A war between Pakistan and India would likely have major negative effects on both countries’ stock markets and could impact global markets depending on the scale of conflict. Here’s a breakdown of likely impacts:
1. Domestic Stock Market Impact
Sharp declines: Indian and Pakistani stock indices (e.g., NIFTY 50, KSE-100) would likely drop immediately due to panic selling and uncertainty.
Capital flight: Investors may move money to safer markets (e.g., U.S. bonds, gold), causing currency depreciation and worsening the decline.
Defense stocks may rise: Companies related to defense and military supply could see gains, though these are usually outweighed by broad market losses.
2. Currency and Inflation
Currency weakening: The rupee and Pakistani rupee would likely fall as confidence in stability declines.
Inflation pressure: Disrupted supply chains and military spending could lead to inflation.
3. Foreign Investment
FPI/FII outflows: Foreign institutional investors might exit quickly, triggering more volatility and liquidity issues.
4. Global Spillover
If nuclear tension or widespread conflict is perceived, global markets (especially emerging markets) could see a risk-off reaction, leading to declines in Asian and BRICS-region markets.
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