India-Pakistan tension: NIFTY, Sensex and KSE remain volatile amid escalating conflict
Written By Wion Web Desk
Published: May 09, 2025, 06:45 IST | Updated: May 09, 2025, 06:45 IST
Story highlights
Business & Economy: The stock market fluctuation is primarily driven by Pakistan's response to India's actions following the April 22 terror attack in Pahalgam, which resulted in casualties.
As tensions between India and Pakistan escalate, markets in both countries have turned extremely volatile, with the Pakistani stock index experiencing a more significant hit.
The turmoil reached new heights on Friday, as India's equity markets closed sharply lower, and Pakistan's KSE-100 index see-sawing wildly, driven by growing geopolitical risks.
This instability largely stems from Pakistan's response to India's response to the April 22 terror attack in Pahalgam that killed 26 people.
The benchmark Sensex Index was down by over 800 points and closed at 79,925.34, still down over 800 points. Meanwhile, the broader NSE Nifty50 was down about 1 per cent, testing the 24,000-point mark at the closing bell.
The sectoral landscape also reflected weakness, with the S&P BSE mid-cap and small-cap indices trading firmly in the red.
Interestingly, the Nifty consumer durables index stood out as the sole gainer, posting modest gains amid the broader market decline.
Still, experts cited India’s economic fundamentals—driven by robust GDP growth and softening interest rates—as key factors underpinning long-term investor confidence.
However, the prevailing geopolitical uncertainty weighed heavily on sentiment, triggering caution among market participants.
On the BSE, 2,466 stocks declined while only 423 advanced, indicating a widespread sell-off.
Despite the weak sentiment, Foreign Portfolio Investors (FPIs) remained net buyers, pumping in ₹2,007.96 crore into equities, whereas Domestic Institutional Investors (DIIs) booked profits, selling shares worth ₹596.25 crore.
Amid the overall market downturn, defence stocks emerged as clear winners.
With heightened tensions and expectations of increased defence spending, stocks of companies like Hindustan Aeronautics Ltd (HAL), Bharat Electronics Ltd (BEL), and Mazagon Dock Shipbuilders saw sharp gains, some climbing as much as 5 per cent.
This surge underscores investor confidence in the defence sector, with an anticipated boost in military procurement and operations.
On the global stage, companies such as Dassault Aviation, makers of Rafale jets, also saw increased buying interest, highlighting a worldwide trend toward strengthening defence capabilities amid geopolitical uncertainty.
On the currency front, the Indian rupee extended its slide on Friday after falling 1.1 per cent to reach ₹85.57 per dollar, marking its sharpest decline since February 2022.
The rupee's drop reflects growing investor caution amid geopolitical instability and heightened demand for the safe-haven US Dollar.
Pakistan’s KSE-100 index see-sawed throughout the day, eventually posting strong gains.
It closed 3.52 per cent higher at 107,174.64, up 3,647.82 points.
Over the past three sessions, the Pakistan Stock Exchange has shed over 10 per cent, reflecting growing fears of economic instability and anxiety ahead of an IMF board review.
On the ground, military activity has surged on both sides of the border. In response to rising threats, India has bolstered security in New Delhi, deploying additional forces and enhancing surveillance.
In a strategic move, India has suspended trade ties with Pakistan and is actively reviewing the Indus Waters Treaty, signalling a hardening stance. Diplomatic relations remain tense, with both nations summoning each other's High Commissioners for the third time this week, emphasizing the severity of the situation.
Given the ongoing geopolitical risks, experts predict continued market volatility in both Indian and Pakistani stock markets.
While defence stocks may continue to see strong interest, aviation, tourism, and logistics sectors are expected to remain under pressure. Investors remain cautious as the situation remains fluid, with the potential for further escalation in the coming days.