Pakistan stock exchange plunges: Market gripped by all out war fears

The Pakistan Stock Exchange (PSX) experienced a severe downturn on Wednesday, plunging by as much as 6,500 points in intraday trading. Investors’ worst fears were realized when Indian military strikes against Pakistan triggered a dramatic drop in market confidence.

Late last night, India launched strikes on six locations in Punjab and Azad Jammu and Kashmir. In retaliation, the Pakistani military successfully downed five Indian jets. The news sent shockwaves through the financial markets, causing a sharp sell-off in stocks. The benchmark KSE-100 index tumbled by 6,560.82 points, or 5.78%, dropping from 113,568.50 to 107,007.68 at the opening bell.

Due to the steep decline, the market was briefly suspended to curb panic selling. This marks the second-largest intra-day plunge by points, second only to the nearly 8,700-point loss experienced after the U.S. tariff announcement last month.

Despite the initial crash, the market showed signs of recovery, briefly climbing to 112,457.37 points by 10:34 am. However, the relief was short-lived as the index fell back to 111,171.92 points by noon, nearly 2,400 points below the previous day’s close.

Expert Analysis on the Decline

Yousuf M. Farooq, Research Director at Chase Securities, stated,

“The market opened under pressure today following Indian strikes on unarmed civilians in Pakistan. Some selling has been observed, though volumes remain low as investors assess the evolving situation.”

He also mentioned that a recovery was anticipated once tensions began to de-escalate.

Shahbaz Ashraf, Chief Investment Officer at Frim Ventures, attributed the sell-off to heightened geopolitical tensions.

“The flare-up has rattled investor sentiment, with fears of further escalation weighing on the market,” he commented.

However, Ashraf remains cautiously optimistic, noting that “many view the pullback as a potential buying opportunity, especially for long-term investors looking to accumulate quality stocks at lower valuations.”

Samiullah Tariq, Head of Research at Pak Kuwait Investment Company Ltd, assured that the selling pressure was likely short-term, with the market expected to recover once the geopolitical situation stabilizes.

Awais Ashraf, Research Director at AKD Securities, also echoed this sentiment, stating,

“The plunge may present a buying opportunity, as we do not expect the situation to escalate further.”

Panicked Selling Amid Growing Fears

In recent days, investors have been reducing their holdings in anticipation of military action by India. Tensions escalated after the deadly attack in Pahalgam on April 22, where 26 people, mostly tourists, were killed. India has alleged “cross-border linkages” without presenting evidence, a claim Pakistan has firmly rejected and called for a neutral investigation.

International rating agency Moody’s has warned that ongoing tensions between India and Pakistan could negatively affect Pakistan’s economic growth. The agency highlighted the potential risks to the country’s stability if the situation continues to escalate.

It noted that sustained geopolitical instability could jeopardize the country’s macroeconomic stability and disrupt foreign funding access.

Moody’s also highlighted the potential fiscal strain on India, stressing that heightened defense spending could impact India’s fiscal strength and slow down fiscal consolidation efforts.