Indian Stock Markets Have Recovered Quickly After Indo-Pak Tensions — Here’s How

The Indian equities market may have tumbled in the immediate trading sessions following the Pahalgam terrorist attack. Moreover, analysts have also adopted a cautious tone, however, history shows that current fallout is in line with past instances when such tensions impacted India. Experts told Moneycontrol that the primary concern among investors revolves around the extent of India’s response to the Pahalgam terror attack amid heightened tensions between both the nations.

2019 Pulwama attack

Sensex fell by 239 points while the Nifty lost 44 points on February 26. On this day, the Indian Air Force conducted air strikes on terrorist camps in Pakistan’s Balakot. However, on the next day, Sensex opened with a gain of 165 points to eventually close flat. Following the Pulwama attack in 2019, benchmark indices dropped by 0.2% on February 15.

Response to Uri attack

The surgical strike following the Uri attack had a minor impact on the Indian stock market. Sensex fell by 400 points, while Nifty was down by 156 points in the trading session.

26/11 attack

During the 26/11 attack on Mumbai in 2008, Sensex gained by 400 points in two days trading sessions, while Nifty gained by 100 points.

Kargil war

During this time, Sensex and Nifty gained by 33%. Over the three-month war period,Sensex jumped by 1,115 points, while the Nifty climbed 319 points.

What do experts say?

According to Deepak Jasani, an independent research analyst, the current market behavior is similar to past instances of geopolitical tensions involving India. Historically, markets have reacted negatively in the initial days following a terror attack. This is largely driven by heightened panic from domestic investors, while foreign investors have continued buying. A similar trend seems to be appearing now.

Investors are anticipating some form of retaliatory action from India, and until there is clarity on the extent and timing of the response, market sentiment is likely to remain cautious and volatile. Additionally, Q4FY25 earnings have remained poor and have fallen below expectations.

Amreesh Baliga, an independent research analyst said that several HNIs indicate growing apprehension, leading to significant selling pressure. This explained the fall in the markets in the past two trading sessions despite healthy buying activity among FIIs. According to him, sharp correction is possible, while the market is unlikely to face any significant decline unless there are escalations in geopolitical risks.

Independent analyst Ajay Bagga believes that Indian markets may witness short-term correction. Markets are set to remain on edge for the next couple of weeks.