Market can break if stress is prolonged – Markets May Crumble If Tensions Persist

Analysts believe that if the war/tension with Pakistan continues for a long time after the operation vermilion, the markets may decline. After the Pahalgam attack, the Indian Army has retaliated on terrorist bases in Pakistan and Pakistan -occupied Kashmir (PoK). But he says that if such action is limited to only select goals and tension does not increase, then the markets can be improved over time.

Anirudh Sarkar, Chief Investment Officer of Quest Investment Advisors, said that the past states that Indian markets have performed well during the struggle with Pakistan and even after that. This time also the situation is not different.

The government said, ‘However, geopolitical concerns have remained for the last two weeks. Nevertheless, foreign institutional investors (FIIs) remained investment in our markets, which shows our economic strength towards these short -term border struggles. Any such military campaign will not have any negative impact on our economy or market, which will be limited to select goals and end in a few days or weeks.

But if the confrontation lasted for a long time (whose possibility is not visible at the moment), then it can have a negative effect on investor perception because they would prefer to avoid risk.

In response to the terrorist attack in Pahalgam on 22 April, the Indian Army targeted terrorist bases in Pakistan and Pakistani occupied Jammu and Kashmir (POJK) on the middle of May 6 and 7. More than 26 civilians were killed in the terrorist attack of Pahalgam. Historically, the Indian stock markets have usually been reacting intensely to geopolitical stresses in the short term.

But uncertainty recover as soon as it decreases. For example, there was a major decline in markets during the Kargil conflict between India and Pakistan in the mid -1999. However, when it became clear that the fight would not run long, the markets returned firmly. Independent market analyst Ambareesh Baliga also believes that if the operation is limited within a scope/region with vermilion target attacks and ends soon, then good recovery can be seen in the market.

He said, ‘If the current struggle increases, uncertainty will immerse the market. At the moment, wait and look at it will be a strategy. Even after Balakot, we saw a boom in the markets. UR Bhat, co-founder and director of Alfaniti Fintech, believes that the market has digested the information available about Operation Sindoor so far. He believes that more information about the stability of markets needs more information about how Pakistan will react to these developments.

G. Chokalingam, founder and head of research, Equinomics Research, said that the performance of small and midcap within the market segment can be weaker than largecap as a Bhurajnial developments can weaken the participation of retail investors. Chokalingam says, “We will recommend some inclination towards largecap, especially Sensex and Nifty shares,” Chokalingam says. But if there is any confrontation or war with Pakistan, then there may be a significant decline in the entire market including large-cap.

First Published – May 7, 2025 | 11:35 pm IST

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