Moaaz Manzoor

India’s suspension of the Indus Water Treaty (IWT) has added a layer of uncertainty to the Indo-Pak geopolitical climate, which, if sustained, could continue to suppress market confidence despite temporary rebounds driven by local trading strategies and external financial assurances, reports WealthPK.

Following the recent developments, the KSE-100 index concluded trading at 114,872 points, up 808 points or 0.71%, after intense volatility was shaped by investor anxiety over the issue. Although late-session buying and selective gains in major scrips, such as ENGROH, MARI, SYS, and MCB, lifted the index back into the positive territory, the broader sentiment remained fragile.

The upcoming IMF board meeting on May 9 to finalize the next tranche and end-of-month window dressing, also helped counterbalance the geopolitical risk-induced pressures. Speaking to WealthPK, Ali Najib, Head of Sales at Insight Securities, said while the market closed in positive territory, the session was characterized by hesitation and intra-day swings.

“Most of the rally was driven by a late buying spree and window dressing as the month ends, but earlier losses showed the fragility of investor sentiment. The news from across the border was a key drag mid-session,” he explained, adding that the Pehalgam incident report and fears of retaliatory actions fed into the investor nervousness.

“Markets respond to narratives just as much as fundamentals, especially when the threat is political or strategic,” he noted. Syed Ali Ehsan, Deputy Executive Director at PRIME, added that the deterioration in bilateral trade prospects and escalating tensions were pivotal in shaping up investor behavior.

“Cross-border uncertainty has historically acted as a significant drag on the Pakistan Stock Exchange. Investor hesitation due to looming fears of conflict could disrupt trade flows and economic stability,” he said. “Even if not immediate, the perception of risk influences liquidity, particularly foreign inflows, which are sensitive to any form of sovereign or regional risk,” he said.

With over 409.9 million shares traded at a total value of Rs29 billion, investors sought safety in select blue-chip stocks, but the broader market remained cautious. Volume leaders like WTL dominated activity, though laggards such as LUCK, UBL, and PPL collectively wiped 335 points from the index.

Analysts expect more volatility unless there’s a visible de-escalation or clarity on diplomatic channels. While the PSX showed technical resilience, the underlying tone remains jittery. India’s suspension of the IWT has created a psychological overhang, prompting defensive positioning by investors. Unless geopolitical frictions ease, Pakistan’s equity market is likely to remain tethered to uncertainty and react sharply to any escalatory signals.

Credit: INP-WealthPk