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Geopolitical tensions between India and Pakistan have historically caused initial jitters in the Indian stock markets. However, data shows that these pullbacks are typically short-lived and are often followed by sharp rebounds, supported by India’s strong macro fundamentals and economic momentum.

On May 7, 2025, India conducted 'Operation Sindoor', a missile strike targeting terror infrastructure in Pakistan and Pakistan-occupied Kashmir (PoK). The move was in retaliation to the Pahalgam terror attack that killed 26 people. While the Sensex opened nearly 700 points lower, it recovered soon after, mirroring past patterns of resilience. Pakistan's stock market, however, dropped 5.5 per cent in early trade.

Below is a summary of how Indian stock indices, particularly the Nifty50, performed around major India-Pakistan military or terror-related events:

Analysis of 11 major India-Pakistan flashpoints shows the Sensex dipped after 8 of those events, with corrections between 2 per cent and 9.5 per cent. On average, the Sensex dropped around 7.5 per cent at its lowest point, but recovered shortly after. In most cases, the market outperformed its global peers, including the US S&P 500, over the next few months.

The Indian equity market typically reacts to Indo-Pak conflicts with short bursts of volatility and risk aversion. However, investor confidence tends to return quickly, especially when the situation avoids full-scale escalation. Historical data reinforces that market fundamentals prevail over panic, and sharp rebounds often follow geopolitical dips.

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