The Pakistan Stock Exchange (PSX) suffered its sharpest single-day fall since 2008 on Thursday, May 8, as the benchmark KSE-100 Index plummeted 9% amid escalating military tensions with India. The market crash, triggered by geopolitical instability following India’s military strikes, led to a temporary halt in trading before operations resumed.
The KSE-100 had initially staged a surprising rebound during early trading, surging nearly 1,800 points on hopes of a de-escalation in hostilities. However, that optimism quickly gave way to panic as heavy selling resumed. By 2:31 pm, the index had dropped by 7,070.54 points or 6.43%, settling at 102,938.49. This steep decline followed Wednesday’s (May 7) meltdown when the KSE-100 tumbled over 6,500 points, wiping out nearly 6% of its value to close at 107,007.
Geopolitical Flashpoint Behind the Crash
The market turmoil was directly linked to news of India’s precision military strike, dubbed “Operation Sindoor.” The operation targeted nine terrorist-linked sites—four within Pakistan’s borders and five in Pakistan-occupied Kashmir. The strikes were carried out in retaliation for a deadly terror attack in Pahalgam, Jammu and Kashmir, on April 22, which killed 26 Indian nationals.
This military escalation led to a wave of uncertainty across Pakistan’s financial markets. Thursday marked the fourth consecutive session of losses on the PSX, with investor sentiment deteriorating rapidly in the face of ongoing cross-border hostilities.
Economic Fragility Adds to Market Jitters
Compounding the geopolitical crisis is Pakistan’s already fragile economic condition. The country’s $350 billion economy is teetering under fiscal pressures, and investors remain on edge as they await a critical decision from the International Monetary Fund (IMF). The IMF is expected to announce tomorrow whether it will extend Pakistan’s funding facility, a decision that could significantly impact short-term investor confidence.
Since the Pahalgam attack on April 22, the KSE-100 has lost around 13% of its value, reflecting the depth of concern over a prolonged conflict. The KSE-30 index has mirrored this decline, reinforcing the broad-based nature of the selloff.
India’s Markets Hold Steady Amid Crisis
While Pakistan’s financial markets have been rattled by the escalating situation, Indian markets have displayed a notable level of resilience. Indian stock exchanges remained largely flat for the second consecutive day, with volatility persisting but without the large-scale panic seen in Pakistan.
Analysts attribute this calm to the non-escalatory and precise nature of Operation Sindoor. According to Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments, “The market is unlikely to be impacted by the retaliatory strike by India since that was known and discounted by the market.”
Historical data also suggests that Indian equities tend to recover quickly from geopolitical shocks, barring a few exceptions such as the Parliament attack in 2001.
The situation remains fluid, and investor eyes are now fixed on potential diplomatic developments and the IMF’s forthcoming decision, which could provide much-needed direction to Pakistan’s battered markets.
