Pakistan Stocks Plunge 2% as India Halts Indus Waters Treaty, Closes Borders Post Pahalgam Attack

New Delhi: The Pakistan Stock Exchange (PSX) witnessed a steep decline on Thursday, dropping over 2% in early trade, after India announced a series of stringent measures against Pakistan in response to the deadly terror attack in Pahalgam that claimed 26 lives.

The KSE-100 index slumped by 2.12%, shedding 2,485.85 points to reach 114,740.29 within the opening minutes. The sharp fall was triggered by rising geopolitical tensions and India’s diplomatic retaliation, which included suspending the Indus Waters Treaty and shutting down the Wagah-Attari border crossing.

In a statement, India’s Ministry of External Affairs outlined the following key actions:

• Suspension of the 1960 Indus Waters Treaty, effective immediately.
  
• Closure of the Attari Integrated Check Post, with a grace period for valid visa holders until May 1, 2025.
  
• Revocation of SAARC Visa Exemption Scheme (SVES) for Pakistani citizens; existing SVES visas have been cancelled, and current visa holders have 48 hours to exit India.
  
• Expulsion of Pakistani military attachés—Defence, Navy, and Air advisors at the Pakistani High Commission in Delhi declared persona non grata with a one-week deadline to leave. India will also pull back its military attaches and five support staff from its High Commission in Islamabad.
  
• Downsizing diplomatic missions, reducing each High Commission’s staff strength from 55 to 30 by May 1, 2025.

The announcement followed a turbulent Wednesday for Pakistani markets, already reeling from the International Monetary Fund’s downward revision of Pakistan’s GDP forecast to 2.6%. Additionally, Fitch Ratings flagged concerns about the depreciating rupee, ongoing political instability, and regional security risks.

Indian Market Reaction

Despite the developments, Indian equities showed relative resilience. As of 11:37 AM IST, the BSE Sensex was down 233 points (0.29%) at 79,884, and the Nifty50 slipped 69 points (0.28%) to 24,259.

Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services, attributed India’s market strength to sustained foreign inflows and economic resilience. “While the S&P 500 has dipped 8.4% YTD, the Nifty is up 2.27%, driven by Rs 21,263 crore in FII inflows over the past six days,” he said.

However, Vijayakumar also cautioned investors: “Markets are likely to remain sensitive to the scale and impact of India’s actions. While staying invested, caution is advised amid rising uncertainty.”