The Pakistan Stock Exchange (PSX) experienced a significant decline on Thursday morning, with the KSE-100 index falling by 2.12 per cent or 2,485.85 points, reaching 114,740.29. This sharp drop followed the announcement from India of strong diplomatic actions in response to a deadly terrorist attack in Pahalgam, India, which claimed 26 lives. The news triggered widespread fear among investors, leading to a rapid sell-off.
India's Diplomatic Measures
India's Ministry of External Affairs responded to the Pahalgam attack by announcing tough measures against Pakistan. These included the suspension of the Indus Waters Treaty, halting trade through the Wagah-Attari border, and revoking visa exemptions for Pakistani nationals under the SAARC framework. These actions are expected to further strain the already tense relationship between the two countries.
PSX's Decline Amid Economic Woes
The sharp fall in the PSX came on the heels of a decline on Wednesday, triggered by the International Monetary Fund (IMF) cutting Pakistan’s GDP growth forecast for the current fiscal year to just 2.6 per cent. Economic and political instability, as well as rising concerns over Pakistan’s weakening currency and security risks, particularly in Kashmir, have all played a role in undermining investor confidence.
Investor Sentiment Under Pressure
Global rating agency Fitch Ratings recently raised concerns about Pakistan's financial stability, citing the weakening of the Pakistani Rupee, political uncertainty, and increasing security risks. These factors have contributed to a volatile market environment, making investors cautious.
Indian Market's Slight Drop
In India, the stock markets did not react as strongly. The BSE Sensex was down 233 points, or 0.29 per cent, while the Nifty50 dropped 69 points, or 0.28 per cent, as of early trading on Thursday. However, Indian investors are keeping a close watch on the evolving situation.
