a positive move despite Mumbai being under siege in 2008. During the two days of the attacks, the Sensex climbed by around 400 points, while the Nifty gained 100 points.

4. Indian Parliament Attack 2001

The attack on the Indian Parliament in 2001 led to a knee-jerk reaction for the Indian benchmark indices, but as reports of the situation coming under control surfaced, both Sensex and Nifty recouped their losses. While the Sensex ended 0.7 per cent lower, the Nifty ended 0.8 per cent down.

5. Kargil War 1999

The Indian market showed resilience and experienced a slight decline of 0.8 per cent from May 3, 1999, to July 26, 1999, during the Kargil war.

According to a report by Anand Rathi, equity market corrections during conflicts typically averaged 7 per cent, with the median correction standing at 3%.

“Based on historical precedent and current global risk pricing, even in the event of a substantial escalation, we believe the Nifty 50 is unlikely to correct more than 5–10 per cent. Investors currently following the 65:35:20 strategy should maintain the allocation. Investors who have any equity gap in the portfolio should invest now, thereby getting aligned to the strategic allocation of 65:35:20,” the report said.

Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.