The Pakistan Stock Exchange (PSX) experienced a dramatic halt in trading on Thursday after panic over rising tensions with India led to a sharp sell-off. The market's main index plunged 6.3% within minutes, triggering automatic circuit breakers. This came amid reports that Pakistan’s military had shot down 12 Indian drones in cities including Karachi and Lahore—a day after India’s precise missile strikes under Operation Sindoor hit terror camps in Pakistan and Pakistan-occupied Kashmir.
The market reaction reflected escalating investor fears. Wednesday had already seen a steep decline of 3.1% after a nearly 6% intraday drop. The latest crash added to that volatility, fueled by concerns of a broader conflict between two nuclear-armed nations.
Pakistan’s international bonds also saw a sharp fall. The 2036 bond maturity dropped over 1 cent, trading at 73.8 cents on the dollar, indicating growing risk aversion among global investors. Analysts like Deutsche Bank's Jim Reid noted the situation signals a rising geopolitical risk in the Global South, which could increasingly shape global financial sentiment.
In contrast, Indian markets remained relatively stable. The Sensex was down only around 138 points, with investors focusing more on domestic economic indicators and quarterly corporate earnings. Analysts attributed the Indian market’s resilience to confidence in the country's economic fundamentals and clear strategic communication from its leadership.
Indian Defence Minister Rajnath Singh, during an all-party briefing, reaffirmed the military's precision strikes and stated over 100 terrorists were killed. He also indicated that Operation Sindoor may still be ongoing, suggesting India is prepared for further action if provoked.
The stark divergence in market reactions between India and Pakistan reflects not only their economic strength but also investor confidence in how each country is handling the situation. Pakistan’s instability is expected to persist in the short term, especially if retaliatory military actions continue.
