New Delhi [India]: Despite heightened tensions with Pakistan following the Pahalgam terror attack, Indian stock markets are expected to remain stable, according to a new analysis by Anand Rathi Research.
The study found that, historically, Indian equities have not corrected more than 2% during most periods of military or political strain with Pakistan — with the notable exception of the 2001 Parliament attack.
Key Findings from the Research
The report observed that:
- During four major India-Pakistan confrontations since the Kargil War in 1999, Indian markets showed minimal corrections.
- The only major drop occurred post the 2001 Parliament attack, but was primarily due to a global downturn, with the U.S. S&P 500 falling nearly 30% during the same period.
- On average, geopolitical events caused a 7% correction, with a median fall of just 3% in Indian markets.
Even in a major escalation scenario, the Nifty 50 index is unlikely to fall more than 5-10%, the report suggests, considering current global risk pricing and past trends.
Implications for Investors
Amid the current backdrop of India-Pakistan tensions, Anand Rathi Research advises investors to stay aligned with their strategic asset allocation.
For those following the 65:35:20 model — 65% equities, 35% debt, and 20% alternatives — the report recommends:
- Maintaining the current allocation without panic selling.
- Filling any gaps in equity investments to realign with the strategic plan.
“Investors who have any equity gap in the portfolio should invest now thereby getting aligned to the strategic allocation of 65:35:20,” the report states.
Background: Pahalgam Attack and Market Sentiment
The April 22 terror attack in Pahalgam, which claimed 26 civilian lives, has increased geopolitical tensions. However, historical patterns suggest that the Indian stock market tends to absorb such shocks with relative resilience unless compounded by global financial instability.
The analysis also reviewed 19 other wars or war-like situations involving G20 nations over the last 25 years to draw broader conclusions about stock market behavior during geopolitical crises.