Karachi Stock Exchange Crashes 6% Following India’s ‘Operation Sindoor’ Strikes

Karachi, May 7, 2025:

Karachi Stock Exchange Crash: The Pakistan stock market witnessed a sharp plunge on Wednesday morning, with the benchmark Karachi Stock Exchange-100 (KSE-100) index falling by 6,272 points, or nearly 6%, in early trade. The market tumbled to 107,296.64 from Tuesday’s close of 113,568.51, marking one of the steepest single-day drops in recent months.

This steep decline came in the immediate aftermath of India’s overnight military operation, dubbed ‘Operation Sindoor’, which targeted nine terrorist camps located in Pakistan and Pakistan-occupied Kashmir (PoK). The strikes were a direct response to the April 22 terror attack in Pahalgam, Jammu & Kashmir, which claimed the lives of several Indian soldiers.

What Triggered the Crash?

The escalating tensions between the two nuclear-armed neighbors rattled investor confidence in Pakistan, prompting panic selling across sectors.

Since the Pahalgam attack, the KSE-100 has already shed around 3.7%, and the latest developments have intensified the downward trend. Analysts attribute this to growing fears of a full-scale military conflict that could destabilize the region’s fragile economy.

“The market is reacting to the possibility of further escalation. Institutional investors are moving to safer assets amid uncertainty,” said Faizan Akhtar, a Karachi-based investment strategist.

Contrast with Indian Markets

Interestingly, Indian stock markets appeared far more resilient in comparison. The BSE Sensex, although opening lower by 692 points at 79,948.80, recovered swiftly, gaining over 200 points to climb above the 80,845 mark.

By 10 AM IST, market volatility had settled somewhat, with the Sensex down just 32 points (0.04%) at 80,609, while the Nifty 50 dropped a marginal 19 points (0.08%) to 24,361.

Historical Perspective: Markets and Military Conflict

While short-term market jitters are common during geopolitical conflicts, historical data suggests that Indian markets tend to rebound strongly once tensions de-escalate.

• Post-Kargil War (1999): Sensex surged 63% within a year.
• After the 2001 Parliament Attack: A rise of over 20% was recorded the following year.
• Post-26/11 Mumbai Attacks (2008): Markets gained 60% in the next 12 months.
• Following the 2019 Balakot Strikes: Sensex rose by 15% by year-end.

“Investors should focus on fundamentals, not fear,” said Pankaj Singh, Founder and Principal Researcher at SmartWealth.ai. “Unless accompanied by broader economic shocks, Indo-Pak tensions haven’t shown long-term adverse effects on Indian markets.”

Outlook: What’s Next for Pakistan

Pakistan’s economic landscape remains fragile, grappling with high inflation, dwindling forex reserves, and a looming IMF review. The added pressure of military uncertainty could exacerbate these vulnerabilities.

Experts warn that foreign investor sentiment may further sour unless the situation stabilizes quickly. Domestic investors, too, are likely to remain cautious in the coming weeks.