The Pakistan Stock Exchange (PSX) experienced a significant downturn on May 7, 2025, with the KSE-100 Index plunging over 6,200 points following India's "Operation Sindoor". This military action, consisting of targeted strikes on terror groups within Pakistan and Pakistan-occupied Kashmir, triggered panic among investors and led to a sharp sell-off in the market.

The KSE-100 Index, the benchmark for the Pakistan Stock Exchange, plummeted by 5.78% shortly after opening, translating to a loss of 6,560.82 points. The index dropped from its previous close of 113,568.51 to 107,296.64. While the index partially recovered later in the day, it remained significantly down, reflecting the ongoing market anxiety.

India launched "Operation Sindoor" in retaliation for the deadly terrorist attack in Pahalgam, Jammu and Kashmir on April 22, where 26 people were killed. The Indian Army announced that the strikes targeted nine locations housing terrorist organizations, while asserting that the operation was "focused, measured, and non-escalatory". They emphasized that no Pakistani military facilities were targeted and that India demonstrated restraint in the selection of targets and methods of execution.

In response to India's actions, Pakistan has condemned the strikes as an "act of war" and vowed to retaliate at a time and place of its choosing. This heightened geopolitical tension between the two countries has further fueled investor concerns and contributed to the stock market crash. According to reports, shelling and gunfire erupted across the Line of Control (LoC), with Indian forces reportedly targeting several locations within Pakistan.

Market analysts attribute the PSX's nosedive to the cross-border military confrontation, which intensified overnight. DG ISPR Lt Gen Ahmed Sharif Chaudhry confirmed that Indian missile strikes had hit six locations, resulting in casualties.

The Indian stock markets, in contrast, demonstrated resilience, recovering swiftly from initial uncertainty triggered by the military action. The markets regained positive territory shortly after opening, displaying stability. According to Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial, the main catalyst behind market resilience is the sustained Foreign Institutional Investors (FIIs) buying over the last 14 sessions, totaling Rs 43,940 crore in the cash segment. He added that Operation Sindoor has not disrupted this trajectory because the retaliatory strike was widely expected and already priced in.

The situation remains fluid, and the market's future performance will likely depend on how the geopolitical tensions between India and Pakistan unfold.