One look at the stock markets of India and Pakistan and it is clear that the Indian market dwarfs that of the neighbouring country by a huge margin in terms of size, depth and flows.
The Indian stock market features among the top give globally in terms of market capitalisation with the current valuation pegged at around $5 trillion. In sharp contrast, the market capitalisation of Karachi Stock Exchange is a paltry $20.36 billion, as per data from Bloomberg.
Further, while there are more than 5,000 listed companies in India, just a little over 500 firms are listed in Pakistan.
Indian equities also benefit from a large pool of institutional and domestic investors, including growing retail flows and SIP-based participation. This diversification helps limit panic-driven selling during periods of uncertainty.
On the other hand, Pakistan’s market remains more sentiment-sensitive and less liquid, making it more vulnerable to sharp drawdowns when risk perceptions rise. With fewer listed companies and lower participation from long-term capital, geo-political events tend to have a more amplified impact.
For instance, Pakistan’s benchmark equity index, the KSE-100 Index plunged as much as 5.7 percent on May 7, its steepest fall since 2021 before trimming losses to 3 percent.
On Wednesday, the Sensex settled the day at 80,746.78, up 105.71 points or 0.13 percent at 80,746.78 while the Nifty closed with a gain of 34.80 points or 0.14 percent at 24,414.40.
Incidentally, the KSE-100 Index lost over six percent in April - its worst monthly fall since August 2023 – as rising geopolitical tensions triggered a panic selloff.
In terms of historical returns, while the last two calendar years have been better for Pakistan, a longer-term comparison clearly shows that India is a fundamentally and structurally much better bet.
In the current year till date, the Sensex is up 3.40 percent while KSE-100 is down a little over six percent.
The year 2024 was the best-ever for KSE-100 with the benchmark gaining more than 84 percent even as the Sensex gained only 8.17 percent. It was a similar story in 2023 as well with KSE-100 gaining 54.33 percent and the Sensex up only 18.74 percent.
The pattern, however, changes in the earlier years with the Indian benchmark outperforming KSE-100 in all the years starting 2017 till 2022.
On a different note, even if one compares the foreign exchange reserves of the two countries, India is ahead by miles with forex reserves totalling $688 billion. Pakistan, on the other hand, has forex reserves of only $15.25 billion.
READ MORE: Sensex, Nifty remain range-bound amid geopolitical tensions, Fed comments; IT gains, FMCG drags
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