India stock market is 245 times Pakistan's stock market! Nifty50 resilient, KSE 100 crashes 9.5% amidst India-Pakistan tensions

India-Pakistan tensions : The reaction of stock markets in India and Pakistan to the rising tensions post Pahalgam terror attack and the ongoing Operation Sindoor so far is an indication of India’s underlying economic strength. The stock markets of India and Pakistan have shown contrasting responses to the rising tensions. India’s Nifty50 has seen a modest decline of 1.52% after Operation Sindoor on May 7, whilst Pakistan's KSE-100 has witnessed a substantial fall of 5.55%.

Since the April 22 attack in Jammu and Kashmir’s Pahalgam that resulted in 26 tourist casualties, Pakistan's main stock market index KSE has dropped by 9.5%, whereas the Nifty has shown minimal movement with just a 0.66% decrease.

This stock market behaviour highlights an important distinction: India's stock market, being 245 times larger than Pakistan's, demonstrates considerably more stability during geopolitical uncertainties.

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• According to an ET report, India stands amongst the globe's top five equity markets, boasting a total market capitalisation of approximately $5 trillion. In contrast, Pakistan's Karachi Stock Exchange maintains a significantly smaller capitalization of $20.36 billion, according to Bloomberg data.
• India's market demonstrates superior structural strength with over 5,000 listed companies, backed by substantial involvement from mutual funds, retail investors, and SIPs. This robust domestic foundation helps maintain market stability.
• Conversely, Pakistan's exchange, listing merely 500 companies, exhibits higher sensitivity to market sentiment and lower liquidity, making it particularly susceptible to sharp declines during political unrest.
• India's economic fundamentals demonstrate considerable strength. The nation maintains forex reserves of $688 billion, whilst Pakistan holds $15.25 billion.

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Economic analysts suggest that Pakistan would face significantly greater financial repercussions than India in the event of prolonged military conflict, making further aggressive actions highly unfavourable.

India stands as the fifth-largest economy globally when measured by nominal GDP, whilst maintaining its position as the fastest-growing major economy. Pakistan, in comparison, fails to secure a position amongst the world's top 40 economies.

Moody's, the international credit rating agency, has issued a cautionary assessment regarding Pakistan's economic outlook. The agency stated that heightened tensions with India would adversely affect Pakistan's economic growth and impede governmental fiscal consolidation efforts, thereby undermining the country's progress towards achieving macroeconomic stability.