The recent Pahalgam attack has once again raised security concerns in India, bringing back memories of past terror incidents that affected not only national security but also economic stability. A similar scenario unfolded on February 14, 2019, when a devastating terror attack occurred in the Pulwama district of Jammu and Kashmir.
The Pulwama Attack: What Happened?
On that fateful day, a suicide bomber rammed an explosive-laden vehicle into a convoy of vehicles carrying Indian security personnel on the Jammu-Srinagar National Highway, resulting in the martyrdom of 40 Central Reserve Police Force (CRPF) jawans. This cowardly act was carried out by the Pakistan-based terrorist group Jaish-e-Mohammed.
In response, the government of India strongly condemned the attack and soon launched a retaliatory strike on February 26, 2019, known as the Balakot airstrike. Indian Air Force jets crossed the Line of Control and destroyed terror training camps in Pakistan. This bold step marked a significant escalation in Indo-Pak relations, sparking global attention and concerns.
Market Reaction and Economic Impact
The markets initially responded with fear and uncertainty following the Pulwama attack. Investors became cautious due to the rising geopolitical tension between India and Pakistan. As a result, Indian stock markets turned volatile. The heightened uncertainty led to a short-term selloff, affecting investor confidence and creating a ripple across sectors. However, after the Balakot airstrike, the markets bounced back, showing resilience. The response restored some confidence among investors, signaling strength in India’s political and economic stance during crises.
Indian Stock Market Movement
Following the Pulwama incident, the Indian stock markets experienced short-term instability. Panic selling and global caution triggered downward trends, especially in defense-related and financial sectors. However, strong economic fundamentals and decisive government action helped the markets stabilize after the Balakot strike.
Also read: India-Pakistan War: Should you sell your stocks or stay calm? Here’s what analysts have to say
Nifty 50 Index
On February 14, 2019, the day of the Pulwama attack, Nifty 50 closed at 10,746.05 points, with an intraday high of 10,792.70 and a low of 10,718.75, registering a negative change of 0.44 percent. After that attack, the Nifty 50 experienced three consecutive negative sessions, plunging to a low of 10,585.65 points, marking a decline of about 1.92 percent from its February 14 high.
The tide turned after India’s Balakot airstrike on February 26, 2019. The market reacted positively to India’s strategic response, with Nifty gaining 0.41 percent on that day. This marked the beginning of a recovery phase, and the Nifty 50 continued its upward trajectory in the subsequent months. By April 18, 2019, Nifty 50 reached a new all-time high of 11,856.15 points, representing an impressive 9.42 percent increase from the post-Balakot airstrike levels.
Bank Nifty Index
On February 14, 2019, the day of the Pulwama attack, Bank Nifty closed at 26,970.60 points, with an intraday high of 27,030 and a low of 26,818.05, registering a slight gain of 0.32 percent. Following the attack, Bank Nifty experienced two consecutive negative sessions, dropping to a low of 26,617.70 points, marking a decline of approximately 1.52 percent from its February 14 high.
The market sentiment shifted positively after India’s Balakot airstrike on February 26, 2019. On that day, Bank Nifty closed at 26,952.95, gaining 0.76 percent, signaling the beginning of a recovery phase. In the subsequent months, Bank Nifty continued its upward trajectory, reaching an all-time high of 30,669.80 points by April 18, 2019, representing an impressive 13.79 percent increase from the post-Balakot airstrike levels.
Sensex Index
On February 14, 2019, the Sensex closed at 35,876.22 points, with an intraday high of 36,109.10 and a low of 35,799.42, registering a decline of 0.44 percent. Following the Pulwama attack, Sensex experienced three consecutive negative sessions, plunging to a low of 35,287.16 points, marking a decline of about 2.28 percent from its February 14 high.
After India’s Balakot airstrike on February 26, 2019, the market reacted positively to India’s strategic response, with the Sensex declining by 0.66 percent on that day, closing at 35,973.71 points. This marked the beginning of a recovery phase, and Sensex continued its upward trajectory in the subsequent months. By April 18, 2019, the Sensex reached a new all-time high of 39,487.45 points, representing an impressive 9.77 percent increase from the post-Balakot airstrike levels.
Sectors Affected by the Conflict
The Pulwama attack and subsequent tensions had varying impacts across different sectors of the Indian economy. Defence stocks saw significant gains as investors anticipated increased government spending on military equipment and security infrastructure. On the other hand, sectors with direct exposure to Pakistan, such as certain textile companies and businesses with cross-border trade, experienced negative pressure.
Tourism and hospitality sectors in Kashmir and border areas also suffered due to heightened security concerns. Banking and financial services initially faced headwinds due to general market uncertainty. Oil and gas stocks were volatile due to concerns about potential supply disruptions and fluctuating crude oil prices in the event of prolonged conflict.
How to Safeguard Your Investment During Geopolitical Tensions
In uncertain times like these, diversification becomes essential. Investors should consider parking money in safer options like gold, silver, and government bonds, which tend to perform well during geopolitical tensions. Holding a mix of equity, debt, and commodities helps reduce overall risk. Keeping a long-term investment horizon and avoiding panic selling can protect wealth during volatile periods.
Conclusion
In conclusion, the Pulwama attack and subsequent Balakot airstrike demonstrated that while geopolitical tensions can cause short-term market volatility, Indian markets showed remarkable resilience. After the initial shock and negative reaction, indices recovered strongly and even reached new heights within months. This underscores the importance of maintaining a long-term investment perspective during crisis periods. While it’s natural for investors to feel concerned during such events, hasty decisions based on short-term market movements often prove counterproductive. A balanced approach, combining safe-haven assets with quality equity investments, typically yields better results during uncertain times.
Written By – Nikhil Naik
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