Operation Sindoor: Will stock market fall as India-Pakistan tensions escalate? History says…

India carried out precision strikes on nine sites in Pakistan and Pakistan-occupied Jammu and Kashmir under Operation Sindoor on Wednesday (May 7). The action, which came in response to the April 22 Pahalgam terror attack, sent shockwaves throughout the country.

Investors and analysts are watching closely for signs of market volatility. But if history is any guide, the Indian stock market may have little to fear.

A review of past India-Pakistan flashpoints, ranging from the Kargil War in 1999 to the Balakot airstrike in 2019, suggests that geopolitical tensions, have rarely derailed India’s market trajectory in the medium to long term.

According to data shared by Finavenue, the Nifty 50 index has shown a pattern of sharp recoveries following most cross-border military events.

Markets may stumble, but they rarely fall

The numbers are telling. After the 2016 Uri surgical strikes, the Nifty 50 slipped by 1.2 per cent in the first month but rebounded with a 15.6 per cent gain over the next year.

Similarly, after the 2019 Pulwama-Balakot episode, which saw heightened military engagement between the two nuclear-armed neighbours, the index rose 6.3 per cent within a month and gained 12.7 per cent over the next 12 months.

The Kargil War, despite being a full-fledged conflict, saw the Nifty surge 16.5 per cent within a month of hostilities breaking out, eventually climbing 29.4 per cent over a year. Even the Mumbai 26/11 attacks, India’s worst terror strike in recent history, did not impede a 54 per cent gain over the following six months and a staggering 81.9 per cent in 12 months following the attack.

The only notable exception was the December 2001 Parliament attack, after which the Nifty slipped into negative territory over both the short and long term. That incident triggered months of military standoff, which may explain the market’s atypical reaction.

Investor sentiment anchored in certainty

“Historical data suggests that the Indian stock market has generally responded with resilience to serious geopolitical events,” said Abhishek Jaiswal, Fund Manager at Finavenue Jaiswal.

He added that “…the likelihood of a full-scale war remains low. As long as such escalation is avoided, India’s economic growth trajectory is unlikely to face any major setbacks.”

“In essence, while the initial reaction to cross-border strikes may be cautious, markets tend to recover and even thrive thereafter—reinforcing the idea that political stability, strategic decisiveness, and national security assurance are valued by investors.”

Operation Sindoor in context

Operation Sindoor, which targeted nine terror infrastructure sites across Pakistan and Pakistan-occupied Jammu and Kashmir, was described by Indian officials as “measured and non-escalatory.”

No Pakistani military assets were targeted, and New Delhi has signalled it showed considerable restraint in the aftermath of Pahalgam terror attack.

That posture may help contain any sharp correction in market sentiment. Analysts say the market had largely priced in a calibrated military response following the Pahalgam attack, which killed 26 civilians.