Pakistan Stock Exchange plunges 3,500 points amid fears of Indian military strike after Pahalgam attack

The Pakistan Stock Exchange (PSX) witnessed a sharp crash on Wednesday, dropping over 3,500 points amid rising tensions with India following the April 22 terror attack in Jammu and Kashmir’s Pahalgam that left 26 people dead. The market was rattled by speculation over a possible Indian military response, following high-level defence discussions in New Delhi and an intelligence warning from Pakistan’s government.

The KSE-100 index began the day with a loss of 1,717.35 points (1.5%) at 9:53 am, falling to 113,154.83. The downward trend continued through the morning, with the index sliding by 2,073.42 points (1.8%) by 10:38 am. Panic selling escalated in the afternoon session, and by 1:50 pm, the market had lost 3,255.42 points (2.83%). By the end of trading, the KSE-100 closed at 111,326.57 — down 3,545.61 points or 3.09% from the previous close of 114,872.18.

Investor anxiety intensified after Information Minister Ataullah Tarar stated on Tuesday evening that Pakistan had received “credible intelligence” indicating India might carry out military action within 24 to 36 hours. This followed a high-level security meeting in India where Prime Minister Narendra Modi granted the top defence leadership "complete operational freedom" to determine the mode and timing of the response to the Pahalgam attack.

Market analysts linked the steep decline to the warning of military escalation. Yousuf M Farooq, Director of Research at Chase Securities, attributed the fall to “news of a likely attack in the next few days.” Fatima Bucha of AKD Securities said the market was “under pressure” following the information minister’s press briefing. Awais Ashraf, Director of Research at AKD Securities, said investors were “worried about potential Indian military action.”

The impact extended beyond equities, with Pakistan’s dollar-denominated international bonds also experiencing pressure. The 2036 bond fell by 1.3 cents to 71.85 cents on the dollar. Commercial activity in Karachi also slowed, with All Karachi Tajir Ittehad Association President Atiq Mir reporting subdued business across markets and shopping centres. India, in response to the attack, has taken a series of diplomatic steps, including expelling Pakistani military attaches, suspending the Indus Water Treaty of 1960, and closing the Attari land-transit post.