Karachi, Pakistan — The Pakistan Stock Exchange (PSX) witnessed a severe sell-off on Wednesday, with the benchmark KSE-100 index plunging 3,545.61 points or 3.09%, amid rising geopolitical tensions with neighboring India. The index closed at 111,326.57, down from the previous close of 114,872.18, marking one of the steepest single-day declines this year.
The market’s sharp downturn was largely driven by fears of imminent conflict, following official warnings from Pakistani authorities. The drop reflects how geopolitical developments, especially those with military undertones, can swiftly shake investor confidence and overwhelm even positive macroeconomic developments such as an upcoming International Monetary Fund (IMF) review.
Mohammed Sohail, CEO of Topline Securities, attributed the panic-driven decline to “news of a likely attack in the next few days.” His view was echoed across the brokerage community.
Awais Ashraf, Director of Research at AKD Securities, explained, “Investors are worried about potential Indian military action against Pakistan. Concerns have intensified following the information minister’s press briefing.” This sentiment was reinforced by Yousuf M. Farooq, Director of Research at Chase Securities, who cited pressure stemming from the minister’s statement suggesting India may initiate military action within 24–36 hours.
Earlier in the day, Information Minister Attaullah Tarar revealed in a press briefing that Pakistan had obtained “credible intelligence” indicating India was preparing a military operation. This followed the Pahalgam attack in Indian-occupied Kashmir, for which India has blamed Pakistan, albeit without presenting evidence. The minister denounced India’s stance, stating that Pakistan “vehemently rejects the self-assumed hubristic role of judge, jury, and executioner,” calling such behavior “reckless.”
Investor sentiment was further shaken when India reportedly granted its military operational freedom to respond to the Kashmir incident, heightening the specter of conflict and sending shockwaves through Pakistan’s equity and bond markets.
The global financial impact was also notable. Pakistan’s international dollar bonds took a hit, with the 2036 bond falling 1.3 cents to be bid at 71.85 cents on the dollar, according to Tradeweb data. Analysts pointed to widening bid-ask spreads as an indication of tightened liquidity and rising risk premiums amid the uncertainty.
On the Indian side, markets remained relatively stable but cautious. The Nifty 50 index dipped 0.05%, while the BSE Sensex edged down by 0.07%. Despite losses from Bajaj Finance, which fell 5.4% due to weak pre-provision profits, Indian equities were bolstered by strength in HDFC Bank. However, volatility remained elevated, with the Nifty volatility index rising in five of the last six sessions following the Pahalgam incident.
Anita Gandhi, founder and head of institutional business at Arihant Capital Markets, said, “For now, geopolitical tensions with Pakistan have overtaken U.S. tariffs in investors’ minds.”
This dramatic fall at PSX underscores the fragility of market sentiment amid geopolitical crises, even as the IMF confirmed its Executive Board would meet on May 9 to discuss a new $1.3 billion climate resilience loan for Pakistan, alongside a review of its ongoing $7 billion bailout.
As tensions between the two nuclear-armed neighbors escalate, investors are bracing for further volatility across regional markets.