Mint Quick Edit | India’s military strike didn’t faze its stock market
Summary
The BSE Sensex held steady on 7 May after India struck hard at terror targets in Pakistan, whose own principal index dropped 6%. But then, India’s economy is robust while Pakistan’s is fragile.
Though Indian stock market indices have a record of falling in response to armed conflicts, the latest strike by India on targets in Pakistan did not bother investors on Wednesday. The Sensex edged lower at first, but quickly recovered to end 0.13% higher. It offered a sharp contrast with Pakistan’s market, whose primary index dropped 6%.
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The Indian equity market’s stability may have the focused nature of the strikes to thank. Though hard-hitting, India’s action only struck terror infrastructure, which investors may have read as a signal that the country was keen not to risk an escalation into full-blown war. The government did well in communicating this early, so that nobody was taken by surprise.
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The skies are not entirely clear yet and risks remain. Yet, it’s understandable why investors would display equanimity. The larger picture that has a bearing on stock performance includes India’s robust economy, which the International Monetary Fund said this week would overtake Japan’s this year to become the world’s fourth-largest.
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Pakistan’s economy, meanwhile, is in bad shape and would fare worse if the conflict escalates. And what financial markets say matters.
