27 April, 2025:
Sahil Aggarwal
(Editor-in-Chief)
Geopolitical Tensions Impact Indian Stock Market After Kashmir Attack
The Indian stock market faced increased volatility following a deadly militant attack in Kashmir on April 22, 2025, which killed 26 people and escalated tensions between India and Pakistan. The surge in geopolitical uncertainty led to cautious investor sentiment, resulting in a pullback from key indices and sectors.
On April 25, the BSE Sensex fell by 589 points (0.74%), closing at 79,212.53, while the Nifty 50 dropped by 207 points (0.86%) to 24,039.35. Mid-cap and small-cap stocks were hit harder, with losses exceeding 2.5% as market participants became more risk-averse in light of the escalating situation.
The India VIX, a gauge of market volatility, increased by 11%, reversing some of the previous week’s gains, signaling heightened market uncertainty. In response to the attack, India suspended the Indus Waters Treaty and downgraded diplomatic relations with Pakistan. In retaliation, Pakistan closed its airspace to Indian airlines, further straining relations between the two nations.
Despite these tensions, certain sectors showed resilience. The IT sector gained 0.7%, largely due to a rally in the US Nasdaq index. However, the hotel and aviation sectors saw a decline, as the ongoing tensions were expected to negatively impact tourism.
Historically, Indian stock markets have demonstrated resilience during geopolitical conflicts. Analysts believe that while short-term volatility is likely, long-term investors may find opportunities during market dips. According to a report from Anand Rathi, Indian equity markets have generally experienced corrections of less than 2% during previous geopolitical tensions, except during the 2001 Parliament attack.
As the situation develops, investors are encouraged to stay updated and factor in historical market behavior when making investment decisions.