KSE Plunges Amid Escalating Tensions with India
The KSE-100 index had been under pressure throughout the day, declining by 1,717.35 points, or 1.5%, in the morning session, and by 3,255.42 points, or 2.83%, in the afternoon session. The market reacted negatively after Pakistan's Information Minister announced that India may attack within 24-36 hours, and fears of an all-out war loom large at the border.
The Pakistan Stock Exchange (PSX) witnessed a massive sell-off on Wednesday, with the benchmark KSE-100 index plummeting by 3.09% or 3,545.60 points, amid escalating tensions with India and uncertainty over monetary policy. The market's decline was attributed to investor anxiety over potential Indian military action against Pakistan, following a statement by Information Minister Attaullah Tarar.
The market opened on a positive note but turned bearish due to war fears, with investor anxiety peaking after the press conference by the Information Minister suggesting the likelihood of an Indian military strike. Foreign investors sold shares worth Rs1.12 billion, and the rupee instability, slump in global crude oil prices, and fears over the outcome of heightened Pakistan-India border tensions contributed to the record bearish activity. Key heavyweight stocks, including Lucky Cement, Engro Holdings, United Bank, Pakistan Petroleum, and Fauji Fertiliser, significantly contributed to the market's fall.
The decline was also reflected in Pakistan's international bonds, which dropped more than 1 cent after the information minister's statement. Indian shares, however, were muted, with the Nifty 50 and BSE Sensex declining by 0.05% and 0.07%, respectively, as gains in heavyweight HDFC Bank helped offset pressure from tensions with Pakistan. Pakistan is facing its worst month in dollar bonds and stocks since 2023 due to ongoing tensions with India.
The US tariffs also pose an overhang, and any de-escalation of tensions is expected to calm investor nerves and lead to a small rally in bond and equity prices. Global powers have called on both sides to show restraint and de-escalate tensions, but the ongoing tensions are putting immense pressure on Pakistan's financial market. The State Bank of Pakistan's Monetary Policy announcement on Monday may offer some support, but analysts believe the next 24-48 hours are critical.