A day after the tragic Pahalgam attack, Indian markets extended their rally for the seventh consecutive session on April 23, showing resilience and brushing aside any immediate negative sentiment. Market experts believe the sentimental impact on equities is likely to remain minimal, as the ongoing rebound from April lows continues to hold strong. However, investor attention has now shifted to how the government responds in the near term and any form of retaliation could keep markets on edge.
Vinit Bolinjkar, Head of Research at Ventura Securities, noted that while a retaliatory strike could trigger short-term market volatility, the broader trend remains intact unless the situation escalates into a full-scale war.
“Unless India undertakes strong military action against Pakistan, any market reaction may be limited. We've already seen the markets absorb extreme events like the Russia-Ukraine war and the US-China tariff standoff under President Trump,” he said.
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Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, echoed a similar view. He said that investors will be closely monitoring the government's course of action—whether it involves negotiations, targeted operations against militants, or a broader military response.
Still, he pointed out that today's economic environment is vastly different from what it was during the 1999 Kargil War. "India’s GDP has grown more than tenfold in just over two decades," he said, suggesting the country is economically better positioned to weather geopolitical shocks.
Veteran market analyst Ajay Bagga added in a post on X (formerly Twitter) that the markets could remain cautious in the short term, as past instances of Indian retaliation have typically led to brief declines before stabilising.
How has Dalal Street reacted to past terror attacks or military events?
On February 26, 2019, when the Indian Air Force conducted air strikes on terrorist camps in Balakot, the Sensex fell by 239 points while the Nifty lost 44 points. However, the following day, markets bounced back as Sensex opened with a gain of 165 points and eventually closed flat.
After the Pulwama attack in 2019, markets saw a mild reaction, dropping just 0.2 percent during the February 15 session. In contrast, the 2016 surgical strikes following the Uri attack saw a sharper fall, with the Sensex dropping over 400 points and the Nifty down by 156.
Yet, historical data over the past two decades suggests that markets often recover quickly, or are even unaffected by such incidents.
During the 1999 Kargil conflict, the Sensex and Nifty each gained around 33 percent. Over the three-month war period, the Sensex surged 1,115 points, while the Nifty climbed 319 points.
Even during the 2008 Mumbai attacks, the markets defied expectations. The Sensex gained nearly 400 points in two days of trading during the attacks, and the Nifty advanced 100 points.
The mood across the nation remains somber in the wake of the Pahalgam tragedy, which has drawn widespread condemnation from global leaders, public figures, and citizens alike. The attack is the deadliest in the Valley since the Pulwama bombing in 2019. Responsibility has been claimed by The Resistance Front (TRF), a proxy linked to Pakistan-based Lashkar-e-Taiba (LeT), though the Indian government has yet to issue an official confirmation.
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