The Pakistan Stock Exchange (PSX) took a severe hit on Thursday, plunging more than 2,500 points in early trading amid escalating tensions with India and a gloomy economic outlook. The sharp decline in the KSE-100 index, which dropped 2.12% or 2,485.85 points to 114,740.29 within minutes of the market opening, reflects growing investor panic triggered by India’s abrupt suspension of the 1960 Indus Waters Treaty following the deadly Pahalgam terror attack. The attack, which claimed 26 lives, has been blamed on Pakistan by Indian authorities, prompting New Delhi to take stringent measures, including closing the Wagah-Attari border and revoking SAARC visa exemptions for Pakistani nationals.
The market’s freefall marks its fourth consecutive day of losses, making this one of the worst weeks for the PSX in recent months. Though the KSE-100 later recovered slightly, it still traded 1,664 points lower, underscoring the depth of investor unease. Adding to the pressure, the World Bank recently slashed Pakistan’s growth forecast for the current fiscal year from 2.8% to 2.7%, while the IMF downgraded its GDP growth projection to 2.6%. These revisions, coupled with concerns over a weakening rupee and political instability, have further rattled investor confidence.
India’s decision to suspend the Indus Waters Treaty—a critical agreement governing the sharing of the Indus River system’s waters—has sent shockwaves through Pakistan’s economy, which heavily relies on these waters for agriculture and hydropower. The treaty’s suspension threatens Pakistan’s agricultural backbone, which supports 23% of its national income and 68% of its rural population. Vikram Misri, India’s Foreign Secretary, emphasized the gravity of the move, stating, “This is not a small step. It reflects our growing frustration with Pakistan’s provocations.”
The market’s downturn has hit key sectors hard, with commercial banks leading the losses, dragging the index down by 699.02 points. The oil and gas sector followed, shedding 312.76 points, while cement, investment, and fertilizer sectors also contributed significantly to the decline. A senior market analyst in Karachi noted, “This is a tipping point in India-Pakistan relations. Investors are scared of further escalation and are rushing to safer assets, triggering widespread sell-offs.”
Analysts warn that the PSX could face continued volatility in the coming days unless tensions between the two nations ease. “If the situation doesn’t stabilize, the market will remain under pressure,” cautioned one expert. With uncertainty looming, Pakistan’s economic challenges are deepening, and the road ahead looks increasingly uncertain.
