Even as geopolitical tremors rattle South Asia following the April 22 terror attack in Pahalgam, India’s financial markets are charting an unexpected path — upward. While diplomatic tensions between India and Pakistan escalate, investors in India are betting big, pushing benchmarks like the Sensex and Nifty higher. Meanwhile, across the border, Pakistan’s stock market is bleeding value, a stark reflection of economic anxiety and political isolation.
India’s stock markets brush off border fears
On May 5, the BSE Sensex jumped 259.75 points at the open, while the NSE Nifty 50 rose 12.50 points. This momentum has continued despite growing uncertainty in the region, signaling investor confidence in India’s economic fundamentals.
This bullish run is supported by easing global crude prices, a weakening the U.S. dollar, and strong foreign institutional inflows. The Indian rupee has climbed to a five-month high, boosting market sentiment further.
Defense stocks are also riding the wave of geopolitical tension. Shares of Hindustan Aeronautics Ltd (HAL) and Garden Reach Shipbuilders & Engineers (GRSE) have continued their upward march since April 23, the day after the Pahalgam terror attack, as investors bet on increased defense spending amid India’s assertive strategic posture.
Global cues and sectoral strength fuel India’s rally
India’s market performance is not solely driven by regional events. Broader global trends are at play. With the U.S. Fed signaling a pause in rate hikes and oil prices softening, foreign investors have returned to emerging markets — and India remains a top pick.
Auto, FMCG, and PSU bank stocks have also contributed to the recent rally, creating a market environment that seems largely insulated from diplomatic frictions.
Pakistan’s stock market slides into uncertainty
The mood is grim across the border. Pakistan’s benchmark KSE-100 index fell another 635.05 points on May 5. Since April 23, the index has shed over 7,500 points — a nearly 6 per cent drop — erasing months of gains and shaking investor confidence.
The sell-off is being driven by a mix of factors: economic retaliation from India, a potential freeze in multilateral aid, and growing investor skepticism about Pakistan’s financial stability. Defense and agriculture — two sectors already stressed — face further strain as India ramps up economic pressure through airspace closures, port restrictions, and even suspension of the Indus Waters Treaty.
A tale of two economies
The contrast is clear. India, despite being at the center of a high-stakes geopolitical standoff, is seeing its GDP projections hold steady, with the IMF forecasting 6.8 per cent growth in 2025. Foreign reserves are strong, the rupee is stable, and inflation is largely under control.
Pakistan, on the other hand, is teetering on the edge of economic instability. The IMF has warned that ongoing tensions could derail Islamabad’s $7 billion bailout program. Its GDP is now expected to grow at just 2.4 per cent, down from earlier estimates of 3.5 per cent.
While both countries remain locked in a diplomatic deadlock, their economies are sending very different signals. India’s markets are thriving, reflecting global investor trust and domestic resilience. Pakistan, burdened by diplomatic isolation and internal fragility, is facing the brunt of the fallout.
