SOURCE : NEW18 NEWS
Last Updated:April 23, 2025, 14:19 IST
Pahalgam Terror Attack: Analysts caution that the market’s calm may be tested depending on how the government responds to the incident
Stock Market Outlook
A day after the tragic terror attack in Pahalgam, Indian equity markets demonstrated remarkable resilience, extending their winning streak for the seventh consecutive session on April 23. Investors appeared to shrug off immediate concerns, with the broader rally from April lows showing no signs of slowing. However, analysts caution that the market’s calm may be tested depending on how the government responds to the incident, with any retaliatory measures potentially sparking short-term volatility.
Vinit Bolinjkar, Head of Research at Ventura Securities, said that while a potential military response from India could lead to brief market disruptions, a broader trend reversal is unlikely unless the conflict escalates dramatically.
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“Unless India undertakes strong military action against Pakistan, any market reaction may be limited. We’ve already seen equity markets absorb shocks from major global events like the Russia-Ukraine war and the US-China tariff standoff during President Trump’s tenure,” Bolinjkar noted.
Kranthi Bathini, Director of Equity Strategy at WealthMills Securities, echoed this sentiment. He pointed out that investors are now focused on how the government navigates the crisis—whether it opts for diplomatic measures, precision strikes, or a broader military approach.
Bathini added that the economic context today is vastly different from the time of the 1999 Kargil War. “India’s GDP has expanded more than tenfold over the past two decades. The country is now in a stronger economic position to absorb geopolitical shocks,” he said.
Veteran market analyst Ajay Bagga, in a post on X (formerly Twitter), cautioned that while markets may remain cautious in the near term, past retaliatory actions by India have usually resulted in only temporary pullbacks, followed by quick recoveries.
Historical Market Response to Military and Terror Events
Looking at past data, Indian markets have typically shown resilience in the face of similar crises. On February 26, 2019, when the Indian Air Force launched air strikes in Balakot, the Sensex dropped by 239 points, and the Nifty slipped 44 points. Yet, by the next trading session, the market had largely stabilized, with the Sensex opening higher and closing flat.
After the 2019 Pulwama attack, the market’s reaction was muted, registering a modest 0.2 percent decline on February 15. However, the 2016 surgical strikes in response to the Uri attack triggered a sharper fall, with the Sensex losing over 400 points and the Nifty down 156 points.
Interestingly, during the 1999 Kargil conflict—a full-scale military standoff—the Sensex and Nifty both surged approximately 33 percent over the three-month period. The Sensex gained 1,115 points, while the Nifty rose by 319 points.
The 2008 Mumbai terror attacks also defied expectations. Despite the magnitude of the crisis, the Sensex climbed nearly 400 points over two trading days, and the Nifty advanced by 100 points.
The Pahalgam attack, the deadliest in Jammu & Kashmir since the 2019 Pulwama bombing, has been widely condemned by global leaders, civil society, and Indian citizens. The Resistance Front (TRF), a group linked to Pakistan-based Lashkar-e-Taiba (LeT), has claimed responsibility. However, the Indian government has yet to release an official statement confirming the involvement of any specific group or nation.
While the national mood remains somber, markets appear to be taking a measured view, awaiting clarity on the government’s next steps. Whether this cautious optimism persists will largely depend on how geopolitical tensions unfold in the coming days.
