Pakistan stock market: KSE 100 index tumbles over 9% in four days amid India-Pakistan tensions, index down 7% YTD

Pakistan stock market: The Pakistan stock market plunged over nine per cent in four days after bears dominated bulls amid escalating geopolitical tensions with India which spooked investors. The benchmark KSE-30 index fell three per cent to its the lowest since December 19, after dropping by 6.1 per cent at one point.

On Thursday, the benchmark index lost over six per cent of its value in intraday deals, sparking a temporary trading halt. In the last four trading sessions, the KSE 100 index lost nearly 9.5 per cent of its value. Meanwhile, since April 22, the day of the Pahalgam terror attack, the index has tumbled 12.5 per cent. The KSE-100 Index has dropped in five of the past 10 years during this year.

How did India-Pakistan tensions impact Indian markets?

India launched ‘Operation Sindoor’ targeting terror infrastructure in Pakistan and Pakistan-occupied Kashmir in a strong response to the terror attack in Pahalgam. The April 22 attack, carried out by a terror organisation, killed 26 civilians.

The action follows a month of relative strength for Indian markets. In April, the Nifty logged its second straight monthly gain, and the rupee hit a five-month high, driven by renewed foreign inflows and optimism around a potential US trade deal. While Indian shares logged a strong April, Pakistan’s stocks and dollar bonds suffered their worst monthly performance in two years.

After the 2016 Uri strike, Indian markets rose 11.3 per cent in a year. Following the 2019 Balakot airstrike, we saw 8.9 per cent growth. Even post-Kargil War, stock markets gained 29.4 per cent in the following year.

"That's the pattern we've seen again and again in India: deep falls, sharp rebounds — and long-term progress for those who stay invested with a well-diversified portfolio. Global diplomatic efforts are likely to bring stability in the coming days," said Vaibhav Porwal, Co-Founder, Dezerv.

"Investors should zoom out and look at the markets from a broader perspective. Indian equity markets stand on strong fundamentals and we don't have much to worry about. Well-diversified portfolios will weather this storm," he added.

What should Indian investors do now?

The Indian armed forces on Wednesday had carried out the precise missile strikes on nine terror targets in Pakistan-occupied Kashmir (PoK) and Pakistan.

"The attack gives a boost to the Indian defense companies such as Hindustan Aeronautics (HAL), Bharat Electronics (BEL), and Bharat Dynamics—showed an increase, because conjecture during military operations holds that higher government spending on defence is reflected in the economy," said Ankur Sharma, Market Analyst, VT Markets.

“In moments like these, staying calm is often the most powerful response. While markets may react negatively in the short-term, such drops are short-lived. The Indian markets have been resilient over the years, despite similar situations,” said Vaibhav Porwal.

Amidst geopolitical tensions, India and the United Kingdom officially signed a significant Free Trade Agreement (FTA) on May 6, 2025. This accord aims to increase bilateral trade by £25.5 billion annually by 2040. 90 per cent tariff reduction on British Goods including automobiles, whisky, and machinery.

UK based service companies can have more access to Indian markets making the legal formalities easy for setup which result in more jobs for Indians and the UK is expecting it’s GDP increase by £4.8 billion yearly. The agreement may result in India to boost exports—particularly in textiles and food goods—and draw more foreign capital.

"While the war situation brings uncertainty to the Indian stock market the UK-India FTA presents a promising avenue for economic growth. Investors and market participants will closely monitor these developments," said Ankur Sharma of VT Markets.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts, consider individual risk tolerance, and conduct thorough research before making investment decisions, as market conditions can change rapidly, and individual circumstances may vary.