Operation Sindoor Spooks Karachi Stock Exchange, Triggers Over 5 Per Cent Crash, D-Street Remains Resilient

Operation Sindoor, Karachi Stock Exchange: Pakistan's benchmark equity index Karachi 100 (KSE 100) derailed over 5.5 per cent in early trade on May 7 after India launched precision strikes on terrorist hideouts across Pakistan and Pakistan-occupied Kashmir. The strikes carried out under 'Operation Sindoor', were in retaliation for the deadly Pahalgam attack that claimed the lives of 26 tourists.

The KSE 100 opened with a sharp gap-down of 6,271.87 points, or 5.5 per cent, at 107,296.64. However, later, the index bounced back and as of 10:56 AM, the benchmark index traded 1,607.87 points, or 1.42 per cent, lower at 111,960.64.

The Pakistan Stock Exchange (PSX), formerly known as the Karachi Stock Exchange, has taken its official website offline. Its official website's webpage shows a message which says, "We'll be back soon."

India's Market Remains Resilient

While Pakistan's stock market crumbled, India's market has stayed resilient, shrugging off all early jitters. The benchmark Sensex and Nifty 50 traded flat in early trade; however, they had a slight negative bias.

The broader market indices such as Nifty Midcap 100 and Nifty Smallcap 100 even traded higher by around 0.6 per cent and 1 per cent, respectively. The Nifty 500, which represents about 92.29 per cent of the free float market cap of the stocks listed on the National Stock Exchange (NSE). 

VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, noted that from a market perspective, the key takeaway from Operation Sindoor is its focused and non-escalatory nature. He said the Indian market is unlikely to react strongly to the precision strikes, as the possibility of a retaliatory move was already anticipated and priced in.

What's Driving India's Resilience

According to Vijayakumar, the real driver of market resilience in India has been the sustained buying by foreign institutional investors (FIIs) over the past 14 trading sessions, amounting to a cumulative Rs 43,940 crore in the cash market. FIIs are currently more focused on global macroeconomic trends such as a weaker dollar, slower growth in the US and China in 2025, and India's relative strength in terms of economic growth, he said.

He also highlighted a clear shift in market preference, with investors moving away from overvalued mid-and smallcap stocks toward large-cap stocks. This trend, led by FII buying, is likely to continue in the near term. However, he cautioned that investors should keep a close watch on developments along the border.