Understanding the Impact of India-Pakistan Tensions on Stock Markets

We are all aware of the relationship between India and Pakistan. Tensions between these two neighbours often go beyond politics. 

One of the first places it shows up is in the stock market. Your confidence as an investor can be shaken by a single event across the border.

You must have heard about the recent Pahalgam terror attack. What you probably didn’t hear is that within 2 weeks, Karachi’s stock market dropped over 7,000 points.

Also, in our country India, the Nifty slipped 1.2% in a day, while defence shares rose nearly 7%.

Such events and happenings aren’t new. The market atmosphere changes almost every time the atmosphere gets tense. 

What Past Events Tell Us?

Well past events help us in having a clearer picture. We can see that every major attack or conflict between these countries has left a mark on the stock market.

Read More -  Indo-Pak Conflict: Do Your Bank FD Rates Skyrocket or Plummet

However, it is also noticeable that recovery has also been consistent. We can see market reaction during past conflicts:

You can see that trend is clear. You can analyse that there was a fall, but it does not last for a long time. 

Most of the time the market corrects itself, within a few weeks to months.

Sector-Wise Impact

If you check regular updates of the stock market then you might have noticed that after the Pahalgam attack:

• Defence firms like HAL and BEL gained between 3% and 6% within two sessions
• Airline stocks dropped over 4% due to fuel price hikes and lower ticket bookings

Being an investor you must have noticed that not every part of the stock is impacted in the same way. Some sectors actually benefit. However, others face short-term damage.

Foreign Investors: Cautious But Still Present

Foreign investors trade with a lot of precaution. They watch such developments closely. You can see in the recent data that they are not panicking but trading cautiously.

Despite the tensions, you can see that foreign inflows returned within a week. Foreign investors still believe that local stocks, like banking and infrastructure, can grow in the long run.

Domestic Retail Investors: Holding Steady

In the current market, retail investors are playing a huge role than ever. As per the reports, using SIPs, mutual funds collected over ₹19,000 crore in April 2025.

Also, new investors are entering the market. It has been reported that around 4.2 lakh new demat accounts were opened last month.

We can see that small investors are not being spooked by the headlines. They are continuing their monthly investments and looking at the long-term picture.

Currency, Oil, and Gold: All Connected

An international tense environment impacts more than just stocks. In such situations the rupee might weaken, oil sometimes becomes expensive, and gold becomes a safer option.

More and more people are now choosing safer options. We can see this from the rising price of gold and falling rupee. 

This creates problems for companies that spend more on oil brought from other countries. Their costs go up, and their stock prices may fall.

Also Read - How War Destroys Civilian Jobs, Farms, and Small Businesses Beyond the Economic Stats

Defensive Strategy: What Should Investors Do?

If you are an experienced investor then you will not rush to sell. Instead, you will make small adjustments.

Final Thoughts

Tension between the borders surely brings market corrections. However, we can see that the pattern is clear: after the fall comes recovery. 

Each sector reacts differently in a tense environment. You as an investor will adjust your strategy. The broader economy will keep moving.

For now, it makes sense to stay alert, stay diversified, and avoid hasty decisions.

FAQs

1. Why does the value of the rupee fall during tensions in stock markets?

The value of the rupee reduces as you as an investor feel unsure and prefer to move your money to safer places. Hence, the value of the currency falls.

2. Which stocks generally perform well during conflicts? 

Companies related to defence usually perform better. People generally expect more spending on defence, so the prices of its stocks go up.

3. If the market is going down due to tension should I stop my SIP?

It is advisable not to stop your SIP. As, stopping can break your long-term plan and markets generally recover after some time.

4. Does political tension always cause the stock market to go down?

Not always. But it can make the market drop for a short time. It depends on how serious the situation becomes.

Apply for Loans Fast and Hassle-Free

Apply Now

About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?