PSX plunges 1500 points amid Pakistan-India tensions

KARACHI: Investors are reeling amid tensions between Pakistan and India following the Pahalgam attack. The Pakistan Stock Exchange (PSX) witnessed a sharp decline on Thursday, with the KSE-100 index falling by 1,500 points.

The decline came amid aggressive diplomatic measures announced by New Delhi in response to a deadly terrorist attack in Pahalgam in Indian-occupied Kashmir, where 26 tourists were killed and several others injured.

Experts said the market opened lower as investors braced for potential losses. The rising tensions between the nuclear-armed countries weighed heavily on sentiment, as strong earnings from major companies offered partial relief.

The market direction will be determined by the state of Pakistan-India relations and the central bank’s upcoming monetary policy decision in early May. Macroeconomic positives, including record low inflation, a current account surplus, and a stable real effective exchange rate, initially propelled the market.

The International Monetary Fund (IMF) and the World Bank recently downgraded Pakistan’s growth forecast for the current fiscal year. It also projected inflation to rise to 7.7 percent by the end of the next fiscal cycle. Moreover, Fitch Ratings warned of further depreciation of the Pakistani rupee, predicting that it could fall to Rs 285 per US dollar by June and possibly as low as Rs 295 by the end of the fiscal year. However, local analysts expect a slightly less dire outcome, forecasting Rs 283.