Operation Sindoor: Full-Scale Indo-Pak War Unlikely, Says Anand Rathi

As tensions flared between India and Pakistan post the Pahalgam terror attack, India retaliated early Wednesday by launching Operation Sindoor, a precision strike on nine Pakistani terrorist infrastructures.

Even as the country undergoes mock drills, a first since the 1971 Indo-Pak war, in preparation for potential wartime, brokerage firm Anand Rathi believes an Indo-Pak war is not on the cards.

What leads to this take? Factors such as international diplomacy, nuclear risk appetite, economic protection combined with public sentiment and evolved strategic doctrines focused on controlled escalation are key, believes the brokerage.

Drawing from historical precedence, the firm highlights that even during high-tension periods like the 2001 Parliament Attack and the Kargil War, India's military response remained calibrated—never escalating beyond high alert, cross-border tactical strikes, and limited air or artillery action.

Equity markets, too, have historically shown resilience during such geopolitical episodes. Of the 11 Indo-Pak tension events studied, only two evolved into war-like situations, said the firm.

During both Kargil and the Parliament Attack, Indian equities outperformed the S&P 500, and foreign portfolio investment flows remained positive. In fact, Anand Rathi noted that average Sensex corrections at their lowest points stood at 7.5%, with a median of just 3.5%, and on a relative basis, Indian markets outshone global peers.

The brokerage does not expect this time to be different. The broader narrative continues to be led by India's domestic macroeconomic strength in the form of earnings momentum, liquidity, policy clarity, and macro stability, and not by its external fault lines, said Anand Rathi. In most cases, investors appeared to distinguish between temporary noise and long-term fundamentals, they added.

However, the impact on Jammu & Kashmir's economy may be more immediate, believes Anand Rathi. The attack casts a shadow over the region's tourism sector, which had seen a strong revival post COVID, with nearly 21 million tourist arrivals in 2023. Given tourism contributes around 8% to the Union Territory's GSDP, a wave of trip cancellations could hurt local travel, hospitality, and allied services.