7th May Alert: Explosive War Drill Sparks Market Anxiety

The Indian Government is preparing for a War drill. This statement sounds like an amazing hideout from their boring chores to some, and for others, it is a source of headache and worry.

Investors, traders, and brokers are some of the people for whom War could be a headache, returns could evaporate just with the sheer announcement.

The current Russia-Ukraine, Middle East chaos are prime examples of the fact that no country benefits from waging a war. The turmoils of battle can generate economic shockwaves that can take away the progress of years.

So, leaving the humanitarian implications aside, let’s discuss the possibility of India waging a war, and what if it happens.

How did it start?

22nd April, a normal Tuesday for us, was a little different for Kashmir. The Pahalgam valley, where tourist were peacefully enjoying their vacations, had abrupt movements. Tourists heard shotguns and in no time, the news came out – 26 people dead in a Terrorist Attack on Pahalgam.

History of Kashmir

Now this isn’t the first time such attacks happened in Kashmir, 14th Feb, 2019 was another black day for India when lives of 40 CRPF Jawans were lost by a suicide bomber.

Responses – War, War Drills, Peace?

In the previous schuffles like Pulwama, India carried out strikes like URI on Pakistani Terror camps. But that does not mean we never had a war.

India had 4 major Wars with Pakistan:

• 1947-1948
• 1965
• 1971
• 1999

Source.

Now, it can be argued that most of these skirmishes happened before the 21st Century, and for nearly 20 years our war front has been stable, except for a few skirmishes with China.

Nuclear Deterrence

There is also the Nash Equilibrium Theory, according to which Nuclear Power acts as a deterrence, and no two countries having nuclear power would fight.

And historically the theory has kept up, except for 1999 when India and Pakistan indulged in Kargil War despite being nuclear powers by then.

The limiting of war to just an area capture still makes us hold the theory tight.

War Drills to War? What if

If War does not happend we can go for our investment like every day, but what if it does happen?

India and Pakistan’s trade

India–Pakistan trade has dwindled from its peak of $3 billion in 2018 to around $1.2 billion in 2024, with India exporting about $1.18 billion and importing a negligible $0.42 million over April 2024–January 2025.

However, there is also some indirect trade that happens, which is actually bigger than direct and worth $10 bn. In the past, such turmoils have led to some volatility, equity dips by 0.5-1%, but this has been for the short term

Large-cap stocks often recover well and may even present an opportunity for some to buy the dip and accumulate. 

IPO and Capital‑Raising Impact

The war-like situation has contributed to a 58% year‑on‑year drop in IPO listings, with at least $759 million of planned raises from Avanse Financial Services and Anthem Biosciences deferred or downsized 

Defense Up?

The recent sessions of the stock market saw rallies in Defense companies like Data Patterns. This leg up is not only because of the new defense contracts but also because in War times, when bloodshed makes the soil red, these stocks often keep the pockets green.

Comfort Stocks

Investors often flock to defensive sectors (FMCG, utilities) and high‑quality large‑caps, while cyclical and financial stocks face profit‑taking

Indian Market Volatility

• Exchange‐Rate Moves: Amid worries over a possible escalation, the Indian rupee slipped to ₹84.37 per US dollar, lagging its regional counterparts during a choppy session.
  
• Stock‐Index Performance: Stock Markets open red today as concerns about India–Pakistan tensions offset positivity from trade negotiations and fresh capital inflows.
  
• Outlook Drivers: Strategists point to geopolitical risks as one of eight major catalysts set to influence market direction this week, alongside expectations for US Federal Reserve rate cuts and the upcoming corporate earnings season.

What’s ahead for Investors

As an investor, a subtle, cautious stance could be fruitful. However, one should keep in mind that an overly cautious approach or panic selling could be wasteful and erode wealth.

Understand that India and Pakistan both are nuclear powers, even if a War-like situation happens, that would be limited to regions and would be more of a symbolic war than a full-throttle battle.

The situation of Russia-Ukraine and Israel-Palestine is much different from this one, and considering the diplomatic stance India has taken till now, it would not be unfair to assume that the primary goal of the country right now is growth, and a full-blown war goes against that and hence less likely to happen.

What are your views on the War Drills? Let us know in the comments

And yes we have covered the market movements like Nifty 500 Ends Flat – April 30, Stock Market Highlights, May 5, and if you want one for today stay pointed on our blogs, we’ll share the updates very soon.

Disclaimer: This blog is for informational purpose, we do not intend to promote any buying or selling of stocks.