After the Pahalgam attack, tension between India and Pakistan has risen sharply. India has taken several actions against Pakistan, the biggest being the suspension of the Indus Water Treaty — a major step, as it had never been stopped since its implementation in 1960. By suspending it, India has made its tough stance against Pakistan very clear.
Following India’s move, Pakistan suspended the Shimla Agreement and decided to close its airspace for India. Both countries have tightened security along the borders. This rising tension is also impacting the stock markets.
While the Indian stock market saw only a minor decline, Pakistan’s stock market crashed by nearly 25,000 points in just two days. Analysts suggest that the situation could worsen further for Pakistan’s market. On Friday, India’s Sensex fell by 588 points to close at 79,212.53, while the Nifty50 dropped 207 points to settle at 24,039.35. However, during intraday trading, the Sensex had fallen by over 1,100 points and the Nifty by more than 300 points.
New Challenge for the Stock Market
Earlier, global trade tensions were causing volatility in the market, but the situation had stabilized with factors like easing global trade worries, a stable domestic currency, and growing FII (Foreign Institutional Investor) investments. However, in the past two days, renewed declines have been observed, making investors more cautious.
Let’s see what stock market experts say about this situation and what happened during the Kargil War in 1999.
According to Business Today, Anand Rathi Research mentioned that historical trends show that the Indian equity market, especially the Nifty50, tends to remain resilient during such conflicts.
What happened during the Kargil War?
According to a study by brokerage firm Anand Rathi Research, past events like the Kargil War (1999), Uri Attack (2016), and Balakot Air Strike (2019) only led to a mild correction of about 1-2% in the Indian equity markets.
What could happen if war breaks out?
Even if tensions escalate, experts believe that the Nifty may not fall by more than 5-10%, and any decline would be short-term. Investors are advised to stay disciplined, stick to their strategies, and look for buying opportunities instead of panic selling.
How much did the market fall during past incidents?
During major events like the Kargil War (1999), the Uri Attack (2016), and the Pulwama-Balakot Strike (2019), the Nifty’s correction remained between just 0.8% and 2.1%.
The only significant market crash during heightened tensions happened after the 2001 Parliament attack, but that -13.9% drop was mainly due to a global recession and a -30% crash in the US S&P 500 index, rather than the India-Pakistan standoff itself.
Also Read- What is the Indus Waters Treaty, and How Will India’s Restrictions Impact Pakistan?
What could happen in 2025?
If the current tension escalates into a limited conflict, analysts expect a maximum correction of around 5-10% in the Nifty50. They suggest that given the current global risks, strong domestic macroeconomic indicators, and India’s historical market behavior during conflicts, any fall is likely to be limited.
What should investors do during such times?
Experts advise following the 65:35:20 rule for portfolios — 65% in equity investments, 35% towards loan repayments, and 20% in savings. Investors should consider investing in good equities during market dips and maintain a long-term perspective. Instead of selling in panic, the focus should be on strengthening the portfolio.