India-Pakistan Tensions: A Historical Look At Nifty’s Performance During The Conflicts

Brokerages including Elara Securities and Anand Rathi note that Indian equity markets often recover within days after military operations involving the Indian government and cross-border tensions with Pakistan. (File image of NSE building in Mumbai. Photo source: Vijay Sartape/NDTV Profit)

Indian equity markets have historically shown resilience during periods of heightened geopolitical tensions with Pakistan. Data from past incidents suggests that while there is usually a brief sell-off following major cross-border events, markets tend to recover quickly, limiting the long-term impact on Indian equity benchmark Nifty 50.

The latest escalation followed the April 22 Pahalgam attack that killed 26. In response, India launched Operation Sindoor on May 7, targeting nine terror sites in Pakistan and Pakistan-occupied Kashmir. The airstrike has raised regional tensions, drawing investor attention to the potential impact on equities.

Short-Term Volatility, Quick Recovery

The average market corrections during past India-Pakistan conflicts have been around 7%, with a median drop of 3%, according to Anand Rathi. The brokerage expects that even in the case of further escalation, the Nifty 50 is unlikely to correct more than 5–10%, based on historical precedent and current global risk assessments.

Elara Securities reviewed nine conflict episodes since 2001 and observed a consistent two-phase pattern in market behaviour: an initial decline in the Nifty 50 followed by a recovery to pre-event levels. The volatility observed during incidents like the 2016 Uri surgical strike and the 2019 Balakot airstrike was short-lived.

Nifty's Recovery Timeline

Elara further notes that the Nifty 50 typically reaches its lowest point within six days of an attack and regains pre-conflict levels in about two days. In cases where India mounted a clear military response, the recovery was faster, often within one to five days. The index also outperformed the MSCI Emerging Markets index during those rebound phases.

While markets remain cautious amid the latest developments, past performance indicates that Indian equities have managed to absorb geopolitical shocks without sustained disruption.

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