PSX dips on border tensions, recovers slightly as flights resume

KARACHI: This morning felt like a scene out of a financial thriller as the KSE-100 plunged over 6,000 points at the opening bell — one of its sharpest intraday falls in recent memory — following reports of Indian airstrikes near the border, analysts said.

“Traders hit sell buttons across the board. Airports suspended operations. Screens turned red,” Tresmark, a financial institution stated.

But shortly, things flipped. The KSE clawed back over half its losses. Flight operations quietly resumed. Investors, it seems, had taken a breath, it added.

Pakistan market lost 6% early morning today after these airstrikes, however, later in the day, most of the losses are recovered and closed -3.13%.

The index eventually closed at 110,009 points, down 3,559 points, or 3.13%.

Since 23 Apr to 06 May, Pakistan market has already lost 4.1% in 9 sessions amidst uncertainty over possible attack from India, Topline Securities stated.

The tensions between Indo Pak further escalated in the night/morning of May 06/07, wherein, as per media reports, neighboring country carried out few air strikes in different parts of Pakistan. In response, Pakistan shot down five fighter jets of India, as per press release of Prime Minister’s Office (PMO).

Pakistan launches its first Green Sukuk to fund eco-friendly projects

Due to this tension Pakistan stock are lackluster despite major positive developments in Pakistan including, Scheduling of IMF board meeting on 1st review of IMF program on May 09,  reduction in policy rate by 100bps, and almost all-time low inflation reading of 0.3% in Apr 2025, Topline Securities added.

Based on our assessment of previous Indo Pak conflicts, namely Pulwama/Balakot Issue in Feb 2019 and Uri Strikes in Sep 2016, the market had not reacted very negatively.

Surprisingly, yields on Pakistan Euro/Sukuk bonds in international market have improved (prices increased) by 18-61bps after falling on average 160bps across various tenors in last 8-9 days, Topline went on to add.

Pulwama/Balakot Issue: On Feb 14, 2019, Indian troops were attacked and 12 days later India responded through air strikes in Pakistan on Feb 26, 2024. Pakistan Market lost 2% on Feb 26 when airstrike took place and 3 days losses fell to 1.4%, recovering 0.6%.

Uri Strikes:  India carried out airstrikes in Pakistan on Sep 29, 2016 in response to causalities reported during a militant attack on India Army at Uri on Sep 18, 2016. Market reacted positive after the strikes on Sep 29 and 1 day and 3 days gains were 0.6% and 2.1%, respectively.

Previously IMF programs continued “Business as Usual” during tense times: In the past we have seen continuation of IMF program despite tensions as these programs are based on macroeconomic targets. During Uri Strikes time, Pakistan also got approval of its 12th review under EFF facility on Sep 28.

The downward trajectory of the index was largely driven by negative contributions from key stocks such as LUCK, HUBC, UBL, SYS, and ENGROH, which collectively dragged the index down by 967 points.

Despite the overall decline, investor participation remained strong, with total traded volume reaching 547 million shares and market turnover amounting to Rs 30 billion. WTL led the volume chart, with 53 million shares.