On Tuesday, Pakistan Stock Exchange (PSX) experienced one of its worst one-day crashes ever, plunging over 4,000 points amid rising tensions between Pakistan and India. Investors responded negatively when reports surfaced suggesting Pakistan had received credible intelligence of an imminent Indian military strike within 36 hours, sparking fears among investors who believed this may trigger another global financial meltdown.
The benchmark KSE-100 Index tumbled by 4,128 points to finish at 52,375 — representing an almost 7.3% decrease. Market sentiment turned distinctly pessimistic as fears of cross-border conflict unnerved both domestic and foreign investors alike.
“This sudden fall reflects sheer panic,” according to Ali Raza, head of research for a Karachi brokerage. Investors today are not pricing in earnings or interest rates – rather, they’re pricing geopolitical risk, which can often be unpredictable and therefore more volatile.
Today, Pakistani Foreign Office reported that India is planning a limited military operation against Pakistan, prompting immediate responses from India’s defense ministry and increased troop levels along the Line of Control (LoC). Although neither party have confirmed these claims officially, widespread fears of military confrontation between two nuclear-armed neighbors has resulted in media reports concerning this allegation.
Financial markets were quick to adjust to the shock. Blue-chip stocks across sectors including banking, energy and cement experienced dramatic losses as investors sought safety in gold or U.S. dollars – in Pakistani rupee terms it fell by Rs3 against the dollar on open markets.
“Uncertainty is toxic for markets,” stated financial analyst Hina Tariq. With such a serious geopolitical threat looming over our nation, institutional and retail investors alike are taking steps to de-risk.
Trading was briefly suspended this afternoon after the KSE-100 fell over 3,000 points in under two hours, setting off circuit breakers. However, trading resumed shortly thereafter with continued market falls once trading recommenced.
Meanwhile, the Finance Ministry issued a call for calm while assuring investors that government was closely watching and taking measures to stabilize markets. “This is only temporary due to speculation,” it stated in its statement.
Analysts caution that without swift de-escalation of regional tensions, the PSX may continue to experience downward pressure in coming days.
As diplomatic efforts intensify behind the scenes, all eyes have now turned towards Islamabad and New Delhi; these next 36 hours may prove vital in maintaining regional peace and financial stability.