Karachi, May 7, 2025 – Investors at the Pakistan Stock Exchange (PSX) are facing heightened anxiety and uncertainty following a sudden and severe deterioration in regional security after India launched an attack in Azad Jammu and Kashmir late Tuesday night.
The escalating conflict has cast a long shadow over the financial markets, with investors reacting swiftly to the alarming developments.
The PSX opened Wednesday’s trading session with a massive plunge, dropping over 6,500 points at the opening bell as investors rushed to offload shares amid panic. Although the market staged a partial recovery, trimming losses to around 1,100 points by mid-morning, renewed concerns pushed the benchmark KSE-100 index deeper into red again. By 11:47 AM, the index had shed 2,778 points or 2.45%, reflecting the deep-rooted investor anxiety.
According to Mohammad Sohail, CEO of Topline Securities Limited, the PSX initially fell by nearly 6% but managed to recover as some investors speculated that the situation between Pakistan and India would not escalate further. “Many are hopeful that tensions will subside and that there won’t be prolonged conflict,” Sohail noted. He added that some investors are maintaining cautious optimism ahead of the upcoming IMF board meeting, which is expected to decide on the next loan tranche for Pakistan.
On Tuesday, prior to the attack, the PSX had already experienced a turbulent session. The KSE-100 index dropped 534 points, closing at 113,568, down from 114,102 a day earlier. This dip came despite the State Bank of Pakistan’s unexpected decision to cut the policy rate—an otherwise market-friendly move intended to stimulate investor confidence.
Initially, the interest rate cut triggered a rally, with the index surging nearly 990 points in early trade. However, this positive momentum was quickly reversed as geopolitical fears took center stage. The combination of regional instability and global uncertainty prompted widespread profit-taking, forcing PSX investors into a defensive position.
With the situation across the border remaining fluid, PSX investors are closely watching both political developments and economic indicators, as any further escalation could deepen market volatility and erode investor confidence further.